The Commission Delegated Directive (EU) 2021/1270 amends the Commission Directive 2010/43/EU which implements the UCITS directive, by imposing obligations on UCITS management companies (“ManCos”) to integrate sustainability considerations into their decision-making and risk management processes, as well as in their structure and organisation (“Commission Delegated Directive”).
The Commission Delegated Directive has been transposed into Luxembourg law by CSSF regulation 22-05 of 27 July 2022 (“CSSF Regulation 22-05”) amending CSSF regulation 10-4 of 20 December 2010 transposing Commission Directive 2010/43/EU (“CSSF Regulation 10-04”).
Consideration of sustainability risks by investment fund managers
The new additional sustainable finance requirements for ManCos brought by the CSSF Regulation 22-05 are the following:
taking into account sustainability risks when complying with rules for organisational requirements laid down in Article 5(1) of the CSSF Regulation 10-04;
retaining necessary resources and expertise for the effective integration of sustainability risks alongside with other obligations for resources pursuant to Article 6 of the CSSF Regulation 10-04;
ensuring that their senior management is responsible for the integration of sustainability risks in their activities referred to in Article 10(2)(a) – 10(2)(f) of the CSSF Regulation 22-05;
when identifying conflicts of interests that may damage UCITS they manage, they must include those that may arise from the integration of sustainability risks in their processes, systems, and internal control;
integrating sustainability risks in their risk management policy;
integrating sustainability risks in the management of UCITS, taking into account the nature, scale and complexity of the business;
taking into account sustainability risks when acting in the best interests of UCITS and their investors, as required by Article 25 of the CSSF Regulation 10-04;
where they or, where applicable, investment companies take into account the main negative impacts of investment decisions on sustainability factors, they or investment companies shall ensure that they take into account such principal adverse impacts when complying with the requirements to act in the best interests of UCITS and their investors, as required by Article 25 of the CSSF Regulation 10-04.
As a result, ManCos will have to update their internal policies.
Alternative Investment Fund Managers (the “AIFMs”) are not excluded as the Commission Delegated Regulation 2021/1255 of 21 April 2021 imposes, mutatis mutandis, the same obligations detailed in points (i.) to (v.) above on AIMFs as of 1 August 2022.
The CSSF Regulation 22-05 came into force on 31 July 2022.