As required by the MiFID II and IDD directives, any sustainability preferences of investors must be taken into account in the advisory process when assessing suitability for all their investment decisions from 2 August 2022.
Data from FE fundinfo, the Fund Data and Technology Company shows that fund managers are still grappling with this challenge a week before the deadline looms for the delegated acts with more than half of fund groups still to submit their data.
To facilitate the exchange between fund managers and fund distributors the European ESG Template (EET) was created and published by FinDatEx in March. Fund managers need to provide ESG data for all their products marketed in the EU to their fund distribution channels.
To meet the requirements of MiFID II, fund groups should complete both the relevant fields in the EET and also the European MiFID Template (EMT), for which Version 4.0 is about to go live. While the sustainability information is in the EET, groups still need to supply the remaining target market indicators and the costs and charges of their funds.
The EET is especially relevant for funds classified as Article 8 (“light green”) or Article 9 (“dark green”) in accordance with the Sustainable Finance Disclosure Regulation (SFDR) but is also relevant for Article 6 (“traditional”) funds. Even though Article 6 funds are not likely to satisfy a client’s sustainability preferences they are expected to report the EET. It is interesting to note that almost half of the completed EETs to date are for those funds.
Besides meeting the deadline, the challenge for fund managers is the creation of the EET that should be provided at a share class (ISIN) level, and securing the timely distribution of their sustainability data to their fund distribution network. If they have not started the process by now, they need to speed up or risk non-compliance.
The template is made up of a total of 580 mandatory, conditional and optional fields, with additional country-specific requirements making things more complex at a fund and underlying individual share class level. Furthermore, as from 1 January 2023 and due to the SFDR, additional fields will become mandatory to meet annual SFDR reporting requirements.
FE fundinfo is supporting fund managers not only with the collection and creation 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. So far, FE fundinfo has collected and ingested ESG data from over 157 fund groups covering 72,000 ISINs which is estimated to be over half of the whole market. Fund distributors can access this data via FE fundinfo’s data feed portal enabling the industry to meet international ESG reporting and disclosure requirements.