Agefi Luxembourg - novembre 2025

Novembre 2025 21 AGEFI Luxembourg Fonds d’investissement E YLuxembourgClimate Change andSustainability Services (CCaSS) is proud to announce the release of Luxem- bourg SFDRBarometer 2025:A DeepDive into SFDRReporting Practice . This study analyzes the sustainability disclosures of 595 funds, providing critical insights into the evolving landscape of sus- tainable finance and the impact of the Sustainable FinanceDisclosure Regulation (SFDR) across the EU fundmarket. Driving sustainable finance forward The SFDR, adopted in 2021, has become a compliance imperative, requiring asset managers to classify and report on the sustainability of their investments. “Sustainability is a key aspect of invest- ment strategy, with the majority of EU funds promoting or committing to sus- tainable objectives,” says Raphael Betti, EY Luxembourg Partner and CCaSS Leader. Betti continues, “SFDRperiodic disclosures currently act as the primary source of evidence for assessing the sustainability performance of asset managers. However, they often remain unaudited and not subject to third- party verification.” It was in this context that the CCaSS team embarked on its research, con- ducting a comprehensive review from March 2024 to June 2025 on the quality of 595 SFDR periodic disclosures, fo- cusing on adherence to the SFDR Reg- ulatory Technical Standards (RTS). The study excluded Article 6 funds and concentrated on Article 8 (“Light Green”) and Article 9 (“Dark Green”) funds, as well as the unofficial “Article 8+” category. Key findings - Reporting maturity : The study cate- gorizes disclosures into Achievers (30%), Moderate Performers (45%), and Laggards (25%), revealing significant disparities in reporting quality and commitment to sustainability. - Quality linked to investment impact : Funds allocating over 70%of their port- folios to sustainable investments consis- tentlydeliver higher qualitydisclosures, demonstrating that robust sustainability commitments drive better reporting outcomes. - Transition potential : Approximately 40%ofArticle 8+ funds exhibit practices that could qualify them for Article 9 classification, potentially unlocking ac- cess to a broader base of sustainability- focused investors. -AssuranceGap: Only 2.2%of periodic disclosures mentioned any type of as- surance related to SFDR/ESG reports, highlighting a critical area for improve- ment in credibility. - EU Taxonomy alignment: 66% of funds considered with best reporting practices have their sustainability in- vestments portfolio aligned with EU Taxonomy. - Social investments: Article 8+ funds average 14.9% of their portfolios in so- cial initiatives, whileArticle 9 funds av- erage 18.7%. - Sector disclosure: Only 39% of Article 8 funds, 45%of article 8+ funds, and47% of Article 9 funds provide both sector and subsector information. - Investments in fossil fuels/nuclear: 15% of Article 8, 27% of Article 8+ and 8%ofArticle 9 funds invest in two of the most contentious topics concerning en- vironmental sustainability. Opportunities and challenges Opportunities and challenges in SFDR reporting are becoming increasingly clear.WhileArticle 9 funds currently set the benchmark for sustainable invest- ments,Article 8+ funds showsignificant promise for transition, with around 40% demonstratingpractices that couldqual- ify them for Article 9 status, potentially unlocking new capital inflows and broadening their investor base. However, there are still hurdles to over- come. Many funds need to improve transparency, particularly in areas such as assurance, EU Taxonomy alignment and sectoral disclosures. The upcoming SFDR 2.0 reforms will introduce new sustainability indicators, reinforce the “Do No Significant Harm” principle, and enhance comparability across dis- closures. The guidance is clear: asset managers who proactively adapt to these changeswill be better equipped to meet future regulatory requirements andmaintain their leadership in sustain- able finance. The path ahead The report underlines that financial in- stitutions should embrace continuous improvement in sustainability report- ing. “Voluntary limited assurance is a keydriver of credibility and compliance, enabling funds to build trust and attract environmentally and socially conscious investors,” says Betti. “By prioritizing transparency andadapting to regulatory changes, financial institutions can lead the transition to a more sustainable fi- nancial ecosystem.” Report: https://short.do/pqRQUL SFDR Barometer 2025: ADeep Dive into SFDR Reporting Practice 1 Luxembourg SFDR Barometer 2025 Adeepdive intoSFDRReporting Practice EYLuxembourgClimateChange andSustainabilityServices Status and trends of the Luxembourg insurance market D espite significant geopoli- tical and market uncer- tainties in the Eurozone at the end of 2024 and the begin- ning of 2025—creating heigh- tened volatility in financial markets and uncertainty around economic growth and inflation prospects—gross written premiums of Luxem- bourg life insurers reached un- precedented levels in 2024. As of December 31, 2024, the Luxem- bourg insurance sector recorded total premium income of € 46.4 billion. On the life side, premiums amounted to € 26.8bn, representing a year-on-year increase of 41%. In parallel, the total assetsmanaged under Luxembourg life insurance policies rose by 9%compared to the prior financial year, reaching € 242bn. (1) Luxembourg life insurance products are largely distributed on a cross-border basis. Themainmar- ket is France, which accounts for approximately 52%of overall premiums written by Luxembourg life insurance companies, followed by Italy, Bel- gium, Germany, and Portugal. (2) Luxembourg unit-linked life insurance—typically referred to as insurance “wrappers” as they enable policyholders to “wrap” a wide range of assets within their policy— is commonly used for invest- ment purposes. These products allow policyhold- ers located both in Luxembourg and abroad to access a broad spectrum of underlying assets and to link the value of their policies to the value of those assets, in contrast to guaranteed life insurance con- tracts where the insurer pays out a fixed sum. Although the list of eligible assets for insurance wrappers under Luxembourg law is broad (and includes, amongst other assets, both Luxembourg and foreign funds), from a fund perspective UCITS have historically been—and remain—the predominant type of investment fund accessed through insurance wrappers. While Alternative Investment Funds (AIFs) offer increased diversi- fication and potentially higher returns, they also raise specific challenges due to their more limited liquidity and their perception as being “riskier” than UCITS. Despite these constraints, market demand forAIF exposure through life insurance wrappers is ris- ing. In an environment marked by inflation and equity/rate volatility, policyholders are under- standably seeking increased returns, reduced cor- relation to listedmarkets and structured access to privatemarkets. This trend reflects the appetite of insurers and insurance intermediaries, who see AIF-linked strategies as ameans of product differ- entiation, and of fund distributors and asset man- agers, who increasingly view the insurance market as an attractive distribution channel. Considerations around including anAIF within a Luxembourg insurance wrapper Eligibility rules: route to market The preliminary consideration for including an AIF in an insurance wrapper is to determine whether the AIF is eligible for the insurer’s wrap- per architecture and, if so, to what extent. These are the eligibility criteria and investment limits set out inCircular 15/3, issued by the Luxembourg in- surance sector regulator, the Commissariat aux Assurances (CAA), on the investment of Luxem- bourg insurance policies into investment funds (the CAA Circular 15/3). Eligibility criteria and investment limits are driven by two main factors. - First, policyholder categorisation. Based on the amount investedwith the relevant insurer and the policyholder’s total financial wealth in securities, policyholders are categorised into five categories: N (the default), A (minimum € 125,000 invested across all contracts with the insurer and declared financial wealth in securities of at least € 250,000), B (minimum € 250,000 invested and at least € 500,000 in financial wealth), C (minimum € 250,000 invested and at least € 1.25 million in fi- nancial wealth) and D (minimum € 1m invested and at least € 2.5m in financial wealth). - Second, the manner in which the policy assets will be invested, i.e., whether the wrapper will in- vest directly in the AIF (the “external fund” model) or through a specific vehicle established by the insurance company (an “internal fund”, set up by the insurer as a separate pool of assets) for the purpose of the wrappers. Internal funds may take various forms and be set up as internal col- lective funds (an internal fund established formul- tiple policyholders, whose assets are pooled and invested in underlying funds), internal dedicated funds (an internal fund established for a single life insurance policy andmanaged by a single manager), or specialized in- surance funds (an internal fund estab- lished for a single life insurance policy and which can be managed by the insurer, an external manager or, in some cases, the policy- holder). Under the CAA Circular 15/3, anAIFwill generally be eligible for both the internal and external fund models for policyholders categorized as C andD, with expo- sure of up to 100% of the insurance policy, subject to any specific rules ap- plicable in the policyholder’s jurisdiction as well as internal limits which may be applied by insur- ers for their exposure to these products. Practical considerations when investing in an AIF via insurance wrappers When a policyholder invests through a Luxem- bourg insurance wrapper, any assets included within the policy at inception and on an ongoing basis (whether cash or securities) fall under the legal ownership of the insurance company. The policyholder holds only a contractual claim against the insurer representing a number of units within the policy. Accordingly, when assets are wrapped within a unit-linked policy, the insurer invests in its own name and becomes the legal owner of such assets. FromtheAIF’s perspective, the insurerwill appear in the register of shareholders/interests (unless in- vesting through a nominee) and will therefore be the legal owner of the fund interests—there is no look-through to the underlying policyholder, who has no direct relationship with theAIF. This mode of investment carries several practical implications. First, during the assessment of whether to include an AIF in a Luxembourg in- surance wrapper, a key consideration is the trans- ferability of theAIF’s shares/interests. Depending on the law applicable to the insurance policy, pol- icyholdersmay have a contractual right to request a full or partial surrender at any time, and the in- surer is legally obliged to comply. In both scenar- ios, the insurer must pay the policyholder’s claim within the contractually (or, depending on the ju- risdiction, legally) determined period. Where the underlying assets are illiquid—as is often the case for AIFs—the insurer must ensure it can satisfy surrender claims and may therefore require transferability of the interests. From the AIF’s perspective, offering documents may limit eligible investors and make transfers conditional upon manager consent and satisfaction of know- your-customer requirements, which can be diffi- cult to reconcile with the insurer’s obligations to policyholders. Second, from an anti-money laundering and counter-terrorist financing (AML/CTF) perspec- tive, the fund will conduct appropriate measures on the insurance company, without a look- through to the underlying policyholder (who is not its client for AML/CTF purposes). Third, theAIF’s eligibility assessment of the insur- ance company (as investor) will in principle be basedon the insurer’s profile. However, depending on the jurisdiction where the policyholder is lo- cated, additional assessments may be required to ensure the fund is not indirectly made available to policyholderswhowouldnot otherwise be eligible. Further challenges may also arise in defining the contractual framework between the insurer and the AIFs included in the wrapper. The fund doc- umentation may need to be supplemented by a separate agreement between the AIF and the in- surer to address the practical points set out above and to determine fee arrangements (if any) be- tween the AIF and the insurer distributing the in- terests (i.e., proper fees versus inducements). Finally, from the perspective of the policyholder, the additional risks attached to these products (and in particular, their limited liquidity) will need to be correctly disclosed by the insurance com- pany in accordance with the CAA Circular 15/3 as, although they are not investors in the fund, the value of their policy ultimately depends on the as- sets into which that policy has invested. Looking forward While demand forAIF exposure through Luxem- bourg life insurancewrappers is rising, presenting a compelling opportunity for both insurance and investment fund market participants, bringing these two worlds together will be nonetheless challenging. With careful assessment and struc- turing, however, insurers and fundmanagers can work through these issues together to the long- term benefit of policyholders and the broader fund ecosystem. Helena FINN, Counsel, Insurance – Avocat à la Cour Natalia CELAC-TARABOANTA, Senior Associate, Investment Funds – Avocat à la Cour A&O Shearman (Luxembourg) 1) ACA (Association des Compagnies d’Assurances et de Réassu- rances du Grand-Duché de Luxembourg), Luxembourg Insurance Sector Key Figures 2024 (ACA 2024) https://short.do/XnBUGT, p. 2-3, accessed on 13 November 2025. 2) ACA Luxembourg Insurance Sector Key Figures 2024 (ACA 2024) https://short.do/XnBUGT , p. 5, accessed on 13 November 2025. Where alternative investment funds meet Luxembourg insurance wrappers: challenges and opportunities