ESG & SFDR: Disclosure Applied to Your Fund

Article 6 — every fund

Pre-contractual explanation of how sustainability risks are integrated into investment decisions and what their likely impact on returns is, or why they are not relevant.

No sustainability promise, no template; in practice, no ESG term in the name.

Article 8 — promoting environmental or social characteristics

Annex II template in the offering document, website disclosure under Article 10, Annex IV in the annual report.

Taxonomy alignment must be stated even when it is 0%; the sustainable-investment share and the consideration of principal adverse impacts are disclosed.

Article 9 — sustainable investment as the objective

Annex III and Annex V templates; the Commission expects every investment to qualify as a sustainable investment under Article 2(17), with hedging and liquidity as the only exceptions.

Contribution, do-no-significant-harm and good-governance tests documented for each holding.

Principal adverse impacts

Entity level: a PAI statement is mandatory for managers with more than 500 employees; smaller managers comply or explain (Article 4).

Product level: each fund states whether and how it considers principal adverse impacts (Article 7).

EU Taxonomy

Six environmental objectives: climate change mitigation, climate change adaptation, water and marine resources, circular economy, pollution prevention, biodiversity and ecosystems.

Article 8 and 9 funds disclose the share of Taxonomy-aligned investments; all other funds carry the statement that their investments do not take the EU criteria into account.

Fund names

ESMA guidelines, applied by the CSSF through Circular 24/863: new funds since 21 November 2024, existing funds since 21 May 2025.

At least 80% of investments in line with the term; Paris-aligned benchmark exclusions for environmental, impact, ESG and sustainability terms, climate-transition benchmark exclusions for transition, social and governance terms; “sustainable” terms also need a meaningful share of sustainable investments.

Manager obligations

AIFMs: sustainability risks in due diligence, resources, conflicts of interest and risk management since 1 August 2022 (Delegated Regulation 2021/1255).

UCITS management companies: the same under Delegated Directive 2021/1270, transposed by CSSF Regulation 22-05.

Luxembourg enforcement

Law of 25 February 2022: the CSSF is the competent authority for funds and managers, the CAA for insurers, each with supervisory and investigation powers.

Administrative fines of EUR 250 to 250,000 for breaches of SFDR Articles 3 to 13 and Taxonomy Articles 5 to 7.

Subscription tax

UCITS and UCI Part II funds: 0.04% instead of 0.05% on the share of net assets invested in Taxonomy-aligned activities once that share reaches 5%; 0.03% from 20%, 0.02% from 35%, 0.01% from 50% (Article 174(3) of the Law of 17 December 2010).

The share is audited or certified by the réviseur d'entreprises agréé; gas and nuclear activities do not count. SIFs, at 0.01%, have no Taxonomy-linked reduction.

SFDR 2.0

Commission proposal of 20 November 2025 (COM(2025) 841): three product categories — Sustainable, Transition and ESG basics — with a 70% minimum share, replacing Articles 8 and 9 as de-facto labels and dropping the entity-level PAI statement.

Council (24 June 2026) and Parliament (mandate confirmed 7 October 2026) both foresee application 24 months after entry into force and an opt-out for AIFs offered only to professional investors; trilogues are ongoing.

Does SFDR apply to an unregulated SCSp or a RAIF?

Yes. SFDR applies to the manager — the AIFM — and to every AIF it manages and markets, whatever the vehicle, regulated or not. The European Commission confirmed in July 2021 that registered sub-threshold AIFMs are financial market participants too, so the entity and product disclosures apply to them as well, included in the fund's pre-contractual and periodic documents.

Article 8 or Article 9: what is the difference?

An Article 8 fund promotes environmental or social characteristics, for example through exclusions, ESG ratings or engagement, and discloses what share of its portfolio, if any, is sustainable or Taxonomy-aligned. An Article 9 fund has sustainable investment as its objective: every investment must contribute to an environmental or social objective, do no significant harm and be in a company with good governance, with hedging and liquidity as the only exceptions. Both use mandatory templates in the offering document, on the website and in the annual report; Article 9 carries the higher burden of proof.

Can my fund keep “ESG” or “sustainable” in its name?

Only if it earns it. Under the ESMA guidelines, applied by the CSSF through Circular 24/863, a fund with an ESG, environmental, impact, social, governance, transition or sustainability term in its name must invest at least 80% of its assets in line with that term and apply the relevant exclusions: the Paris-aligned benchmark exclusions, including fossil-fuel thresholds, for environmental, impact and ESG terms, and the climate-transition benchmark exclusions for transition, social and governance terms. “Sustainable” terms also require a meaningful share of sustainable investments. The rules have applied to new funds since 21 November 2024 and to all funds since 21 May 2025; the alternative is a name change.

What does the CSSF check, and what happens if the disclosures are wrong?

The CSSF checks that the pre-contractual annex, the website disclosure, the periodic report and the marketing material tell the same story, and that the manager's processes deliver what they promise. In the 2023–2025 common supervisory action led by ESMA, in which the CSSF took part, supervisors found room for improvement in managers' integration of sustainability risks and in their disclosures. Under the Law of 25 February 2022 the CSSF has investigation powers and can impose administrative fines of EUR 250 to 250,000.

Will we have to reclassify under SFDR 2.0?

Probably, unless your fund is an AIF offered only to professional investors and the opt-out survives the negotiations. The Commission's proposal of 20 November 2025 replaces the Article 8 and 9 disclosures with three product categories — Sustainable, Transition and ESG basics — each requiring at least 70% of investments in line with the claim. The Council (24 June 2026) and the European Parliament (mandate confirmed 7 October 2026) both foresee application 24 months after entry into force and an opt-out for professional-investor AIFs; trilogue negotiations are ongoing. Until the text is final, we keep your disclosures accurate under current SFDR and build the data you will need for a category.

Is there a tax advantage for sustainable funds?

For UCITS and UCI Part II funds, yes. The subscription tax falls from 0.05% to 0.04% on the share of net assets invested in Taxonomy-aligned economic activities once that share reaches 5%, to 0.03% at 20%, 0.02% at 35% and 0.01% at 50% (Article 174(3) of the Law of 17 December 2010). The share is audited or certified by the réviseur d'entreprises agréé each year; gas and nuclear activities do not count. SIFs, which already pay 0.01%, have no Taxonomy-linked reduction.

What is a principal adverse impact statement?

The entity-level statement in which a manager explains whether it considers the principal adverse impacts of its investment decisions on sustainability factors — environmental, social and employee matters, human rights, anti-corruption and anti-bribery — using the indicators of the SFDR RTS, or why it does not. It is mandatory for managers with more than 500 employees and comply-or-explain for the rest; at product level, each fund says whether it considers PAIs. The Commission's SFDR 2.0 proposal would drop the entity-level statement.