GERMANY Law and Practice Contributed by: Tarek Mardini, Antonia Puglisi and Enzo Biagi, POELLATH
For German-based funds, the depositary must be German-based as well. Money-Laundering Officer A money-laundering officer must be German-speak - ing and German-resident. BaFin does not accept a money-laundering officer on a fly-in basis. It is usually sufficient, however, for the money-laundering officer to be employed by the fund manager and not by the fund. Compliance Officer A compliance officer and other internal control func - tions usually require a local presence as well. It is also usually sufficient for the compliance officer to be employed by the fund manager and not by the fund. Fund Administrators Fund administrators can provide their services from outside Germany. This is useful for offshore fund administrators who would like to access the Ger - man market, but for whom it does not make business sense to have a local presence. 2.10 Anticipated Changes for Funds ESAs’ Assessment of the SFDR On 18 June 2024, the European Supervisory Authori - ties (the European Banking Authority, the European Insurance and Occupational Pensions Authority and ESMA, together the ESAs) published a joint opinion on the assessment of the SFDR. The assessment was published in the context of an ongoing assessment of the sustainability disclosures framework. One of the ESAs’ key concerns is the complexity of the current SFDR disclosure requirements. The ESAs acknowledge that current investor disclosures have resulted in a high level of complexity and are difficult to understand. Therefore, the ESAs suggest simplifying the current disclosure requirements by implementing a product classification system that considers both the green transition as well as improved consumer protection. Additionally, the new classification should reflect the lessons learned from the functioning of the SFDR to date. The ESAs propose the introduction of simple and clear categories for financial products, consisting of two
voluntary categories, “sustainable” and “transitional”. Financial market participants should use such catego - ries to ensure that consumers understand the purpose of the respective products. The rules for the catego - ries should also have the clear objective of reducing the risk of greenwashing. Additionally, the ESAs rec - ommend the introduction of a sustainability indicator that grades financial products. This should help con - sumers navigate the broad selection of sustainable products and support the full transition to sustainable finance. Such sustainability indicator could refer to environmental sustainability, social sustainability or both, illustrating to investors the sustainability fea - tures of a product on a graded scale. According to the ESAs, the sustainability indicator could be used as an alternative or in addition to the above-mentioned categories. The ESAs recommend that the above-mentioned options for product categorisation and/or sustain - ability indicator(s) should be consumer tested and consulted on before final implementation in the SFDR framework. Despite the regulatory progress, uncertainties remain with respect to certain aspects of the application of the SFDR and the Taxonomy Regulation. While BaFin released a Q&A in September 2022 (that is periodically updated from time to time), which notably addressed the debated translation of “promote” under Article 8 of the SFDR into German law, BaFin has not published guidance on all aspects of sustainable investment funds and many practical issues remain unresolved. In May 2025, the European Commission launched a formal consultation on the future of the SFDR regime. The initiative (titled “Call for Evidence”) aims to assess practical experience with the existing framework and explore potential options for simplification and struc - tural adjustments. The consultation builds on earlier ESAs’ opinions and stakeholder engagement and is intended to serve as the basis for a substantive reform. A legislative proposal is expected in the fourth quarter of 2025, but might be delayed due to the implementa - tion of the SFDR in a wider omnibus initiative covering a review of all European sustainability regulations.
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