Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS)

For the attention of:

• investment fund managers subject to Circular CSSF 18/698, except for Luxembourg branches of IFMs subject to Chapter 17 of the Law of 17 December 2010 relating to undertakings for collective investment (hereinafter “IFMs” or “entities”);
• registered AIFMs (i.e. managers referred to in Article 3(2) of the Law of 12 July 2013 on alternative investment fund managers (hereinafter “registered AIFMs” or “entities”));
• their réviseur d’entreprises agréé (approved statutory auditor) (hereinafter the “REA”).

The CSSF draws the attention of IFMs and registered AIFMs and of their REAs on the entry into force of the Corporate Sustainability Reporting Directive (CSRD) and of the European Sustainability Reporting Standards (ESRS). The CSDR provides for a phased approach for the first application which started on 1 January 2024 with the first visible effects in 2025 when the first sustainability reports will be disclosed in accordance with the CSRD. The sustainability report will be published in a dedicated section of the management report and verified by a REA.

Thus far, the CSRD follows the legislative procedure (cf. Draft Law No 8370).

The CSSF would like to point out that IFMs and registered AIFMs are potentially within the scope of this new regulation. For further information concerning the CSRD, the entities are invited to refer to the dedicated pages of the CSSF website.

The CSSF therefore requests all entities to determine as of now, if it is not yet done so, if they are subject to the CSRD and as from which financial year. To this end, the entities are invited to consult their REA. 

It must be noted that IFMs and registered AIFMs are concerned by the CSDR if they are established as one of the Luxembourg legal types listed in Annexes I and II of Directive 2013/34/EU (the “Accounting Directive”), namely:

• SA, SCA and SARL;
• SENC and SCS, where all of the direct or indirect partners that have unlimited liability in fact have limited liability (such as an SCS whose general partner is an SARL ).

The entities established as one of the Luxembourg legal types listed in Annexes I and II of the Accounting Directive and qualifying as large undertaking under the Accounting Directive fall under the scope of the CSRD as from the financial year beginning on or after 1 January 2025 (disclosure of the sustainability report in 2026).

The Grand-ducal Regulation of 25 October 2024¹ transposed Commission Delegated Directive (EU) 2023/2775 of 17 October 2023 increasing the size criteria in relation to the categorisation of undertakings and groups, as provided for by the Accounting Directive, into national law. The upward adjustment by 25% of the thresholds regarding total balance sheet and net turnover aims at taking into account the significant inflation during the last years. Undertakings may apply the new thresholds for financial years beginning on or after 1 January 2023.

The thresholds for large undertakings and large groups are now as follows:

In accordance with the definition of the Accounting Directive, large undertakings are those that exceed the limits of at least two of the three criteria at the balance sheet date for two consecutive financial years.

For further details on the practical application of the new thresholds and their effective date on the re-categorisation of undertakings and groups, please refer to the page of the Luxembourg Commission des normes comptables (only in French), which is updated on a regular basis, as well as to Q&A CNC 24/034, 24/033 and 19/019 (only in French).

Undertakings are also invited to refer to the FAQs published by the European Commission (Notice C/2024/6792) which aim at clarifying the interpretation of certain provisions introduced by the CSRD².

It must be noted that the notion of turnover is defined in Article 48 of the Law of 19 December 2002 on the trade and companies register: “The net turnover shall comprise the amount derived from the sale of products and the provision of services, after deduction of sales rebates and of value added tax and other taxes directly linked to the turnover”. Under that article, turnover of IFMs or registered AIFMs must include, but must not be limited to, commissions received (in relation to the management of UCIs and, where applicable, discretionary management and auxiliary services) on the same basis as any other elements composing item 70 of the standardised chart of accounts. It must be noted that commissions payable, where applicable, by the IFM or the registered AIFM, may not be deducted from turnover.

As regards the average number of employees during the financial year, the number of full-time staff (full-time equivalent) on average over the financial year should be considered. This applies equally to the registered office and any branches of the entity.

Entities may also take into account exemption criteria provided for by the CSRD (cf. Q&A of the European Commission: no. 19, 24, 40, 44 and 48). Thus, entities that are non-listed subsidiaries of an undertaking established in the EEA and that are included in the sustainability report prepared and published by their parent undertaking may be exempted from preparing that report, on the condition that they mention this exemption in the management report and that they refer to the consolidated sustainability report of the parent undertaking. However, non-listed entities that are subsidiaries of an undertaking established in a third country may only be exempted from preparing and publishing a sustainability report, if they are included in a consolidated sustainability report that their parent undertaking prepared and published in accordance with the ESRS standards established by EFRAG or in a similar manner in accordance with an implementing act of the European Commission on equivalence (no equivalence has been determined so far).

The CSSF draws the attention of the entities to the existence of support and accompanying measures for undertakings (by the Chamber of Commerce notably), in particular through the implementation of training programmes dedicated to the CSRD and the ESRS.

IFMs and registered AIFMs may address their questions to the following email addresses:

• For IFMs: gfi@cssf.lu
• For registered AIFMs: aifm_registration@cssf.lu.