What CSSF’s sustainable finance priorities mean for Luxembourg firms

In brief:

• CSSF will continue supervising sustainability-related disclosure obligations in scope of SFDR, Pillar 3 and related reporting.
• CSSF will continue on-site inspections of depositary entities, integrating ESG-related investment restrictions monitoring, aligned with ESMA’s supervisory briefing on sustainability risks and disclosures in investment management.
• For banks, prudent management of ESG-related risks remains a priority, aligned with SSM supervisory priorities 2026–2028.

On 2 March 2026, CSSF issued an updated communication outlining its 2026 supervisory priorities in sustainable finance relevant for the entire Luxembourg financial sector (including banks, investment firms, investment fund managers (IFMs), and other supervised entities), and reinforcing expectations around credible ESG integration, reliable disclosures, and anti-greenwashing controls, aligned with broader EU supervisory trends. The focus now moves from policy existence to verifiable implementation, with supervisors increasingly testing evidence, consistency and alignment between disclosures and actual risk-management or portfolio practices

What will be looked at

For credit institutions and investment firms, the CSSF will prioritize transparency and disclosure, sustainability‑related risk management and governance, and compliance with MiFID sustainability requirements.

For IFMs, the CSSF will continue to monitor compliance with SFDR, the SFDR RTS and the Taxonomy Regulation taking into account ESMA Guidelines on the use of ESG‑ or sustainability‑related terms in fund names, with the objective of enhancing transparency and mitigating greenwashing risks. In addition, under its risk‑based supervisory approach, the CSSF will focus its on‑site and off‑site reviews on the integration of sustainability risks, the accuracy and completeness of pre‑contractual and periodic disclosures, consistency across fund documentation and marketing materials, compliance with website disclosure requirements, portfolio analysis, and participation in CSSF SFDR data collection exercises.

For credit institutions the particular focus is on Circular CSSF 21/773 and new EBA Guidelines on the management of ESG risks, implemented in Luxembourg for less significant institutions through Circular CSSF 26/905. These guidelines outline clear requirements for robust ESG risks identification, materiality assessment and management as well as setting up a prudential transition plan. Following this, the regulator will continue its on-site inspections on governance and credit risks, specifically focusing on the integration of ESG risks.

What this means for firms

The CSSF’s priorities signal a supervisory environment in which sustainability claims must be clearly substantiated by robust governance arrangements, effective controls and reliable data. Firms operating in Luxembourg should therefore anticipate increased expectations for well‑documented and auditable evidence. Against this background, firms are encouraged to:

• Embed ESG risks into their strategy, risk appetite and decision‑making processes, creating a structured prudential transition plan
• Review and ensure consistency across all sustainability‑related disclosures
• Align portfolio construction and investment practices with stated sustainability commitments
• Strengthen data quality, governance and control frameworks
• Prepare early for upcoming CSRD and ESRS requirements

How can EY help?

EY can support supervised entities across the full set of 2026 CSSF expectations by providing to:

1. Run an end-to-end disclosure consistency review covering pre-contractual, periodic, SFDR website disclosures and marketing materials
2. Validate name/strategy/holdings alignment, perform portfolio-strategy-name reviews and document your evidence trail
3. Confirm governance, operating model, resourcing for ESG-risk integration, and transition plan are effective, operational and auditable
4. Support banks and investment firms by reviewing Pillar 3 and SFDR sustainability disclosures and reinforcing MiFID sustainability-suitability documentation
5. Assess and enhance the design and effectiveness of sustainability-related internal controls (compliance, risk, internal audit) and provide recommendations to strengthen the overall control framework
6. Assist IFMs with SFDR data quality and timeliness assessments to help ensure submissions remain accurate and up to date
7. Provide an EY-built AI-powered platform – EY.ai Greensight - to help organizations monitor green claims and mitigate greenwashing risk across legislations