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    CSSF Guides on SFDR Implementation, Reviews Issuer Climate Disclosures

    December 22, 2020

    CSSF published a communication guiding investment fund managers of undertakings for collective investment in transferable securities (UCITS) and alternative investment funds to comply with the requirements of the EU Regulation 2019/2088 on sustainability-related disclosures in the financial services sector (also known as SFDR). The communication highlights that investment fund managers will need to comply with the high-level, principle-based requirements laid down in the SFDR by March 10, 2021. Additionally, CSSF published results of its assessment of the status of climate-related information reported by issuers. The review not only revealed some improvements in disclosures but also highlighted significant gaps and scope for improvements.

    The review of reported climate-related information compares the climate-related disclosures of issuers with the recommendations in the updated EU guidance on climate-related disclosures. The review revealed that key improvements relate to the information provided on policies and due diligence processes, disclosures on risk management of climate-related risks, and key performance indicators. However, the review also highlighted that significant gaps remain and that additional improvements in the quality and comparability of climate-related disclosures are urgently required to meet investor and other stakeholder needs. The following are the key highlights of the review: 

    • Only a small and unsatisfactory percentage of issuers address the questions in relation to climate-change beyond the basic requirements of the NFI Directive (Directive 2014/95/EU).
    • While the importance of climate-change effects is relatively well highlighted in the description of business models (for those disclosing climate-related information), there is lack of information about concrete actions beyond commitments made or proposals to significantly reduce global warming.
    • There is an omission with respect to the insights on governance aspects, including the board’s oversight of climate-related risks and opportunities and the management’s role in assessing and managing these risks and opportunities, along with the information provided on policies and due diligence processes. Therefore, the review identified a clear need for improvement in future non-financial reports, as it allows stakeholders to understand the robustness of the company’s approach to climate-related issues.
    • There is a lack of disclosures on risk management in relation to climate-related risks (identification/assessment/mitigation) in the short, medium, and long term for a large majority of issuers. There is also a significant need for disclosures in relation to the key climate-related risks, distinguishing physical and transition risks.

    CSSF recommends issuers willing to achieve a better non-financial reporting to proactively monitor the Taxonomy Regulation developments. CSSF urges issuers to review the updated EU guidance that provides practical recommendations on how to better report the impact that their activities have on the climate as well as the impact of climate change on their business. Issuers are expected to exercise their own judgment when deciding which disclosures to use. In 2021, CSSF will conduct a follow-up of this assessment and of the European priorities, to continue providing issuers with recommendations and good practices.


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    Keywords: Europe, Luxembourg, Banking, Securities, Climate Change Risk, ESG, Governance, SFDR, Sustainability-Related Disclosures, Sustainable Finance, CSSF

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