The European ESG Template (EET) is a standardized template for financial services stakeholders which aims to simplify the process of exchanging ESG data between participants, making it easier to conform to legislative requirements.
The EET was developed by FinDatEx to comply with ESMA and FCA regulations and includes a number of data points to comply with SFDR (Sustainable Finance Disclosure Regulation), RTS (Regulatory Technical Standards), (MiFiD (Markets in Financial Instruments Directive) and IDD (Insurance Distribution Directive), which compels greater market transparency for sustainable investments.
While participation with the EET is not compulsory, market pressure to conform to standards set by ESMA and FCA will make it very difficult to sell a product without the template being available.
What does the EET contain?
The template contains upwards of 600 machine-readable ESG fields such as ‘Greenhouse Gas Emissions’ or ‘Hazardous Waste’ indicators which allow participants to easily justify a fund’s ESG characteristics to potential investors.
The EET includes various levels for SFDR reporting on sustainable and non-sustainable products such as: disclosure, sustainability preferences; EU Taxonomy related information; screening criteria; Article 8 and Article 9 information; and Principal Adverse Impact (PAI) indicators.
UK Funds that are in scope of the Task Force on Climate-Related Financial Disclosures (TCFD) also have the ability to enter relevant information in the EET.
Who does it impact?
Financial market participants that fall into scope of SFDR (Article 2). EET must be provided for all products marketed in the EU, including funds classified as Article 6, 8 or 9 according to the SFDR Level 1 Regulatory Technical Standards (RTS). The Disclosure requirements within the EET depend on the ESG characteristics of the financial product (refer to what’s in scope).
Who needs an EET?
Product Manufacturers, Fund Distributors and Financial Advisers that need to fulfil SFDR reporting, and have to facilitate fund selection per the sustainable preferences as communicated in IDD (Insurance Distribution Directive) and MiFID (Markets in Financial Instruments Directive), such as: Insurance companies and intermediaries (for BIPs), Fund of fund managers, and Investment firm or credit institutions which provide investment advice (including wealth managers and wealth management platforms).
What are the challenges for fund managers?
The EET presents a number of challenges for fund managers, namely: regulatory compliance (keeping abreast of changing regulations and developments to the FinDatEx requirements template), file creation (creation of the EET file including simple Y/N flags for more complex calculations), quality assurance (validation of coverage and quality against FinDatEx definitions), and data dissemination (ensuring that your EET file reaches fund distributors on time, containing accurate information)
Accessing the EET
The latest version of the template, European ESG Template (EET) Version 1.1.1, was released on 18 January 2023. It can be downloaded here: https://findatex.eu/
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