CSSF updates supervisory priorities for sustainable finance

Context

The CSSF has broadened its scope, noting that integrating sustainability considerations and managing sustainability risks should not be seen solely as regulatory requirements but as essential drivers of long-term financial strategies and resilience. The CSSF continues to play an active role in EU and international working groups, advocating for a more coherent, consistent and clarified sustainable finance framework. This enables Luxembourg’s financial sector to navigate evolving rules while maintaining the credibility of sustainability-related practices.

The CSSF specifies that these priorities are not exhaustive and may be adjusted depending on emerging risks and further regulatory developments, such as the reviews of the SFDR and Pillar 3 disclosure ITS.

Key takeaways

For credit institutions and investment firms

• Transparency and disclosure: the CSSF will continue supervising SFDR obligations through the long-form report, as outlined in Circular CSSF 22/821 (as amended by Circulars CSSF 24/865, CSSF 23/845 and CSSF 25/897) for credit institutions and Circular CSSF 24/853 (as amended by Circulars CSSF 25/870 and 26/904) for investment firms. The self‑assessment section is part of prudential supervision and may trigger enforcement.
• Risk management and governance: prudent management of climate and nature‑related risks remains a priority (in line with the SSM’s supervisory priorities for 2026–2028). The CSSF will monitor alignment with Circular CSSF 21/773 and the EBA Guidelines on the management of ESG risks implemented in Luxembourg via Circular CSSF 26/905; on‑site inspections on governance and credit risks will integrate ESG factors, and ESG‑specific inspections may be carried out.
• MiFID rules related to sustainability: supervision of MiFID II sustainability‑related obligations will continue under a proportionate, risk‑based approach, adjusting scope and intensity by entity risk profile and regulatory uncertainty.
• Depositary entities: the CSSF will continue to carry out on-site inspections to ensure the proper integration of ESG-related investment restriction monitoring.

For the asset management industry

The CSSF will continue monitoring compliance with SFDR, SFDR RTS and the Taxonomy Regulation, applying ESMA’s Supervisory Briefing and its Guidelines on fund names using ESG terms or sustainability-related terms to increase transparency and prevent greenwashing.

The CSSF will focus on:

• Integrating sustainability risks into organisational arrangements.
• Verifying pre‑contractual and periodic disclosure transparency requirements.
• Verifying consistency across fund documentation and marketing materials.
• Verifying IFM website disclosure obligations.
• Ensuring consistency between product level claims and portfolio holdings.

The CSSF will continue using SFDR‑related data collection exercises (IFM, pre‑contractual, periodic) to enhance its supervisory work. IFMs must keep all submitted information updated. The CSSF will continue issuing clarifications as needed.

For issuers

As the changes to Directive (EU) 2022/2464 on corporate sustainability reporting (CSRD) are still being finalised at EU level and implementation in Luxembourg is pending, the CSSF will continue to guide voluntary ESRS reporters. Guidance will include fact‑finding publications and bilateral exchanges highlighting areas to address when preparing sustainability statements.

The CSSF, together with ESMA and European national accounting enforcers, will continue applying European Common Enforcement Priorities (ECEPs) when reviewing annual reports.

Finally, the CSSF will contribute to developing the minimum ESG information annex, as well as related EU‑level Q&As and guidelines in the context of approving securities prospectuses

Next steps

The CSSF’s updated priorities confirm that ESG compliance extends beyond product-level disclosure and encompasses governance, organisational structure, and risk management frameworks across all in-scope entities.

• Credit institutions and investment firms should review their long-form report self-assessment responses, which will be assessed as part of prudential supervision and may trigger enforcement measures. ESG risk management frameworks should be reviewed for alignment with Circular CSSF 26/905 and the EBA Guidelines on the management of ESG risks. The CSSF will continue to conduct on-site inspections integrating ESG aspects and may carry out inspections specifically focused on ESG risks where warranted. Depositary entities should also prepare to face further scrutiny regarding ESG monitoring activities.
• Investment fund managers should review their organisational arrangements for sustainability risk integration, verify the accuracy and consistency of pre-contractual, periodic, and website disclosures, confirm alignment of portfolio holdings with stated sustainability objectives and characteristics, and ensure that data previously submitted to the CSSF through its SFDR data collection exercises remains up to date.
• All entities should monitor ongoing EU legislative developments, including the SFDR review and the pending CSRD implementation in Luxembourg, as the CSSF has indicated that its supervisory priorities may be adjusted in light of emerging risks and regulatory changes.