SFDR Update: New EET 1.1.2 and enhanced RTS Proposals
The recently released European ESG Template (EET) Version 1.1.2 and proposed improvements to the Regulatory Technical Standards (RTS) aim to harmonize sustainability reporting practices in the European Union. Let’s explore the latest developments of the Sustainable Finance Disclosure Regulation (SFDR).
The European ESG Template (EET) Version 1.1.2
On 20 December 2023 FinDatEx released an updated version of the EET V1.1.2. EET V1.1.2 does not have any structural changes compared to previous versions. The version includes only minor changes such as typo corrections and the addition of two new data fields. Some so far mandatory fields are now classified as optional fields . It can be used starting from December 31, 2023, and should be delivered for SFDR entity level reporting by the end of March 2024.
Major amendments to the EET, such as removing unused columns and restructuring the data fields for better readability, have been postponed to a later date in the context of the ongoing SFDR review activities.
Proposed Improvements to Regulatory Technical Standards (RTS)
The three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) published a draft RTS to the SFDR on 4 December 2023.
This final report responds to a mandate sent by the European Commission in April 2022 to review different aspects of SFDR Delegated Regulation. The review includes disclosures of principal adverse impacts (PAI) of investment decisions on sustainability factors and introduces disclosure of financial products’ decarbonisation targets. After considering the feedback to the consultation, the ESAs have adjusted the draft RTS in several areas. The draft RTS cover the following topics specified in the European Commission’s mandate:
- An extension of the social PAI indicators;
- Other changes to the PAI disclosure framework;
- A new financial product disclosure of greenhouse gas (GHG) emission reduction targets
Additionally, after conducting consumer tests in four EU countries, the ESAs have recommended making improvements and simplifications to the financial product templates in the SFDR Delegated Regulation. This includes a new “dashboard” that provides a simple summary of key information.
Lastly, the ESAs are also suggesting some small technical changes to the SFDR Delegated Regulation regarding:
- Enhanced disclosure of how sustainable investments comply with the “do not significantly harm” (“DNSH”) principle;
- Revision of the provisions for products with investment options such as multi-option products (MOPs); and
- Other technical changes including harmonised calculation of sustainable investments and a requirement to produce the disclosures in machine-readable format.
An application timeline for the new draft RTS is not yet available.
How can IDS help
The EET Version 1.1.2 and proposed RTS improvements represent a significant step towards standardizing sustainability reporting practices across the EU. They provide a framework that improves the comparability and reliability of disclosed ESG information, to promote responsible business practices. As ESG factors play an increasingly important role in investments decision-making, the EET Version 1.1.2 and proposed RTS improvements meet the demand for reliable and comprehensive sustainability information.
Our team of ESG experts can guide you through the complexities of ESG reporting and implementation. Contact them today to discuss your specific needs and challenges.
