European ESG Template: what is it and how to start creating one?

March 9, 2023

min read

Key takeaways

Crating the EET is an intimidating task, but it will help spread the word about the sustainability profile of your financial products
If you plan on creating the EET manually, our team recommends four steps to structure the work
Datia's platform uses a questionnaire to guide you through the EET and automates about half of the answers

The European ESG Template (EET) is a standardized template created by an industry-led organization called FinDatEx with the goal of facilitating the sharing of ESG-related data about financial products among Financial Market Participants.

Even though the EET is not a mandatory report (the Sustainable Finance Disclosure Regulation, for example, does not require it), it is quickly becoming a widespread tool. Why? Because it turns ESG data into machine-readable information, as FinDatEx emphasizes on its website.

‍How the EET contributes to the development of sustainable finance

If you use retail investment services, you might have noticed that more references to sustainability aspects of funds start slowly being displayed. For example: whether a fund is Article 6, 8, or 9 and what percentage of the asset under management is invested in controversial businesses (see some examples below of retail investment platforms available in Sweden, where Datia is headquartered).

This retail investment platform displays sustainability information such as the disclosure preferences of the fund according to SFDR

A list of controversial business involvements is also displayed in some retail investment platforms

But if you look closer, you will notice that the information related to sustainability is not standardized across platforms. The reason for this has formerly been the absence of a standardized format to share this information.

That is exactly the problem the EET will solve in both the retail and the institutional investment markets: fund distributors and wealth advisers will have access to a consistent format of information on the sustainability profile of different financial products. This standardization will happen as more funds prepare their EET files and as more fund distributors and wealth advisers start requiring the template.

‍How widespread the EET is now

Datia’s team dug and found that almost 85,000 of the financial products distributed in Sweden had published a report following the European ESG Template on Morningstar by February 2023. Of these, the majority (62%) were either Article 8 or Article 9 funds (see the breakdown below).

Breakdown of financial products distributed in Sweden and that submitted an EET to Morningstar

‍What the EET looks like

The EET is an excel template (print screen below) containing 615 lines that correspond to information about one financial product. You can download the template directly from FinDatEx’s website. If your entity manages multiple funds, you need to create one EET file per financial product.

The data points vary from static information which you need to collect, copy, and paste into the template (examples: name of the fund manufacturer and the links to SFDR pre-contractual and periodic reports) all the way to values that need to be calculated (for example, in the case of Article 8 and 9 funds, Principal Advise Impact indicators and the coverage taken into consideration for the calculations).

The latest version of the EET (V 1.1.1) includes supplementary Taxonomy disclosures about fossil gas and nuclear exposures.

After April 30, 2023, “V1.1.1 will be the only version of the EET that should be used”, advises FinDatEx on its website.

A print screen of the v 1.1.1 European ESG Template as created by FinDatEx

Tips on how to prepare the EET for your funds

Creating an EET file is a time-consuming project and you should approach it as such. To be more efficient, we suggest breaking the process into the following steps:

Step 1: Get an overview

Map all the data requirements of the EET and structure them in order to differentiate between mandatory and optional questions and to understand how the questions are interdependent.

Step 2: “Copy and paste”

Collect all the static information necessary to fill in the simpler fields which rely on documents previously prepared. For example:

- Name of the manufacturer;

- Links to pre-contractual and periodical reports for each fund;

- Which article of SFDR applies to the fund (6, 8 or 9)?

Step 3: Prepare the numbers

Identify, for example, which Principal Adverse Impacts your fund considers. Then insert the indicators calculated for the fund. This is probably the most time-consuming step, but it applies mostly to Articles 8 and 9. If your fund is already producing PAI statements, then this is also a “copy and paste” exercise.

Step 4: Check & Share

Validate answers before submitting. Then submit the excel file to stakeholders. If some field is incorrect, stakeholders using the EET usually reach back asking for a correction.

‍How Datia can help

Datia offers a tool that takes care of the majority of the heavy lifting for our customers: we interpreted the EET data requirements and translated the questions to fit human reading as opposed to machines. In order words: we transformed the excel template into a questionnaire that is intuitive and easy to complete.

About half of the EET questions are automatically pre-filled, considering data already available about your fund in the platform. For example: all the mandatory PAI indicators, additional PAIs considered by the fund and their indicators, as well as the coverage for the calculations.

Thanks to this solution, Datia’s customers are able to create a full EET for Article 6 funds in a few minutes. The process takes no more than one hour for Article 8 and 9 funds - given that their pre-contractual and periodical reports were previously produced.