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SFDR is here to stay: SFDR data collection exercise for Luxembourg IFMs

3 February 2023

Regulatory News Alert

On 1 February 2023, the Commission de Surveillance du Secteur Financier (CSSF) launched a data collection exercise for investment fund managers (IFMs) on regulatory requirements for Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (SFDR).

Originally announced in the CSSF’s 27 July 2022 communiqué, this exercise aims to digitally collect SFDR-related information via a questionnaire, focusing mainly on the organizational structures of IFMs.

SFDR mandates that IFMs classified as financial market participants (FMPs) and/or financial advisers (FAs) abide by rules requiring the integration of sustainability risks into their operations by 10 March 2021. SFDR also outlines the mandatory website disclosure requirements that apply to IFMs.

The Commission Delegated Regulation (EU) 2022/1288 of 6 April 2022, containing the Regulatory Technical Standards that supplement SFDR (SFDR RTS), came into effect on 1 January 2023, providing additional details on the transparency that FMPs and FAs must maintain.

Considering the above, the CSSF expects IFMs to account for the integration of sustainability risks in their organizational arrangements, particularly regarding:

  • Human resources and governance
  • Investment decision-making and advice processes
  • Remuneration
  • Risk management policies
  • Management of conflicts of interest

The ongoing data collection is necessary for the CSSF to perform its supervisory responsibilities, particularly in evaluating IFMs' compliance with the requirements of SFDR and SFDR RTS.

The following entities are impacted, insofar as they manage SFDR Art. 8 or Art. 9 financial products:

  • UCITS management companies
  • Self-managed investment companies
  • Authorized AIFMs, including internally managed alternative investment funds (note: the scope includes AIFs managed by a Luxembourg-based AIFM that were not concerned by the filing procedure, i.e., RAIFs)
  • Managers of a qualifying venture capital fund
  • Managers of a qualifying social entrepreneurship fund

The following process must be followed:

  • The questionnaire must be filled out by the IFM’s eDesk user using the new eDesk module “SFDR-IFM disclosures” (available as of 2 February 2023)
  • A designated update feature (“Create update declaration”) will be available to modify information initially submitted. The IFM’s eDesk user will need to ensure the information is kept up to date on an ongoing basis.

The deadline for submitting the questionnaire is 2 March 2023.

Upcoming developments

The exercise will be extended to information contained in the principal adverse impact (PAI) statements and the precontractual and periodic disclosure templates (further details will be communicated at a later stage).

The European Securities and Markets Authority (ESMA) is currently debating a Common Supervisory Action (CSA) regarding sustainability risks and disclosures, anticipated to begin in 2023. A focal point will be CSA Level 1 and Level 2 provisions, as well as the requirements in the ESMA Supervisory Briefing on Sustainability risks and disclosures in the area of investment management.

How can Deloitte help you?

Deloitte’s RegWatch will help you stay tuned to regulatory updates and anticipate regulatory changes impacting your business and organization.

Deloitte’s Advisory and Consulting services can help you with:

  • Assessing the readiness of your organizational arrangements in the context of sustainability risk management;
  • Reviewing your overall ESG oversight model and control framework in line with regulatory requirements;
  • Designing tailor-made training to improve your SFDR regulatory expertise and skillset; and
  • Understanding the requirements and benchmarking interpretations on specific fields of the questionnaire.

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