Less than a year after issuing Version 1.0 of the European ESG Template (EET), the industry-driven body FinDatEx has published both Version 1.1 and Version 1.1.1.
To be fair, the multiple versions have been introduced at different times to facilitate disclosure under new versions of various regulations. Version 1.0 was originally used from June 2022 to supplement the European MiFID Template (EMT) to help advisers match funds to their clients’ sustainability preferences, which they have had to take into account under MiFID II since August 2022. At that stage, few of the 580 fields of the EET needed to be completed, as most went far beyond the MiFID requirements.
In October 2022, FinDatEx published V1.1 with confirmation that it “does not implement new regulation but updates the initial EET in view of the applicability of the SFDR RTS [Sustainable Finance Disclosure Regulation Level 2 Regulatory Technical Standards] as of 1 January 2023.” The SFDR has been in place since March 2021, but without the Level 2 technical standards or prescribed disclosure templates until the beginning of this year.
No sooner was V1.1 issued than the European Commission endorsed the revised RTS for SFDR, together with new disclosure templates, for the inclusion of nuclear power and natural gas as Taxonomy-aligned sustainable economic activities. Hence we now have V1.1.1.
Including the fields for structured products introduced in V1.1 and the gas and nuclear fields in V1.1.1, the EET now runs to 615 fields, but 115 of these are for possible screening criteria and 358 cover all the possible principal adverse impacts (PAIs). Only a small number of either of these is likely to apply to any individual fund, so no fund will complete anywhere near a majority of these 615 fields.
Following endorsement by the Commission on 31 October, the European Parliament and the Council had three months in which to raise any objections (i.e. by 31 January) before the revised RTS are published in the Official Journal and then coming into force three days after that. We therefore expect the revised RTS to be published in the Official Journal and for the new disclosure templates to take effect any day now.
From the end of April 2023, it is expected that only EET V1.1.1 will be used, after a period of parallel running.
Although it may seem complex, it can be seen that each iteration is little more than fine-tuning of the one before to incorporate external changes.
To complicate matters slightly, while the original requirements of MiFID II – and thus the EMT – have applied in both the EU and UK since 2018, the SFDR and the later addition of sustainability preferences under MiFID II have only been relevant to the EU. In the UK, therefore, the EMT, currently on Version 4.0, is still valid for disclosure of costs, charges and target market.
FE fundinfo is supporting fund managers not only with the collection, creation and publication of the EET, but also with the dissemination of EET required data fields and documents for EU financial products and market participants to a global network of distributors. Fund distributors can access this data via FE fundinfo’s data feed portal enabling the industry to meet international ESG reporting and disclosure requirements.