Introduction
On 10 February 2025, the Luxembourg law of 6 February 2025 (the Law) was published in the Official Journal of the Grand-Duchy of Luxembourg.
The Law implements the supervisory powers of the Commission de Surveillance du Secteur Financier (the CSSF), as provided for in Regulation (EU) 2023/2631 of the European Parliament and of the Council of November 22,2023 on European Green Bonds and optional disclosures for bonds marketed as environmentally sustainable and for sustainability-linked bonds (the EuGB Regulation).
The EuGB Regulation
The EuGB Regulation entered into force on 20 December 2024, establishing a set of requirements that bond issuers, namely companies and public authorities, may choose to follow when issuing, namely, green bonds. Issuers opting in to comply with the EuGB Regulation are entitled to make bonds available to investors in the European Union (EU) under the designation 'European Green Bond'. The EuGB Regulation provides, inter alia, specific requirements relating to the use of proceeds of the 'European Green Bonds' and enhanced transparency for the benefit of investors through detailed reporting requirements including, i) pre-issuance of a green bond factsheet, ii) post-issuance of an allocation, and iii) impact report, as well as iv) pre-issuance and v) post-issuance performance of external reviews1.
The EuGB Regulation additionally provides that national competent authorities of each Member State are responsible for the supervision and monitoring of the effective application of the EuGB Regulation and describes the related supervisory tasks.
As the EuGB Regulation is an EU regulation, it is directly applicable throughout the EU in the national legal system of all member states. However, the purpose of the Law is to operationalise the implementation of the EuGB Regulation, and, to this end, the Law generally follows the provisions of the EuGB Regulation, which are detailed below.
Main features of the powers of the CSSF
The Law designates the CSSF as the competent authority to oversee the application of the EuGB Regulation in Luxembourg.
In this context, the CSSF is vested with a set of supervisory and investigative powers including:
- Requiring issuers to publish documents (e.g., European Green Bond factsheets, which is Annex I of the EuGB Regulation, reviews and assessments, annual allocation reports etc.);
- Requiring issuers, auditors and the senior management of the issuer to provide relevant information and documents;
- Prohibiting or suspending an offer or admission to trading on a regulated market of European Green Bonds for a maximum of ten consecutive business days where there are reasonable grounds to suspect that the issuer has failed to comply with transparency requirements and the recourse of an external reviewer, including those applied to securitisation transactions2;
- Making public the fact that an issuer of European Green Bonds has failed to comply with the EuGB Regulation, and requiring the issuer to publish that information on their website;
- Prohibiting an issuer from issuing European Green Bonds for a period of more than one year if the issuer has repeatedly and seriously the transparency requirements and the recourse of an external reviewer, including those applied to securitisation transactions;
- Carrying out on-site inspections or investigations at sites where a reasonable suspicion exists that documents and other data may be relevant to prove an infringement of this Regulation;
In addition to the powers provided under the EuGB Regulation, the Law also provides the possibility for the CSSF to pass on information to the public prosecutor with a view to criminal prosecution.
The Law also sets out administrative sanctions by reproducing the related provisions of the EuGB Regulations. The CSSF may, inter alia, make a public statement specifying the identity of the natural or legal person responsible and the nature of the infringement and make an injection prohibiting the natural or legal person responsible from issuing European Green Bonds for a period not exceeding one year.
The pecuniary sanctions set out by the Law include:
- in the case of a legal person, administrative fines of up to EUR 500,000 or 0.5% of the legal person's total annual turnover. It is specified that, in the case where the legal person is a parent undertaking or a subsidiary of a parent undertaking which is required to draw up consolidated financial statements in accordance with Directive 2013/34/EU3, the total annual turnover of the ultimate parent undertaking shall be taken into consideration;
- in the case of a natural person, administrative fines of up to EUR 50,000;
- in the event of unwillingness to cooperate with an investigation, inspection or request of the CSSF, the latter may impose a fine within the range of EUR 250 to EUR 250,000.
It should be noted that all sanction decisions taken by the CSSF must be duly reasoned. Decisions taken by the CSSF in the exercise of its supervisory or sanctioning powers may be appealed before the Administrative Court of Luxembourg.
What's next?
The Law entered into force on 10 February 2025.
Our sustainability experts Aurélien Hollard and Julie
Pelcé will keep you updated with any further
development.
In the meantime, please do not hesitate to contact us if you have
any questions.
Footnotes
1. For more information on key elements of the EuGB Regulation, please read our publication here.
2. 'an obligation under Title II, Chapter 2 or Articles 18 or 19 of the EuGB Regulation'
3. Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
