Introduction
On 30 September 2025, the Luxembourg supervisory authority (the CSSF) released its feedback report on the Common Supervisory Action (CSA) initiated by European Securities and Markets Authority’s (EMSA) on sustainability-related disclosures and the integration of sustainability risks by investment funds managers (IFMs) launched in July 2023 (the CSSF Feedback Report).
Thirty Luxembourg-domiciled IFMs formed the CSSF’s sample, with the exercise split into an initial “greenwashing” focus (September 2023) and a second phase (March 2024) centred on organisational arrangements and transparency at both manager and product level. The CSSF Feedback Report represents the domestic corollary to ESMA’s conclusions in its final CSA report (published in June 2025) and serves as a supervisory blueprint for the entire Luxembourg fund industry.
Although the CSSF Feedback Report confirms an overall satisfactory level of compliance, the CSSF finds that there is room for improvements and urges IFMs to assess whether their sustainability disclosures are in compliance with the regulatory expectations.
Principal Findings Relevant to IFMs
I. Entity-level SFDR disclosures
First, the CSSF found that disclosures on remuneration policies are often too broad or aspirational and not always easily accessible.
The CSSF further observed that the “principal adverse impact” (PAI) statements, although present, were not always easily accessible on IFM websites and their coverage would sometimes not be sufficient. For instance, the coverage for each PAI metric varies from 10% to 90% and some IFMs limited PAI coverage to Article 8 and 9 funds, whereas the CSSF clarified that all investment decisions, including those related to Article 6 funds, must be covered.
Additionally, the CSSF found that some IFMs omitted mandatory indicators, such as Scope 3 GHG emissions and real estate-specific metrics or failed to select additional indicators from the relevant tables in the SFDR RTS, and that actions and targets disclosed in relation to PAIs often lacked granularity, with some IFMs reporting the same action for multiple sub-indicators.
Finally, while most IFMs provided information on engagement policies, the CSSF identified room for improvement in summarizing how engagement policies will be adapted if there is no reduction in PAIs.
Key takeaways and action points for IFMs:
- Disclosures on remuneration policies should be precise and specific and cover how sustainability risks and ESG metrics are integrated into remuneration, including criteria in employee objectives, the use of sustainability risk indicators in determining remuneration, and consideration of sustainability risks in delegated portfolio management.
- PAI statements should be easily accessible on the website.
- PAI statements should cover all funds (Article 8, Article 9 and Article 6) and all mandatory indicators. Where data is not readily available, IFMs are expected to disclose efforts to obtain information, including the use of third-party data providers or reasonable assumptions.
- Actions and targets should be disclosures in relation to PAI and each action should be tailored to the specific characteristics of each PAI.
II. Integration of sustainability risks and factors in the risk management frameworks
The CSSF observed a positive evolution in the integration of sustainability risks into risk management policies and procedures. However, gaps remain in the description of sustainability risk indicators and limits, the scope of funds and assets covered, the frequency of reporting to senior management, and the articulation of escalation procedures in case of non-compliance. Some IFMs do not apply the same level of risk assessment to Article 6 funds as to Article 8 or 9 funds, and asset coverage can be improved for certain asset classes such as cash, structured products, and private assets. Data quality checks are not always clearly described, and the CSSF encourages more robust controls.
Key takeaways and action points for IFMs:
- Risk assessment for Article 6 funds should be equivalent to Article 8 or 9 funds.
- Risk indicators and limits should be improved, as well as the reporting to senior management and escalation procedures.
- More robust controls on data should be implemented.
III. Product-level disclosures
The CSSF found that disclosures explaining the methodology for determining "sustainable investments" under Article 2(17) SFDR are often overly generic, particularly regarding the contribution to environmental or social objectives and the application of the "do no significant harm" (DNSH) principle.
Regarding website disclosures and periodic reports, despite an overall satisfactory level of compliance, the CSSF finds room for improvement on certain point: for instance, the "summary" section of the website disclosures do not always clearly distil the prescribed information, and, in periodic reports, certain IFMs fail to demonstrate how all mandatory PAI indicators were considered in the DNSH assessment, and a minority of Article 8 or 9 funds still display inconsistencies between their binding pre-contractual commitments and reported outcomes.
Sustainability credentials of funds are generally fair and clear, although marketing communications referencing ESG labels or ratings sometimes omit key contextual information about the certifying body, data sources, and the validity period. In addition, the CSSF did not identify any ESG-related text, imagery or sounds in the sampled Article 6 funds’ disclosures.
In addition, 75% of the sampled funds included ESG or sustainability terms in their names, showing overall satisfactory compliance with ESMA guidelines on funds names.
Key takeaways and action points for IFMs:
- Regarding the “sustainable investments” assessment and the application of DNSH principle, IFMs should disclose underlying assumptions, methodologies, thresholds, and rationales in a clear, comprehensive, and accessible manner, enabling investors to make informed decisions (eg. using defined standards and ongoing monitoring).
- The summary section of the website disclosures should summarize all required content in a clear and comprehensive way.
- In the DNSH assessment, there is a legal obligation to take into account all mandatory PAI indicators and any relevant additional indicators, and to provide clear, comprehensible, and fair disclosures.
- When communicating on ESG labels or rating, it is recommended to include direct links to certifying bodies and to provide meaningful information about internal ESG scores or ratings.
- Adequate disclosure of elements supporting the use of ESG or sustainability-related terms in fund names are expected to be disclosed in the precontractual documentation.
What’s next?
The CSSF Feedback Report highlighted that there is still room for improvement, particularly with regard to the completeness and clarity of the disclosures pertaining to the consideration of PAI for DNSH assessment.
To this end, The CSSF requires every Luxembourg-domiciled IFM to perform a comprehensive gap analysis against both the ESMA’s final CSA report and the CSSF Feedback Report, covering organisational measures and all disclosures at manager and product level, even where the firm does not market an Article 8 or 9 product. Managers must then adopt corrective measures without delay and stand ready to evidence the outcome of their self-assessment. The CSSF Feedback Report provides for good practices that may be used as a reference by IFMs trying to improve their compliance with sustainability-related disclosures obligations.
Given the supervisory emphasis on preventing greenwashing and enhancing comparability, firms should anticipate more intrusive follow-up work, including targeted information requests and potential on-site inspections. Concurrently, ESMA has announced additional convergence initiatives, suggesting that the regulatory bar will continue to rise alongside potential revisions to the SFDR framework announced by the European Commission.
Our sustainability experts, Aurélien Hollard and Julie Pelcé, will continue to monitor the applicable regulatory landscape for IFMs. In the meantime, please contact us if you have any questions.
