What insurance investors need to know: best practice guide launched to aid ESG EET Template

Industry group, TISA, has unveiled a new tool designed to help navigate templates on ESG data and the reporting of commitments as well as aid the goal of more ESG-standardisation.

Andrew Putwainposted on Friday, June 17, 2022

Jeffrey Mushens, Technical Policy Director, TISA.

Industry body, The Investing and Saving Alliance (TISA), has launched a good practice guide to assist industry participants, including insurers and asset managers, which wish to complete the European ESG Template (EET).

The best practice guide will offer practical advice for investors on the EET Template. It is designed to clarify the specific data that is required - from an operational perspective - for each section under the first phase of the EET. TISA's guide will outline which regulatory requirements the data is designed to meet, and the preferred methodologies for use in completing the EET.

The EET template will help insurance investment players as it could provide more clarity for the compliance and regulatory needs of around ESG reporting. ESG remains a still developing area with work remaining on definitions and regulatory frameworks. TISA has several insurance members, which contributed to the design of the guide that had similar needs in understanding reporting formats as other insurers.

“The industry came together, in an organisation set up by separate European trade associations to agree data standards for sharing of sharing and regulatory data arising out of the three separate systems that we had.”

The EET is a cross-sectoral template comprising the views of the banking, asset management, structured product, insurance, and pensions industries. It was developed as an initiative to standardise data exchange between industry participants. The template was also designed to help support meeting the regulations.

The template was co-designed by groups that came together across Europe under the FinDatEx (Financial Data Exchange Templates) umbrella. TISA is a membership body with over 200 firms involved, which operate in the supply and distribution of savings, investment products and associated services, including investment managers, banks, insurers, pension providers and wealth managers.

TISA's best practice guide includes sections on "What products should I be reporting on for Phase I?", "Clients ’ESG preferences under MiFID II/IDD", and "Presentation of the EET template", including information on sections that are Mandatory, Conditional, and Optional. There are also tips on Screening Criteria and guidelines on Country-Specific Information, which include more information for French and German users that have unique requirements.

Speaking to Insurance Investor about the best practice guide, Jeffrey Mushens, Technical Policy Director at TISA, said, “The industry came together, in an organisation set up by separate European trade associations to agree data standards for sharing of sharing and regulatory data arising out of the three separate systems that we had.” These systems included MiFiD and Solvency II.

“As a distributor, you get the information you need in the format you need when you need it. The complexity involved was quite apparent quite quickly. We designed the best practice guide because we saw that there was a need for it.”

EET is partly a reaction to new guidelines, which state that under MiFID II and IDD directives - from August 2 of this year - distributors and insurers will have to start asking investors about their sustainability preferences. To determine which funds are suitable for these investors, distribution platforms and insurance companies will need these funds’ ESG data.

“As a distributor, you get the information you need, in the format you need, when you need it,” Mushens says of the new template, and why a best practice guide was needed. “The complexity involved was quite apparent quite quickly. We designed the best practice guide because we saw that there was a need for it.”

Mushens says the Template will allow for more standardisation and ease of work for investors due to its depth. “The European MiFiD Template (EMT), for example, has about 9500 fields and if you want to sell your product in Europe, you need to complete it because the distribution business needs to be able to demonstrate the presale disclosure disclosures. If you want your product sold, you have to complete at the end, so [the template’s] got the same idea.”

This depth, he says, will enable firms to capture and share distribution businesses or ESG data modules in the EET due to its increased data resources and complexity. The EET covers about 600 fields, as opposed to about 100 ESG-specific fields for the EMT. 

“There were some limits to how far we could go in terms of providing explanations where the legal requirements of the SFDR regulatory technical standards are not yet in force.”

The EET was designed to work as a response to the EU’s Sustainable Finance Disclosure Regulation (SFDR) and will provide the required data set for all funds to explain a fund’s ESG characteristics. There will be levels of reporting depending on the fund definitions including Articles 6, 8 and 9. The EET's sheer size could lead to issues, which TISA saw as a key reason for the best practice guide.

However, TISA has said they see more room for improvement with the EET and will push for edits as it embeds, which would likely see the best practice guide updated. “There were some limits to how far we could go in terms of providing explanations where the legal requirements of the SFDR regulatory technical standards are not yet in force,” said Kyra Brown, Consultant at Kandor and Chair of the TISA EET Working Group. “Or that might be considered interpretation where there is ambiguity on the regulatory requirements, but this will improve as the regulatory environment matures.”

Mushens agreed and said that there is already a working group that would set out ways to improve the EET, with a new release due in September that aims to correct some minor issues with the Template that have been noted.

 

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