Communication to the investment fund industry in relation to the ESMA Guidelines on funds’ names using ESG or sustainability-related terms
CSSF
The CSSF informs financial market participants that on 13 December 2024, ESMA published Q&As providing further details on specific aspects of the practical application of the Guidelines. The Q&As are related to green bonds, the understanding of “meaningfully investing in sustainable investments”, and the definition of controversial weapons:
the Q&A on green bonds explains that investment restrictions related to the exclusion of companies do not apply to investments in European Green Bonds. For other green bonds, financial market participants may use a look-through approach to assess whether the activities financed are relevant for the exclusions;
the Q&A on “meaningfully investing in sustainable investments” sets forth that while national competent authorities should carry out a case-by-case analysis of how any sustainability-related term is used in the name of a fund, they may find that funds with “sustainable” terms in their names investing less than 50% of the proportion of investments in sustainable investments are not « meaningfully investing in sustainable investments ». That amount could be higher, subject to the circumstances of the case; and
the Q&A on controversial weapons specifies that the reference for the exclusion related to controversial weapons should be the one referred to in SFDR principal adverse impact indicator 14.
The CSSF expects financial market participants to give due consideration to the above-mentioned Q&As when applying the Guidelines to the products they manage. Regardless of whether they are disclosing under Article 6, 8 or 9 of the SFDR, financial market participants are expected to carry out a self-assessment of the applicability of the Guidelines to the products they manage and to ensure compliance of fund names with the Guidelines.
Finally, the CSSF reminds financial market participants that the Guidelines started to apply as from 21 November 2024 to new funds and will apply as from 21 May 2025 to existing funds.
21 October 2024
Circular CSSF 24/863 (english only)
Guidelines on funds’ names using ESG or sustainability-related terms Communiqué of 21 October 2024.
21 August 2024
ESMA publishes translations of its Guidelines on funds’ names using ESG or sustainability-related terms