The EU Regulation on the establishment of a framework to facilitate sustainable investment (the "Taxonomy Regulation") was published in the Official Journal on 22 June 2020. The Taxonomy Regulation establishes a classification system (or taxonomy) to provide businesses with a common language to identify whether a given economic activity should be considered "environmentally sustainable" and to determine to which extent an investment should be deemed environmentally sustainable or "green".

The Taxonomy Regulation empowers the Commission to adopt delegated acts to specify how competent authorities and market participants shall comply with its obligations, more specifically:

  • a delegated act on the technical screening criteria for economic activities that make a significant contribution to climate change mitigation and climate change adaptation (the "Climate Delegated Act")
  • a delegated act supplementing Article 8 of the Taxonomy Regulation, specifying the content, methodology and presentation of information to be disclosed by both financial and non-financial undertakings concerning the proportion of environmentally sustainable economic activities in their business, investments or lending activities (the "Article 8 Disclosures Delegated Act")
  • a delegated act on technical screening criteria for economic activities that make a significant contribution to (a) the sustainable use and protection of water and marine resources, (b) the transition to a circular economy, (c) pollution prevention and control, or (d) the protection and restoration of biodiversity and ecosystems (the "Environmental Delegated Act")

The Climate Delegated Act was formally adopted on 4 June 2021 for scrutiny by the co-legislators. The Article 8 Disclosures Delegated Act was adopted by the Commission on 6 July 2021 for scrutiny by the co-legislators.

CSSF communiqué of 29 November 2021

In this communiqué, the CSSF reminds financial market participants that, pursuant to Article 10 of the Article 8 Disclosures Delegated Act:

  • from 1 January 2022 until 31 December 2022, non-financial undertakings (i.e. undertakings with more than 500 employees on average) must disclose:

(a) the percentage of taxonomy-eligible and taxonomy-ineligible economic activities in their total turnover, capital and operational expenditures; and (b) the relevant qualitative information referred to in Section 1.2 of Annex I to the Article 8 Disclosures Delegated Act, including but not limited to a description of the nature of their taxonomy-eligible economic activities, by referring to the Climate Delegated Act.

  • from 1 January 2022 until 31 December 2023, financial undertakings (including inter alia AIFs, UCITS and PEPPs) must disclose:

(a) the percentage exposures in their total assets to taxonomy-ineligible and taxonomy-eligible economic activities; (b) the percentage exposures in their total assets to central governments, central banks and supranational issuers, and derivatives; (c) the percentage exposures in their total assets to undertakings that are not subject to the NFRD; and (d) the qualitative information referred to in Annex XI to the Article 8 Disclosures Delegated Act.

CSSF communiqué of 2 December 2021

In this communiqué, the CSSF informs financial market participants of the establishment of a fast-track procedure for the submission by UCITS and AIFs of updated pre-contractual documents, for disclosures relating to environmentally sustainable investments in accordance with the Taxonomy Regulation.

It should be recalled that the deadline for compliance by Article 6, 8 and 9 SFDR financial products with the pre-contractual disclosure requirements regarding the environmental objectives of climate change mitigation and climate change adaptation is 1 January 2022.

The fast-track procedure aims to facilitate the submission of updates to a prospectus/offering document by financial market participants. In order to benefit from the fast-track procedure, the CSSF indicates that the updates must be limited to those changes required by Articles 5, 6 and 7 of the Taxonomy Regulation.

For UCITS, an updated prospectus submitted for a visa stamp must be accompanied by a confirmation letter, available on the CSSF's website. The CSSF has indicated that complete offering documents/prospectuses that comply with the Taxonomy Regulation submitted under the fast-track procedure and received by the CSSF no later than 17 December 2021 will be visa stamped prior to 31 December 2021.

For Luxembourg-based AIFs managed by an AIFM authorised or registered by the CSSF, the AIFM should submit to the CSSF, for each AIF managed, the specific disclosures required by the Taxonomy Regulation. The AIFM should also clearly indicate where in the fund documentation this information is disclosed to investors.

The same procedure applies to Luxembourg-based managers of EuVECAs and EuSEFs.

What’s next?

The CSSF communiqué of 29 November 2021 sums up the next steps as follows:

  • As from financial year 2022, the Article 8 Disclosures Delegated Act will apply in full to non-financial undertakings. It will apply in full one year later to financial undertakings, i.e. as from financial year 2023.
  • The Climate and Article 8 Disclosures Delegated Acts are now being scrutinised by the European Parliament and the Council and will enter into force on 1 January 2022, if no objections are made.
  • By 30 June 2024, the Article 8 Disclosures Delegated Act will be reviewed, in particular with respect to the treatment in the KPIs by financial undertakings of sovereign exposures and exposures to undertakings not subject to the NFRD.
  • As from 1 January 2026, the Article 8 Disclosures Delegated Act will also apply to credit institutions for KPIs on services other than lending and on trading portfolios for financial year 2025.