AGEFI Luxembourg - septembre 2025

AGEFI Luxembourg 28 Septembre 2025 Fonds d’investissement W hile the EU’sOmnibus Package reshapes the sustainability landscape, fostering simplification and a de- crease in reporting burden, finan- cial institutions continue to face challenges in access to ESGdata, paramount for their investment de- cisions and loan strategies. TheEU’sOmnibus Package aims to sim- plify sustainability reportingbut has also createdanewchallenge: awideningESG data gap. Financial institutions still need reliableESGinformation toguide invest- ment and lending decisions, yet fewer companies are now required to report. For small and mid-sized enterprises (SMEs), the stakes are evenhigher: access tofinance increasinglyhingeson theabil- itytoprovidecredibleESGdata,asfinan- cial players require this information to assess risks andmeet regulatoryexpecta- tions. Despite concerns about feasibility, market expectations have not eased: in- vestors, lenders and regulators still de- mand transparency. The Voluntary Sustainability Reporting Standard for SMEs (VSME) could be- comeabridge tomeet theseexpectations. Officially adopted by the European Commission on 30 July 2025, VSME can beaproportionate, flexible framework to help smaller companies report ESGdata in away that is credible, comparable and capital-ready. The Post-Omnibus Reality In February 2025, the European Com- mission announced the Omnibus Sim- plification Package, a sweeping reform aimed at reducing the administrative burden of sustainability measurement and reporting. Among its most conse- quential changes: significantly raising the CSRD (Corporate Sustainability Re- portingDirective) thresholds.Whiledis- cussions on the thresholds are ongoing, the adjustment is expected to exempt at least 40,000 companies frommandatory ESG disclosure, shrinking the scope of CSRD by an estimated 80%. (1) Although manybusinesseswelcome regulatory re- lief, the implications for financial institu- tions are far more complex. Banks, asset managers and insurers nowface agrow- ingESGdatagap.With fewer companies required to report, the volume of pub- licly available sustainability indicators is set to decline sharply just as demand for such data is accelerating. This is not a theoretical concern! As Luxembourg is amajor sustainable fi- nance center,wherefinancialmarket par- ticipants rely heavily on ESG data, the reduction in mandatory reporting is al- ready raising red flags. At the same time, this data gap poses an additional hurdle forsmallandmid-sizedcompanies,which already face significant challenges in ac- cessing financing. Without the means to demonstrate strong ESG performance, these businesses may find it even harder toattract the investment and lending they need to growand compete. The problem is compounded by the fact thatsmallandmid-sizedenterprises,often embeddingenvironmentalandsocialpro- tection as a core element of their business strategy, do not publicly report on their sustainability performance, focusing on operationalefficiencyandbusinessresults aspriority.Thishaslongchallengedfinan- cial institutions - evenbeforeOmnibus. A2024reportonESGDatabytheLuxem- bourgSustainableFinanceInitiative (2) con- cluded that “the lack of uniformity in measurement methodologies hinders the accessibilityof comparableESGdata,”es- pecially for data sourced from SMEs. Without a standardized framework, fi- nancial institutions are left chasing frag- mented questionnaires, unverifiable estimates, or costly third-partyproxies. And yet, the need for ESG transparency has become more urgent. Financial insti- tutions must still assess their exposure to climate risk and demonstrate sustainabil- ity performance to regulators, sharehold- ers and larger stakeholders. Investors continue to demand clarity on emissions, governance and social impact, regardless ofwhetheracompanyislegallyobligedto report.And it is precisely this gap that the VSME couldhelp tofill. VSME: TurningVoluntary Standard into StrategicAdvantage The VSME arrives at the right time. De- veloped by EFRAG at the request of the European Commission and officially adopted on 30 July 2025, VSME offers a practical, proportionate framework for small and mid-sized companies to dis- closeESGdata,evenwhendoingsoisnot legally required. Intended as a strategic enabler, the framework goes beyond a pure reporting tool. VSMEisstructuredaroundtwomodules: - BasicModule :Aminimumsetof11dis- closures covering governance, environ- mentalimpact(e.g.,energyuse,emissions) and workforce metrics (e.g., employee gender breakdown, health and safety, wage standards). It is designed to be ac- cessible even formicro-enterprises. - Comprehensive Module : Additional ninedisclosuresforcompaniesreadytogo further,coveringESGstrategy,climatetar- gets, human rights policies, board diver- sity and sector-specific risks. What are the benefits? For small andmid-sized companies, the benefits are tangible. VSME reduces the time andcost of ESGreportingby replac- ing ad hoc questionnaires received from various stakeholders with a single, stan- dardized format. It helps companies present a credible sustainability profile tobanks, investors andcorporate clients, covering major sustainability indicators such as emissions, energy, health & safety, diversity, andcases of ethical con- duct violations. This has thepotential for opening doors to green loans, invest- ment opportunities and long-term part- nerships. In a market where ESG credentials in- creasingly influence access to capital, VSME can become a differentiator. Since VSME is designed to be conceptually alignedwiththeESRSusedbylargecom- panies, it enables like-for-like compar- isons across portfolios. Financial market participants can benchmark emissions, safety performance, or governance indi- cators across SME clients, improving transparency and reducing reliance on costly third-party estimates. VSME also strengthens supply chainvis- ibility. Large companies subject to CSRD oftenrelyonsmallandmid-sizedcompa- niesforkeyinputs.WithVSME,suppliers canprovidestructuredESGdatathatsup- portskeyinitiativessuchasScope3emis- sions tracking and value-chain human rights due diligence. This not only helps the SME but also enhances the ESG pro- file of the larger company, creating a rip- ple effect of transparency. To support adoption, EFRAG has re- leased a digital template to help compa- nieswith the practical implementation of theStandard.Thetemplateguidesreport- ing companies through the disclosures with auto-calculations and consistency checks. Going beyond this, a digital tool allows companies to export its data in a machine-readable XBRL format that will enable financial institutions to ingest VSME reports directly into their systems, enabling automation and scalability. AsVSMEopensthedoortogreatertrans- parency and opportunity, the next chal- lenge lies in putting these principles into practice. The real measure of success will be how companies and financial institu- tionstranslatethepromiseoftheStandard into effective, actionable processes, in- cluding digitalized ways for data collec- tion, smart interpretation of the obtained results and potential controversies, en- gagement for sustainability performance improvement, upskilling and rising awareness on sustainability risks andop- portunities. Start Small, Build Smart With the VSME Standard nowavailable, thefocusshiftsfromdesigntoimplemen- tation. The question is no longer whether small and mid-sized compa- nies should report ESG data, but how they can do so in a way that is propor- tionate and alignedwithmarket expec- tations. As the European Commission itself has acknowledged, reducedreport- ing requirements do not reduce stake- holder expectations. For small andmid-sized companies, the message is clear: start withwhat is feasi- ble. The modular approach of VSME gives adopters the flexibility to start small andscaleup, improvingdataqual- ity and governance year by year. The Basic Module covers the minimum in- formation every company should be tracking, for instance topics like energy use, workforce composition and gover- nance practices. The Comprehensive Module would require more technical expertise and knowledge of sustainabil- ity dependencies, for example mapping of climate hazards and transition risks that the company canbe subject to, or in- ventory of Scope 3 emissions across the company’s value chain. The VSME implementation should be approached ina structuredway: identify the existinggaps vs. requirements, focus on “quick wins” and set a roadmap for improvement in policies, targets, action plans, data quality and automation. For financial institutions, now is the time to act as enablers. By encouraging clients and suppliers to adopt VSME, financial institutions can play a significant role in supporting the emergence of this com- monreporting language. Somebanks are already mapping ESG readiness across their portfolios - VSME has the potential to be a cornerstone of that engagement. The real value of VSMEwill be achieved through commitment by companies that see sustainability as a lever for innova- tion, trust and long-term growth. In today’s world, transparency is essential, and VSME empowers companies to in- vest in their credibility, resilience and competitiveness. Starting small does not mean thinking small: it means building smart, laying the groundwork for future ESGmaturity, one disclosure at a time. VanessaMÜLLER, EYLuxembourgPartner,ESGLeader AnnaILLARIONOVA, EYLuxembourgSeniorManager,ESGConsulting YannickBERINGER, EYLuxembourgSeniorConsultant,ESGConsulting 1)HowtonavigatetheEUOmnibusSimplification Package,EY 2)ESGData:OutcomeReportfromLSFI’sWorking Group,LuxembourgSustainableFinanceInitiative Bridging the ESG Data Gap: Unleashing Sustainable Finance with the VSME Standard T he LuxembourgHouse of Financial Technology (LHoFT) announce the ap- pointment of CraigBlair, Senior Vice President andLuxembourg CountryHead at FranklinTemple- ton, to its BoardofDirectors. The appointmentmarks a significant milestone in advancingLuxem- bourg's position as a global leader infinancial technology innovation anddigital asset development. Franklin Templeton has emerged as the assetmanagement industry'sblockchain trailblazer, recently launching the FranklinOnChainU.S.GovernmentMo- ney Fund, the first Luxembourg-domi- ciledfullytokenizedUCITSproductona public blockchain and using the firm’s proprietaryinhousetechnology.Thisfol- lowsFranklinTempleton’sgroundbreak- ing launch of the FOBXX tokenized money market fund in the U.S. in 2021; the world’s first such offering from a major asset manager on a public blockchain. Driving Fund Innovation This appointment comes at a decisive phase as Franklin Templeton continues to lead the asset management industry in blockchain adoption and tokenized fund innovation around the world. Their groundbreaking Franklin On- Chain U.S. Government Money Fund uses their proprietary inhouse blockchainenabledtransferagencyplat- form, giving investors thebenefitsof en- hanced transparency, security, accuracy and immediacy made possible by blockchain technology. Regarding Blair's appointment, Nasir Zubairi,LHoFTCEO,stated:“Craig’sap- pointment strengthens the bridge be- tweentraditionalassetmanagementand emergingdigitalfinance.Iamverygrate- ful that he has accepted to joinour board andwelcomethecontributionthathisex- perience and leadershipwill bring.” LeadingDigital Asset Innovation Franklin Templeton’s Luxembourg- basedtokenizedUCITSfund,builtonthe Stellarblock-chain,isnowavailabletoin- stitutional investors across Austria, France,Germany,Italy,Liechtenstein,the Netherlands, Spain, and Switzerland. This follows the success of its U.S.-based tokenized MMF, which has grown to over $512 million in AUM across eight public blockchains, making it the third- largest globally. As FranklinTempletondeepens its com- mitment to digital assets and blockchain innovation, Craig Blair discusses the firm’s strategic vision and his new role advancingfintech as a BoardMember at LHoFT:“Wearetremendouslyexcitedto join the LHoFT and become further im- mersed in the thriving financial technol- ogyecosysteminLuxembourg.Financial Servicesarechangingatarapidpace.Ad- vances across AI, blockchain, APIs and cloud technology will fundamentally change the way the asset management industryoperates, andhowadvisors, in- stitutions and investors think about their investment portfolios”. “In the next 5 years, we'll likely seemore progressinre-architectingfinancialmar- ket infrastructure thanwe've seen across all of the last 50. Franklin Templeton is a leader in this newdigital revolution and becoming a partner member of the LHoFT reinforces our long-standing 35- year commitment to Luxembourg and thebeliefitwillbeacentreofexpertisefor emerging technologies and financial services.” ExpandingLuxembourg’s Role inAlternatives Withover sevendecades of unparalleled presenceinEurope,including35yearsin Luxembourg, Franklin Templeton has solidified its position as the top provider of cross border funds with the distribu- tion of its flagship Luxembourg UCITs range in 57 countries across the world. The firm’s commitment to Luxembourg extends beyond digital assets. The firm recentlylaunchedtheFranklinLexington PE Secondaries Fund (Flex-I), a Luxem- bourg-domiciled evergreen private eq- uity secondaries fund with $875 million inassetsundermanagement (AuM), tar- geting the international wealth channel. This is Franklin Templeton's first vehicle ofthiskindoutsidetheU.S.,demonstrat- ingthefirm'sconfidenceinLuxembourg as a key hub for innovative financial products. Craig Blair appointed to the board of directors of LHoFT