In particular, an EU delegated regulation came into force on 2 August 2022 and an EU delegated directive has been implemented into Luxembourg law by a grand- ducal regulation of 27 July 2022 that will enter into force on 22 November 2022. Both texts aim at ensuring that firms providing investment services better take into account sustainability factors, risks and preferences when dealing with clients.

Commission Delegated Regulation (EU) 2021/ 1253 of 21 April 2021

This EU delegated regulation amends delegated regulation 2017/565 in view of integrating sustainability risks in the governance of firms providing investment services within the meaning of MiFID II (in particular in their risk management and conflicts of interest policies and procedures).

It also integrates sustainability considerations within the rules of conduct which firms providing investment advisory and/or discretionary portfolio management services have to abide.

Firms providing investment advisory services must:

• disclose to their clients, where relevant, the sustainability factors taken into consideration in the selection process of financial instruments;
• obtain specific information on their clients’ preferences regarding sustainable investments and ensure that they do not recommend any transaction that do not meet such preferences; and
• make sure that the suitability reports to be addressed to retail clients explain how the recommendations meet the respective clients’ sustainability preferences.

Investment firms providing discretionary portfolio management services are required to obtain specific information on their clients’ preferences regarding sustainable investments and to ensure that they do not carry out any transaction that do not meet such preferences.

In a communication of 2 August 2022, the CSSF clarified that it expects firms providing investment advisory and/or discretionary portfolio management services to take into account sustainability preferences in all new clients’ profiles and for any regular update of existing clients’ profiles as of 2 August 2022, notwithstanding the fact that guidelines on these new requirements are yet to be issued by the European Securities and Markets Authority (ESMA) and that sustainability related product-level information is only progressively becoming available (as per the requirements of Regulation (EU) 2019/2088 on sustainability‐related disclosures in the financial services sector, as amended).

The above requirements apply in addition to the sustainability‐related disclosure obligations with which such firms already have to comply in respect of certain of their policies as well as pre-contractual disclosures pursuant to Regulation (EU) 2019/2088, Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment (although part of its provisions will be applicable only from 1st January 2023) and Commission Delegated Regulation (EU) 2022/1288 of 6 April 2022 supplementing Regulation (EU) 2019/2088 (that will however be applicable from 1st January 2023).

Grand-ducal regulation of 27 July 2022

For its part, this grand-ducal regulation amends the grand-ducal regulation of 30 May 2018 on the protection of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or non-monetary benefits in order to implement the Commission Delegated Directive (EU) 2021/1269 of 21 April 2021 amending Delegated Directive (EU) 2017/593 as regards the integration of sustainability factors into the product governance obligations applicable to investment firms.

This grand-ducal regulation aims at integrating sustainability related objectives and sustainability factors into the product governance requirements applicable to firms manufacturing or distributing financial instruments within the meaning of MiFID II through notably the integration of sustainability factors in the definition of target markets.

Further guidance on the implementation of these new requirements should be issued by ESMA in the near future once the consultation process launched on 8 July 2022 for the review of the guidelines on MiFID II product governance requirements comes to an end.