Agefi Luxembourg - avril 2025

AGEFI Luxembourg 24 Avril 2025 Fonds d’investissement A fund’s name plays a key role in sharing important infor- mationwith investors and acts as a vital marketing tool sha- ping and influencing investment decisions. In recent years, there has been a significant rise in funds that promote environmen- tal and social characteristics, reflecting growing investor interest. By the end of 2024, funds promoting ESG characteristics (Article 8) and those with a sustaina- ble investment objective (Article 9) accounted for EUR 6.1 trillion in assets, re- presenting 60%of the total market share (1) . This growing trend has rai- sed concerns about the potential for mislea- ding sustainability claims and the risk of greenwashing, especiallywhen funds’ names refer to green or socially sustainable without meeting adequate standards. With the aim to address these concerns, the ESMA Fund Naming Guidelines (2) were published in Au- gust 2024. Applicable since 21 November 2024 to new funds, these guidelines granted existing funds additional sixmonths – until 21May 2025 – to com- plywiththenewrules.TheGuidelinesaimtoprotect investors from unfounded and overstated sustain- ability claims in fund names and to establish clear, quantifiablestandardsforassetmanagerstoevaluate when ESG or sustainability-related terms can be used in fund names. On 21 October 2024, the CSSF published Circular 24/863 (3) on the application of the ESMA guidelines. To facilitate theupdateof pre-contractual documen- tation, the CSSF launched a priority processing pro- cedure (4) (“PPP”) for existing UCITS and AIFs that limit the update of their issuing document/prospec- tus to amendments required in the context of the entry into force of the Guidelines. TheGuidelines apply to awide range of investment fundmanagers (IFMs)managingUCITSorAIFs, re- gardless of whether they disclose under SFDRArti- cles 6, 8, or 9. Understanding ESMAGuidelines The Guidelines categorize the fund names in three distinctcategories,comingwithasetofrequirements. Funds using transition, social or governance related terms must allocate at least 80% of their investments towardsproductspromotingenvironmentalorsocial characteristics.Theyalsohavetoexcludeinvestments in companies involved in controversial weapons, the production of tobacco or those benchmark adminis- tratorsfindinviolationoftheUNGCprinciplesand/or theOECDGuidelines formultinational enterprises. Ontopofthat,fundsusing environmentalorimpact terms mustfurtherexcludeinvestmentsincompanies deriving a significant portion of their revenue from coal, oil, or gas-related activities. Themost ambitious category, funds using words derived from“sustain- ability” should apply all above criteria andmust ad- ditionallydemonstrate ameaningful commitment to sustainable investments. If a funddoes not complywith these requirements, it willneedtodecidewhethertochangethefundname oramendtheinvestmentstrategyandcompositionof thefundtomeettheconditions,andkeepinmindthat anydeviationwill be considered a rule breach. Getting ready for 21May:A two-step approach The CSSF emphasizes that the list of ESG and sus- tainability-related terms in theGuidelines is not ex- haustive,meaning that financialmarket participants must individually assess whether the Guidelines apply to all financial products they manage. In all cases full transparency on the ra- tionale behind ESG-related fund names are required, eliminating the reliance onbroad sustainability claims without substantive evidence. Fund managers will need to assess all exist- ingfundnamesandrel- evant documentation against the ESMA guidelines to identify any discrepancies or areasofnon-compliance. Incaseafundnamechange is required, fund managers willneedtofilethePPPforexistingfunds andconsidernecessaryamendmentstotheSFDRdis- closures andmarketingmaterials of the fund. Additionally, there are measures fund managers can takebeyond immediate compliance tomaintain alignment with evolving regulations. Investing in training sessions for product development teams withworkshops focusedon the fundnamingguide- lines will help ensure that teams are fully informed andcapableof applying thenewstandards in future product developments. Internal controls should be established to verify continuous compliance with the ESMA guidelines criteria, based on the fund name’s category, documented in the policies and processes of the entity. Regular monitoring will be essential to ensure that funds continue to meet the guidelines’ requirements over time. Finally, clear communication with key stakeholders is critical; fund managers must ensure that investors under- stand fund name changes and strategy shifts, rein- forcing transparency and trust. Clarity or complexity? Theregulatoryupdateaimstocombatgreenwashing and enhance investor transparency, but it also intro- duces significant challenges that require strategic de- cision-making. While the guidelines aim to enhance transparency, they pose an ultimatum: adapting the fund’s strategy or adapting its name. This presents a particularchallengeforfundswithanambitiousdef- inition of sustainable investments: in its Q&A (5) of December 2024, ESMAstates that a fund isonlycon- sidered tobe “meaningfully investing insustainable investments” if at least 50% of its portfolio qualifies as such. However, since as per SFDRArticle 2(17), (6) there is not a formal definition of sustainable invest- ment, a stricter internal definition – one that aligns withamore rigorous sustainabilityambition– could paradoxically result in a lower percentage of quali- fying sustainable investments. As a result, highly ambitious funds risk being penalized by their own high standards, facing the difficult choice of either diluting their sustainability strategy to meet the thresholdor givingupon the use of a sustainability- related fund name. Adapting the investment strategy would require a fundamental shift in how a firm defines and inte- grates sustainability, which may not be desirable – or even feasible – for firms that have built their rep- utations on strong ESG commitments; it entails sig- nificant efforts and a reconsideration of previous engagements, leadingmanymarket players tooften choose the alternative of adapting the fund names. However, changing the fundname has far-reaching consequences; as each firmoperates under one uni- formdefinition of sustainable investment renaming funds wouldmean having to align processes, inter- nal controls and SFDR disclosures across the entire fund range. Funds with a strong sustainability am- bition may need to adjust their approach to ensure both compliance and alignment with their sustain- ability objectives. Fundmanagersmust carefully balance compliance, integrity, and strategic positioning to thrive in this new regulatory framework and will play a central role in shaping the future of sustainable future. As the implementation of the Guidelines is nearing its end, the industry will likely see a transformation in howESGinvestmentsarestructured,communicated and positioned. Vanessa MÜLLER, ESG Leader Maëlys DUBÉ, ESG Consultant EY Luxembourg 1) Morningstar study: SFDRArticle 8 and Article 9 Funds: Q4 2024 inReview 2) ESMAFundNamingGuidelines 3) CSSFCircular 24/863 4) Communication to the investment fund industry in relation to the ESMAGuidelines on funds’ names using ESG or sustai- nability-related terms –CSSF 5) ESMA’sQ&Aon the application of theGuidelines 6) SFDR Fund naming guidelines on ESG: Last sprint in the 21 May deadline - are you ready? I n a sharp change fromhistorical caution, Europe is rampingup defence spending—andLuxem- bourg’s privatemarket players are positioning themselves at the heart of this transformation. As geopolitical tensions rise and the EU embraces a new strategic au- tonomydoctrine,thetradition- ally under-financed European defence sector is becoming fertile ground for invest- ment. Luxembourg, known for its fund structuring exper- tise and agile regulation, is emerging as a prime hub for asset managers and venture capitalists exploringdefence and dual-use technologies. The EU is backing this shift with significant financial firepower. The European Defence Fund (EDF) has earmarked over €1 billion for collaborative R&D in 2025, while instruments like The European Defence Industry Reinforcement through common Procure- ment Act (EDIRPA) and The Act in Support of Am- munition Production (ASAP) reinforce industrial capabilities and cross-border procurement—vital for scaling start-ups and established suppliers alike. Furthermore,EDIRPA,whichpromotesjointprocure- ment by EUMember States, could significantly ease market entry for new suppliers—offering investors the prospect of more stable and predictable revenue streams. Meanwhile, the Defence Equity Facility— launched by the European Investment Fund (EIF) with €175 million in InvestEU capital—is actively committing to VC and PE funds with a defence or dual-use thesis. The target: €500million inmobilized capital by 2027. From satellites to cybersecurity, and from battlefield AItosecurecommunications,thefocusisbroad.Gen- eralist funds are also being encouraged to carve out partial defence strategies, boostingflexibility for asset managers.Luxembourg’sfinancialindustryisalready responding. Several local funds have started in- cludingdefenceallocations,whileothersexplore launchingdedicatedvehicles. Following the domiciliation of the €1 billion NATO Innovation Fund in Luxembourg in 2023 and the growing ecosystemof deeptech start-ups, the Grand Duchy is becoming a magnet for institutional defence capital. On theGround: Luxembourg’s Engagement inFocus OnMarch27, 2025, theChamber ofCommercehostedthe‘Security andDefencePerspectives for Lux- embourg Investors’ event, coordi- nated by Luxinnovation and the LuxembourgDirectorateofDefence with support from LPEA. The aimwas clear: bring limited and general partners closer to the rapidly evolvingdefence landscape. Speakers included Hélène Massard (Luxembourg Directorate of Defence), Volker Bäcker (European Commission),FedericaValente(EDA),NicolasdeLa Vallée Poussin (EIF), andAri Jonsson (NATO Inno- vation Fund). Their message: we need a clear and structured path for private capital to scale defence innovation across Europe. The panel discussions re- vealed gaps—such as the absence of EU growth funds and the need for public-private synergy—as well as opportunities inAI, secure space communi- cations,andautonomoustechnologies.Luxembourg start-ups including Tadaweb, LMO, and Uplift360 shared their journeys raising funds from VC for dual-usesolutions,reinforcingtheroleoflocalcapital in powering this transition. LookingAhead: Forecast for 2027 andBeyond By 2027, defence will no longer be a niche thematic strategy. Europe is poised to institutionalize it across capital markets, with Luxembourg serving as both a structuringhub and thought leader. WeanticipateariseinspecialisedLuxembourg-domi- ciled defence funds—both VC and PE—with in- creased backing from EIF, NATO-aligned LPs, and sovereign investors. Thisisnotjustatrend.It’sastructuralshift.Defenceis becoming a critical pillar of Europe’s industrial pol- icy—andprivatecapitalwillbeessentialtoitssuccess. Natália VIEIRA, Events & Communications Officer at LPEA Private Market Momentum in Europe’s Defence Investment Shift L a guerre commerciale initiée par le pré- sident américainDonaldTrump avec des droits de douane supplémentaires allant de 10%à 50%, et ses conséquences sur la croissance économique ainsi que lesmar- chés financiersmondiaux, ont retardé de nombreux projets d'introduction enBourse (IPO) à travers lemonde et pèse sur les opé- rations de fusions et acquisitions (M&A). La fintech suédoise spécialiste du paiement frac- tionnéKlarnaetlanéobanqueaméricaineChimeont ainsi annulé leur IPO, selon des personnes proches des dossiers. LerevendeurdebilletsStubHub,quidevaitentamer ces prochains jours sa tournée de présentation aux investisseurs en vue de son IPO déjà retardée, a repoussé ses projets. Les dirigeants prévoient d'at- tendre après Pâques. LasociétédeservicesfinancierseToro,baséeenIsraël, a également reporté les présentations aux investis- seurspoursonIPOàWallStreet,prévuesinitialement le 7 avril, à après le 20 avril en raison des conditions du marché et de la volatilité, a rapporté une source proche dudossier. "Il sera très difficile de mener une opération à son terme, car le coût de la dette devrait augmenter et il sera plus difficile d'évaluer les entreprises", a déclaré un banquier chevronné. Si cette tendance se poursuit, elle pourrait étouffer la capacité des entreprises à lever des fonds et à investir, ce qui ralentirait encore la croissance économique. Lapoli- tiquedouanière adéjà refroidi leM&AàWall Street au cours du premier trimestre, le volume de trans- actions aux Etats-Unis ayant fondu de 13% sur un an à 436,56 milliards de dollars, selon les données de Dealogic compilées pour Reuters. "Ce ne sont pas les droits de douane en tant que tels qui posent problème", a expliqué Antony Walsh, associé du cabinet d'avocats Eversheds Sutherland spécialisé dans les fusions et acquisitions d'entre- prises. "C'est le niveau d'incertitude qui les accom- pagnequiaffectelaconfiancedeschefsd'entreprise". Source : Reuters Les IPO et M&Aperturbées par la guerre commerciale ©Freepik