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CSSF's sustainable finance agenda for the financial sector: How to prepare for the CSSF's upcoming inspections on sustainable finance

On 6 April 2023, the CSSF published a communiqué on the CSSF’s supervisory priorities in the area of sustainable finance.

The communiqué outlines how the CSSF, as the financial sector’s supervisor, supports the transition to sustainability and monitors the compliance of entities under its supervision with the evolving sustainable finance framework. The CSSF aims to promote a consistent and effective implementation of the sustainable finance framework across the entire financial sector and to integrate ESG requirements in its own supervision. The CSSF wil l adopt a gradual approach to reflect the regulatory changes and the developing practices in this area. However, the supervised entities are ultimately responsible for complying with the applicable rules and for embedding ESG factors in their governance, risk management and compliance processes. They should also invest in ESG education for themselves and their staff. The communiqué highlights some key issues to consider in this area, but it is not exhaustive or definitive. The CSSF may revise its priorities and examine other ESG-related aspects as part of its ongoing prudential supervision.

Supervisory priorities 

The CSSF presented its supervisory priorities for (i) credit institutions, (ii) asset managers, (iii) investment firms and (iv) issuers.

1.   Credit Institutions

1.1.  Sustainability disclosures

The CSSF will check how credit institutions comply with SFDR disclosure through the updated long-form report (see CSSF circular 22/821), which includes a self-assessment section (SAQ) and an audit report on SFDR disclosures. It will also assess the compliance of a sample of banks with the website disclosures requirements in the SFDR and SFDR-RTS at both entity and product level. Furthermore, the CSSF will examine the Pillar 3 disclosures on ESG risks that large institutions with listed securities must publish, according to the ITS on prudential disclosures on ESG risks. The CSSF will follow up with the relevant institutions accordingly.

1.2.  Risk management and governance

One of the ECB’s priorities for the banking sector is climate and environmental risk management for the three years from 2022 2024. The CSSF will assess how well a sample of 15-20 banks categorised as less significant within the meaning of the Single Supervisory Mechanism and their third-country branches comply with its guidance in CSSF Circular 21/773 on this topic and give them feedback. The CSSF will verify how these risks are addressed in other areas of supervision where on-site inspections are conducted, such as governance, business models and credit risks. In addition, it plans to conduct specific on-site inspections on climate and environmental risks from late 2023 or early 2024. Moreover, it will review how banks have aligned their remuneration policies with sustainability risk integration by the end of this year. 

1.3 MiFID rules related to sustainability

The CSSF will check how credit institutions apply MiFID rules on sustainability when providing investment advice or discretionary portfolio management services and in particular whether they collect all relevant information related to their client sustainability preferences and take into account such preferences since 2 August 2022 and whether they are anticipating the application of the ESMA Guidelines on MiFID II suitability requirements (which should apply six months after the publication of their translations in all EU official languages).

The CSSF will also inspect how banks comply with MiFID rules on sustainability in other areas, such as product governance, suitability assessments, conflicts of interest, client information and internal control functions, and will focus on the new sustainability disclosure obligations. As from 2024, the CSSF will conduct MiFID on-site inspections that include sustainability disclosure obligations for both credit institutions and investment firms. The CSSF will also assess how supervised entities market and advertise sustainability-related products under MiFID rules as part of a Common Supervisory Action (between ESMA and the national competent authorities) on marketing communications.

2.   Asset managers

The CSSF will supervise how IFMs follow the rules on sustainability-related disclosures and activities under SFDR, the SFDR-RTS and the Taxonomy Regulation. The CSSF will use the ESMA Supervisory Briefing on Sustainability risks and disclosures in the area of investment management as a reference and will adapt its supervision to any new regulations on the topic.

In particular, the CSSF will check that IFMs:

  • have the right organisational arrangements to integrate sustainability risks, notably in terms of human resources, governance, investment decision or advice processes and remuneration, risk management and conflict of interests policies;
  • comply with the pre-contractual and periodic disclosures of financial products;
  • provide consistent sustainability-related information across fund documents and marketing materials;
  • comply with their product website disclosure requirements under SFDR; and
  • ensure that the investments of funds managed match their sustainability claim (ie. name, investment objective, strategy and characteristics of the fund).

The CSSF also reminds that it has started collecting SFDR data from supervised entities to check their compliance and disclosures. The data collection now covers product disclosure information as well (see our previous alert here). It has also issued more guidance and FAQs on SFDR, and will keep doing so as needed.

3.   Investment firms

3.1 Transparency and disclosures

Investment firms providing investment advice and portfolio management services must comply with disclosures obligations under SFDR. The CSSF plans to reform the long-form report and include a self-assessment questionnaire for investment firms to evaluate their compliance with SFDR.

3.2. Risk management and governance

The CSSF will supervise ESG risks for investment firms in a gradual manner, starting with how investment firms incorporate ESG risks in their strategies and governance. The CSSF will revise CSSF Circular 20/758 on administration, internal governance and risk management accordingly.

3.3. MiFID rules related to sustainability

The CSSF will also monitor investment firms on how they apply MiFID rules related to sustainability, similarly to what it does for credit institutions (see 1.3. above).

4.   Issuers

The CSSF will continue to focus on climate-related matters in its reviews of the 2022 annual reports, both for IFRS financial and non-financial information, as part of the European common enforcement priorities (ECEPs). The CSSF will also tailor its review to follow up on its findings on the 2021 financial and non-financial information of issuers, where significant climate-related risks were identified. Additionally, the CSSF will verify for the first time whether the relevant non-financial issuers in scope comply with the new disclosure requirements on the alignment of their activities with climate objectives, as set by article 8 of the Taxonomy Regulation. This review is also one of the ECEPs for the upcoming campaign.

The CSSF further discloses the scheduled supervision exercises in sustainable finance at the initiative of ESAs or ESMA for 2023 in the form of a table:


Nature of exercise

Relevant for

2023 Q1

2023 Q2

2023 Q3

2023 Q4

ESMA CSA Marketing communications
and advertising under MiFID II

Credit institutions Investment firms



CSA roll-out

ESMA European Common Enforcem ent Priorities for
non-financial reports




Exercise roll-out

ESMA CSA Sustainability
risks and disclosures in asset management




CSA roll-out (continued in 2024)

ESAs ‘JC Survey Stocktake’ of the
extent of voluntary disclosures

Credit institutions
Investment firms

Survey roll-out