The grand duchy’s top financial regulator would like the European rulemakers to take a page from Luxembourg’s sustainable finance book.

After mentioning during an industry conference that he recently met with several European Commission officials regarding proposed revisions to the Sustainable Finance Disclosure Regulation, Claude Marx said that the “EU should consider the important labelling work done by Luxflag.” Marx is director general of the Luxembourg Financial Sector Supervisory Commission (CSSF).

The agency’s “labels are well understood” by the industry and investors, Marx stated. That, in contrast, is “unlike” the widespread use of SFDR’s “article 6, article 8 and article 9,” with some funds switching categories repeatedly. Articles 6, 8 and 9 refer to the regulation’s disclosure classifications.

Regulators recognise “the weaknesses of SFDR,” Marx commented. This includes the use of SFDR categories as a labelling regime, not its intended purpose. Marx was supportive of a proposal to introduce a simpler categorisation scheme as part of the commission’s SFDR revamp, currently in progress.

Marx was speaking at Luxflag Sustainable Investment Week on 23 October 2024.

Esma greenwashing guidelines

Earlier in his remarks, Marx said that the CSSF’s sustainable finance “priorities were totally aligned with EU priorities.” It “would be highly counterproductive to have 27 [different] national priorities” across the bloc, as the rules are already “complicated enough”.

Marx told the audience that, if they had not already done so, he “recommended reading” the European Securities and Markets Authority’s greenwashing report published in June, which provides a “clear definition of greenwashing” that had previously been missing from the market.

Regulators are “aware” that compliance with Esma’s ESG fund naming rules could prove difficult at times. For instance, there is not an “exhaustive list of terms that will trigger” a review by regulators. To provide further clarity, the CSSF published guidelines in the form of Circular 24/863 on 21 October 2024, Marx noted. Newly established investment funds must comply with the rules by 21 November 2024, while existing funds have until 21 May 2025 to be compliant.