Highlights:

The deadline for annual KI(I)Ds submission is approaching in mid February. Since 1 January 2025, the “Slippage Method” is the mandatory method for transaction cost calculation. Slippage calculation for PRIIPs transaction cost involves managing dataflows, addressing incorrect or missing data, coordinating with data vendors, adapting to complex instruments, and maintaining a reliable audit trail.

Luxembourg Market Update:

Luxembourg alternative investment funds enjoyed net inflows of €3.952bn in November, up from €1.55bn the previous month, after net outflows of €469m in September and €805m in August, according to the European Fund and Asset Management Association. However, net inflows into UCITS funds domiciled in the grand duchy were down from €16.5bn in October to €5.8bn, while Ireland-domiciled UCITS took in a net €73.2bn. Irish alternative investment funds attracted €3.66bn of inflows in November, as AIFs across the EU enjoyed inflows of €13.1bn, up from €8.8bn the previous month.

Regulatory Developments in and beyond Luxembourg:

29 November 2024: European Commission issues further guidance on the EU Taxonomy via FAQs

The FAQs contain questions and answers regarding general aspects of the Taxonomy, the environmental objectives, the generic DNSH criteria and the Taxonomy Disclosures Delegated Act. These questions and answers are to be seen as complementary to the clarifications issued in the past.

The formal adoption of the latest FAQ in all the official languages of the European Union is expected to take place at a later stage once the language versions are available. The EC may update these FAQs in the future as appropriate.

12 December 2024: Official Journal of the EU publishes a new Regulation on ESG rating activities

The Regulation discusses the transparency and integrity of ESG rating activities.

Meanwhile, ESMA has been mandated to provide several draft RTS, to submit to the European Commission by 2 October 2025. These draft RTS will most likely involve an industry consultation and they shall include

• Application for EU authorisation (Art. 6)

• Recognition of non-EU ESG rating providers (Art. 12)

• Separation of business activities (Art. 16)

• Minimum public disclosure to the public of the methodologies, models and key rating assumptions used in ESG rating activities (Art. 23)

• Minimum disclosures to users of ESG ratings, rated items and issuers of rated items (Art. 24)

The Regulation (and thus the need for registration) will apply from 2 July 2026.

12 December 2024: ESMA publishes a consultation paper on draft RTS on open-ended loan originating AIFs under the revised Alternative Investment Fund Managers Directive (AIFMD)

The revised AIFMD mandates ESMA to develop draft RTS that ensure loan-originating AIFs meet specific requirements to maintain an open-ended structure. These include:

• Implementing robust liquidity management systems;

• Ensuring access to liquid assets and conducting stress testing;

• Adopting redemption policies aligned with the liquidity profile of the AIF.

The standards also account for key factors such as the nature of loan exposures, average repayment timelines, and the overall granularity and composition of AIF portfolios. The Consultation Paper summarises the draft regulatory technical standards on open-ended loan-originating AIFs under the AIFMD.

13 December 2024: ESMA publishes a Q&A providing clarification and guidance on the application of the Guidelines on fund names using ESG or sustainability-related terms

The Q&A on green bonds explains that investment restrictions related to the exclusion of companies do not apply to investments in European Green Bonds. For other green bonds, fund managers may use a look-through approach to assess whether the activities financed are relevant for the exclusions;

The Q&A on “meaningfully investing in sustainable investments” presents a common understanding among national competent authorities that funds may not be “meaningfully investing in sustainable investments” if they contain less than 50% of sustainable investments; and

The Q&A on controversial weapons specifies that the reference for the exclusion related to controversial weapons should be the one referred to in SFDR principal adverse impact indicator 14.

17 December 2024: EU Platform on Sustainable Finance (PSF) publishes a report on the categorisation of products under SFDR

The report strongly supports establishing a categorisation scheme as part of the SFDR review process. Three core categories are proposed: sustainable, transition and ESG collection.

The PSF highlights that the proposal remains high-level, but should serve as a basis to build a complete and detailed categorisation scheme. It is mentioned that further development is needed to define or refine thresholds based on real-world testing.

18 December 2024: FinDatEx releases the latest version 1.1.3 of the European ESG Template (EET) on its website

The new version reflects the ESMA fund naming guidelines, PAB and CTB compliance and contains, among others, as well as editorial changes. All data fields that have been worked on are highlighted in the new version in yellow. FinDatEx recommends using version 1.1.3 as of 1 January 2025 and decommissioning version 1.1.2 as of 1 July 2025.

19 December 2024: EU PSF releases a report on investing for transition benchmarks (ITB)

In the report, the PSF proposes two voluntary benchmark labels (investing for transition benchmarks, with and without exclusions) to highlight the pivotal role the taxonomy can play in shaping climate and environmental benchmarks as well as in transition finance.

With this work, the PSF aims to support the development of innovative tools that contribute to the decarbonisation and greening of investment portfolios.

19 December 2024: European Commission publishes a Taxonomy Delegated Regulation

The Regulation aims to correct certain language versions of Delegated Regulation (EU) 2021/2139 that supplements the Taxonomy Regulation by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to climate change mitigation or adaptation and for determining whether that economic activity causes any significant harm to any of the other environmental objectives. The corrected errors relate, e.g. to energy efficiency classes.

19 December 2024: European Commission publishes a newsletter on the status of the implementation of DORA and MiCA

The EC newsletter summarises all acts adopted up to this point, as part of the DORA and MiCA frameworks. These regulatory frameworks respectively comprise 12 and 35 different legal mandates for the development of delegated acts, regulatory technical standards and implementing technical standards.

The Commission "emphasises the importance for financial entities to adopt a robust, structured approach in order to meet their obligations in a timely manner and to engage with supervisors.”

19 December 2024: ESAs publishes the final reporting package for the DORA Register of Information (RoI) on the EBA website

The final reporting package was published following the workshop organised by the European Supervisory Authorities (ESAs) on 18 December 2024. During the workshop, the ESAs shared key findings and lessons learned from the dry-run exercise.

This reporting package includes the data points, taxonomy, and validation rules aligned with the final text of the Implementing Technical Standards (ITS) for the DORA RoI.

8 January 2025: CSSF publishes FAQ on Swing Pricing Mechanism

This is Version 5 of the FAQ on Swing Pricing Mechanism. The only update is the deletion of Question 4 in the FAQ.

9 January 2025: CSSF publishes Circular CSSF 25/870 on the revised long form report for investment firms

The Circular amends Circular CSSF 24/853 on the revised long form report for investment firms and contains practical rules concerning the self-assessment questionnaire to be submitted by investment firms – Mission and related reports of the réviseurs d’entreprises agréés (approved statutory auditors).

10 January 2025: CSSF publishes a Communiqué with regard to the application of the Corporate Sustainability Reporting Directive (CSRD)

The Communiqué restates the application dates and thresholds. It also restates that, as to date, the CSRD is in the process of being transposed into Luxembourg national law (cf. draft law No. 8370: Dossiers parlementaires | Chambre des députés du grand-duché de Luxembourg (chd.lu). The CSSF further points out that IFMs and registered AIFMs are potentially within the scope of this new regulation. Accordingly, it asks each entity to determine whether it falls within the scope of the CSRD and as from which financial year.

15 January 2025: CSSF publishes a Communiqué on DORA

The CSSF reminds the Financial Entities subject to the Digital Operational Resilience Act (“DORA”) that as from 17 January 2025 the requirements of the DORA regulation and its underlying regulatory technical standards and implementing technical standards as published in the EU official journal, take precedence over any overlapping elements or requirements present in CSSF circulars, notably in circulars:

• CSSF 20/750 specifying the requirements regarding information and communication technology (ICT) and security risk management;

• CSSF 22/806 on outsourcing arrangements (regarding ICT outsourcing arrangements);

• CSSF 24/847 on ICT-related incident reporting framework.

The CSSF would like to remind Financial Entities that other topics covered by the aforementioned circulars, not related to DORA, remain applicable in their current form, to the respective Financial Entities.

The ESA and the CSSF are proceeding with the updates of relevant texts (Guidelines and circulars), which will be published in due course. In the meantime, to provide Financial Entities with further guidance, practical modalities are already anticipated below.

Reporting of the register of information

Financial Entities are required to submit their register of information to the CSSF from 1 April 2025 to 15 April 2025 via eDesk. Additional information related to the eDesk procedure will be published at a later stage.

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For further information, please contact:

Tobias Ettlin

m: +352 691 111 931

tobias.ettlin@one-gs.com

Disclaimer: This regulatory update has been prepared for clients of ONE group solutions and its subsidiaries for informational purposes and is not intended to be relied upon as professional advice. Please visit: https://www.one-gs.com/

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