Luxembourg law does not provide for an explicit legal framework specifically dedicated to identifying, assessing, and sanctioning greenwashing in the financial sector.

The current regulatory framework applicable in the financial, investment fund and insurance sectors provides, however, general rules of conduct requiring firms to act fairly and not misleadingly towards clients.

• The Law of 5 April 1993 on the Financial Sector, as amended ("LFS") requires notably credit institutions and investment firms to act "honestly, fairly and professionally in accordance with the best interests of their clients" (Article 37-3(1)) as well as to ensure that "all information, including marketing communications, (...) shall be fair, clear and not misleading". A breach of the abovementioned requirements could lead to the imposition of penalties and/or administrative measures by the Luxembourg supervisory authority of the financial and investment fund sectors, the Commission de surveillance du secteur financier ("CSSF"), or private enforcement actions.
• The Law of 7 December 2015 on the Insurance Sector, as amended (the "LIS") provides that insurance distributors "shall always act honestly, fairly and professionally in accordance with the best interests of their customers" as well as ensure that "all information, including marketing communications, (...) shall be fair, clear and not misleading" (Article 295-7 of the LIS). A breach of the abovementioned requirements could lead to the imposition of penalties and/or administrative measures by the Luxembourg supervisory authority of the insurance sector, the Commissariat aux Assurances ("CAA"), or private enforcement actions.
• As to the area of collective asset management, the requirements upon asset management companies to act “honestly, with due skill, care and diligence and fairly in conducting their activities” and “in the best interests of the investors” might be used by the CSSF to address potential false or non-effective sustainability related-claims at product and entity level. Furthermore, it is worth mentioning the qualitative requirements imposed on information, including promotional communications, provided by asset management companies to investors, which shall be "accurate, clear and not misleading". A breach of the abovementioned requirements could lead to the imposition of penalties and/or administrative measures by the CSSF, or private enforcement actions.

In addition to the above, Luxembourg consumer law also provides general provisions aimed at protecting consumers from misleading commercial practices when dealing on a B2C basis. Although the definition of "misleading commercial practice" included in Article L. 122-2 of the Consumer Code does not explicitly refer to the environmental characteristics of the product/service offered, the provision of misleading information pertaining to environmental characteristics could in our view fall within the general definition of "misleading commercial practices" (i.e. practices entailing the provision of false information or information capable of misleading the consumer as regards, amongst the others, the main characteristics of the product, such as its availability, advantages, risks, performance, composition, accessories, after-sales service and complaint handling, method and date of manufacture or performance, delivery, fitness for purpose, use, etc). "Misleading commercial practices" may lead to the imposition of fines ranging between EUR 251 and 120,000, as well as private enforcement actions.

The relevant legal framework mainly derives from European legislation (in particular from Directive 2014/65/EU of 14 May 2014 on markets in financial instruments, Directive (EU) 2016/97 of 20 January 2016 on insurance distribution, Directive 2011/61/EU of 8 June 2011 on Alternative Investment Fund Managers, Directive 2009/65/EC of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities and Directive 2005/29/EC of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market), which have been implemented into Luxembourg law.

As mentioned above, greenwashing is not specifically addressed as such under Luxembourg law.

The rules of conduct requiring firms to act fairly and not misleadingly towards clients are both sectorial (i.e. deriving from the financial, insurance and investment funds regulatory framework) and general (i.e. deriving from the consumer protection framework), as detailed under section 1 above.

There is no general definition of greenwashing under Luxembourg law. However, the Luxembourg Bankers Association ("ABBL"), the Association of the Luxembourg Fund Industry ("ALFI") and the Luxembourg Insurance and Reinsurance Association ("ACA") (i.e. associations that represent the banking, investment funds and insurance sectors in Luxembourg) have provided some guidance on the definition of greenwashing.

The ABBL's Sustainable Finance Glossary defines "greenwashing" as "the practice of conveying misleading information on the sustainability or environmental benefits of a company’s products, services or corporate practices".

The ACA's Glossary Key Terms Relating to ESG defines “greenwashing” as "the use of marketing to portray an organization's products, activities or policies as environmentally friendly when they are not (i.e. misleading of consumers about the environmental benefits of a product or policy through specious advertising, public relations and unsubstantiated claim)".

The ALFI’s Targeted Response to the ESA's call for evidence on better understanding greenwashing builds upon the definitions provided for in Recital (11) of Regulation (EU) 2020/852 (Taxonomy Regulation) and Recital (16) of Regulation (EU) 2019/2088 (SFDR), and insists that the incriminated conduct should be intentional in order to amount to greenwashing.

The definition is not regulatory binding, however, the guidance issued by the ABBL, ACA, and ALFI are generally taken into account by the market players in Luxembourg.

• Lack of legal certainty, due to the lack of legal definition of what greenwashing consists of.
• Complexity and inconsistency of the rules defining ESG-related disclosure obligations, due to the presence of multiple texts, with different scopes of application, different timelines and sometimes inconsistent and very technical rules.
• Lack of data required to adequately comply with the ESG-related disclosure obligations.
• Need to acknowledge and address the diversity of the financial products subject to disclosure requirements (there is extensive guidance on how to implement the relevant disclosure requirements in the investment funds sector, but less guidance with respect to the implementation of such requirements in relation to portfolio management mandates or IBIPs).

The Law of 5 April 1993 on the Financial Sector, as amended: https://www.cssf.lu/wp-content/uploads/L_050493_lfs.pdf 

The Law of 7 December 2015 on the Insurance Sector, as amended: https://www.caa.lu/uploads/documents/files/Law_on_the_insurance_sector_2015-12-07_consol_2022-06-01.pdf 

The Consumer Code: https://legilux.public.lu/eli/etat/leg/code/consommation/20210730#art_l_121-1 

The Luxembourg Bankers' Association's "Sustainable Finance Glossary": https://www.abbl.lu/en/professionals/toolbox/csr-handbook/sustainable-finance-glossary 

The Luxembourg Insurance and Reinsurance Association's "Glossary Key Terms Relating to ESG": https://www.aca.lu/wp-content/uploads/2022/06/Glossary-key-terms-relating-to-ESG.pdf 

The Association of the Luxembourg Fund Industry's "Targeted Response to the ESAs Call for Evidence on Better Understanding Greenwashing": https://www.alfi.lu/pdfs/alfi-response_esas_greenwashing_20230110