Sustainable Finance update (asset management): CSSF announces fast track procedure for Taxonomy Regulation compliance by 1 January 2022

The CSSF announced in its communication (available here) published on 2 December 2021 that it has put in place a fast track procedure to facilitate compliance with the taxonomy-related disclosure requirements of articles 5, 6 and 7 of the Taxonomy Regulation, which will start applying from 1 January 2022 in respect of the environmental objectives of climate change mitigation and climate change adaptation.

The CSSF indicates that the Taxonomy Regulation requires article 8 and article 9 SFDR funds to provide transparency with regard to the environmental objectives of climate change mitigation and / or climate change adaptation in their pre-contractual disclosures by 1 January 2022.

It should be pointed out that all financial products not subject to article 8 or 9 of the SFDR, so-called article 6 SFDR funds, will also need to update their pre-contractual documentation prior to 1 January 2022 in order to include the prescribed statement of article 7 of the Taxonomy Regulation.

The fast track procedure is available until 17 December 2021 and the CSSF will endeavor to release visa prior to 31 December 2021 for filings received prior to this deadline. Filings received after 17 December 2021 will only be considered by the CSSF on a best efforts basis.

In order to benefit from the fast track procedure only changes necessary to reflect the requirements of articles 5, 6 and 7 of the Taxonomy Regulation will be permitted although, similar to the SFDR fast track in February 2021, “editorial adjustments” will again be acceptable. Any material changes pursuant to CSSF circular 14/591 will have to follow the normal CSSF filing procedure.

1) UCITS
Under the fast-track procedure, the UCITS prospectus filed for visa will need to be accompanied by a confirmation letter (available here) which representatives of the fund or the UCITS management company or their legal advisors are able to sign. In the letter, compliance with the Taxonomy Regulation disclosure requirements needs to be confirmed and that marketing communications and the KIID / PRIIPs KID will be in line with and not contradict the disclosures in the prospectus.

In the confirmation letter the CSSF explains what needs to be considered when using the confirmation letter stating that i) it expects that the article 7 of the Taxonomy Regulation statement is accurate, clear and prominent to allow investors to identify any sub-funds to which it is applicable (i.e. any sub-funds not referring to article 8 or 9 SFDR).

In addition, the CSSF states that where sub-funds disclose investing in an economic activity that contributes to an environmental objective of climate change mitigation and/or climate change adaptation, as set out in Articles 9, 10 and 11 of the Taxonomy Regulation, the prospectus must 1) inform on these environmental objective(s) and 2) provide a description informing on how and to what extent the investment underlying the sub-funds are taxonomy-aligned (criteria of article 3 Taxonomy Regulation fulfilled). This description needs to be fair, clear and informative for investors, including in respect of possible transitional considerations, constraints or a proportion of investments in targeted taxonomy-aligned investments.

2) AIFs
The fast track procedure for AIFs differs from the procedure applicable to UCITS insofar that no confirmation letter needs to accompany the CSSF filing. Instead, the CSSF requires that the information to be disclosed under the Taxonomy Regulation in the disclosures to investors pursuant to article 23(1) AIFMD (including any updates) is submitted to the CSSF by Luxembourg based authorised AIFMs using a dedicated email address. The submission needs to clearly indicate where the relevant information has been disclosed to investors. The CSSF clarifies that these requirements also apply to AIFs managed by a registered AIFM but that AIFs managed by an AIFM not supervised by the CSSF are required to apply the procedure of the AIFM’s local supervisory authority.

According to the CSSF, necessary updates in the prospectus of existing Luxembourg ELTIFs will be swiftly handled on a case by case basis.

Separately, the CSSF also mentions in its communication that while it acknowledges that the European Commission intends to postpone the application of the SFDR RTS to 1 January 2023, it encourages financial market participants to start using the pre-contractual and periodic disclosures templates in the draft RTS dated 22 October 2021 and to complete them on a best efforts basis during the transitional period.