LUXEMBOURG Law and Practice Contributed by: Andreas Heinzmann, Hawa Mahamoud and Eva Jean, GSK Stockmann
make financial products available should disclose how and to what extent they use the criteria for environ- mentally sustainable economic activities to determine the environmental sustainability of their investments. Such disclosure applies as follows: • as from 1 January 2022, concerning the environ- mental objectives of climate change mitigation and climate change adaptation; and • as from 1 January 2023, concerning other environ- mental objectives. Regulation (EU) 2023/2631 of 22 November 2023 on European Green Bonds and optional disclosures for bonds marketed as environmentally sustainable and for sustainability-linked bonds (the “Green Bonds Regulation”) shall apply to issuers from 21 December 2024. The Green Bonds Regulation lays the foundation for a common framework of rules regarding the use of the designation “European green bond” or “EuGB” for bonds that pursue environmentally sustainable objec- tives within the meaning of the Taxonomy Regulation. Issuers must state that the bond is a EuGB in a com- pliant prospectus approved by a national competent authority (eg, CSSF in Luxembourg). The Green Bonds Regulation also sets up a system for registering and supervising companies that act as external reviewers for green bonds. It will further facilitate the market for high-quality green bonds, thereby contributing to the Capital Markets Union, while minimising disruption to existing green bond markets and reducing the risk of greenwashing. The Green Bonds Regulation also contains special conditions for securitisation bonds, with the gener- al requirements of the Regulation slightly modified, taking into account the structural characteristics of securitisations. In contrast to corporate bonds, the purpose of a securitisation bond is not to provide liquidity at the issuer level, but at the level of the origi- nator, who is not the issuer of the bond. The Green Bonds Regulation focuses on the originator’s use of the proceeds from the bond issue. As there are cur- rently still very few risk exposures that can be securi- tised and are aligned with the Taxonomy Regulation, the Green Bonds Regulation only excludes certain risk exposures, rather than requiring the securitisation of a minimum share of green receivables. For the time
being, a regular review and potential expansion of the scope of application of the Regulation are planned, rather than establishing a separate legal framework for sustainable securitisation. On 6 February 2025, Luxembourg adopted national legislation that aligns with the Green Bond Regula- tion. This law operationalises the EU framework and confers supervisory power on the CSSF, allowing it to oversee compliance with the requirements of the Regulation, in particular as regards transparency and disclosure. Additionally, Regulation (EU) 2024/3005 on the trans- parency and integrity of Environmental, Social and Governance (ESG) rating activities was adopted on 27 November 2024 and applies from 2 July 2026. The regulation enhances investor confidence in sustain- able products by ensuring greater transparency, relia- bility, and comparability of ESG ratings, which assess the sustainability profile of companies and financial instruments. Under the new rules, ESG rating provid- ers will be subject to authorisation and supervision by ESMA, with strict requirements on methodology transparency and conflict of interest management. Providers based outside the EU wishing to operate within the EU will need to secure an endorsement or recognition by an EU-authorised provider. With regard to local initiatives, the Luxembourg gov- ernment, in co-operation with the private sector, founded in 2020 the Luxembourg Sustainable Finance Initiative (LSFI). Its main aspirations are to promote existing and upcoming sustainable finance initiatives, to coordinate and support the Luxembourg financial centre in taking impactful actions in the field of sus- tainable finance and to measure the progress that is made in this sector to integrate sustainability by col- lecting and analysing data on the Luxembourg finan- cial industry. Through this initiative, the Luxembourg government has sent yet another strong signal of the country’s determination to help mainstream sustain- able finance. Furthermore, Luxembourg was the first European country to launch a sustainability bond framework in September 2020. This framework, which meets the highest market standards, was the first in the world
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