With the rise of sustainable finance, transparency has become a crucial issue for investors and regulators alike. The European ESG Template (EET) is emerging as a standard aimed at harmonizing the communication of non-financial data between asset servicers or asset managers and distributors, ensuring the consistency of ESG funds in light of regulatory requirements.
A Growing Need for Transparency in Sustainable Finance
ESG investing is experiencing exponential growth, driven by investor demand and the evolution of the regulatory framework. However, the lack of uniformity in the communication of environmental, social, and governance (ESG) criteria makes it difficult to compare funds and undermines investor confidence.
To address this challenge, European regulators have strengthened transparency requirements through the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy. In this context, the European ESG Template (EET) was developed to standardize the sharing of ESG information between asset managers, distributors, and institutional investors.
EET: A Key Tool for Structuring ESG Information
Developed by FinDatEx, the EET is designed to centralize and standardize the ESG data of investment funds. It acts as a structured reporting format that facilitates the transmission of information across different market participants.
The template covers a variety of indicators, including:
- SFDR classification (Article 6, 8, or 9)
- Non-financial impact indicators
- Alignment with the EU Taxonomy
- Principal Adverse Impacts (PAIs) on ESG criteria
Through this standardization, the EET enables distributors to better assess the suitability of ESG products with investors’ preferences while helping to meet regulatory obligations.
Adoption Challenges for Asset Managers
While the EET represents major progress in terms of transparency, its implementation is not without challenges. Asset managers must overcome several hurdles to integrate it effectively into their ESG reporting:
- Data reliability: Collecting non-financial information requires robust data sources and a clear methodology.
- Interoperability with other standards: Ensuring consistency between the EET, SFDR requirements, and other reporting frameworks such as the Green Taxonomy.
- Automation of reporting: Integrating the EET into existing systems demands appropriate technological solutions to efficiently manage data flows.
To meet these challenges, asset managers need to adapt their internal processes, collaborate with reliable ESG data providers, and invest in automated reporting tools to ensure effective compliance.
Toward Greater Harmonization in Sustainable Finance
The EET marks a significant step forward in creating a more transparent and better-regulated sustainable finance landscape. By standardizing ESG data communication, it supports the work of distributors and strengthens investor confidence in sustainable financial products.
However, its adoption is only the beginning in a continuously evolving regulatory environment. The next major development will involve aligning the EET with the SFDR, particularly to help asset managers meet increasing transparency and non-financial reporting requirements. This is a key challenge in promoting a more responsible and better-regulated financial system.
