Luxembourg: Implementing ESMA rules on ESG or sustainability related fund names

Why should I read this?

On 22 October 2024, the Luxembourg Financial Supervisory Authority published Circular CSSF 24/864 (the “Notice”) implementing the ESMA guidelines on funds' names using ESG or sustainability-related terms (the “Guidelines”) into the Luxembourg legal framework.

Background and the CSSF requirements

The Guidelines require funds with: (i) sustainability, (ii) impact, (iii), transition, (iv) environmental,  (v) social,  or (vi) governance related terms in their names to either:

• hold a minimum percentage of investments with relevant characteristics; and
• put in place relevant exclusionary criteria as required.

For further detail on the scope of the Guidelines and their requirements, see our previous client briefing:

• EU: ESMA publishes final guidelines on the use of ESG-related terms in fund names

From the date of the Notice the CSSF expects market participants, regardless of whether they are disclosing under Article 6, 8 or 9 of the SFDR, to assess whether they are in the scope of the Guidelines.

The Notice points out:

• fund names should not be misleading;
• pre-contractual disclosures should include elements supporting the use of ESG or sustainability-related terms in the fund’s name. At the moment, it isn’t clear whether this entails specific references to the Guideline’s requirements or whether disclosures made in line with SFDR or SFDR RTS will be considered satisfactory; and
• the list of ESG and sustainability-related terms mentioned in the Guidelines is not exhaustive.

Market participants are expected to review the names of all the financial products they manage.  They should assess, on a case-by-case basis, whether the Guidelines apply to those products. It is currently not clear how the CSSF will assess which terms not specifically listed in the Guidelines  may bring a fund within the scope of the Guidelines. Funds with names which use terms related to those  listed in the Guidelines may need to engage with the CSSF to confirm the position.  We expect that the CSSF may raise questions about any names that imply any ESG or sustainability credentials.  

The CSSF expects market participants to closely monitor and take due consideration of any further developments on this topic at the European level.

Application process and timing  

Funds formed on or after 21 November 2024 are expected to comply with the Guidelines immediately.

For funds already in existence on 21 November 2024, a transitional period extends the deadline to 21 May 2025, providing time to adjust their names or strategies if necessary. The CSSF has introduced a priority processing procedure for changes to prospectuses of  AIFs or UCITS which relate solely to amendments required to comply with the Guidelines. These amendments are limited to:

• changes of names of at least one sub-fund;
• minor adjustments of:
  • “ESG engagement” disclosures; or
  • SFDR pre-contractual disclosures.

Funds wishing to benefit from the priority processing procedure will be required to complete a fund naming confirmation letter providing the details of the fund’s investment strategy and process illustrating its compliance with the Guidelines' requirements.

How Eversheds Sutherland can help

We have extensive experience and expertise in advising clients on ESG matters. Our team has been closely following the development of SFDR and all related frameworks such as the ESMA naming rules. Please speak to your usual Eversheds-Sutherland contact if you need help with the interpretation of the Guidelines and their impact on the products you manage. We can assist you with any changes that may need to be implemented for your funds to comply with the requirements introduced by the Guidelines and obtain necessary regulatory and corporate approvals in this respect.