The ITS instructions for template 9.1 states that institutions can follow a simplified approach for their general purpose lending with counterparties that are not subject to NFRD disclosure obligations, where the focus of the assessment is based on the main activity of the counterparty. However it is unclear what “simplified approach” exactly entails. The ITS states that in case of specialized lending, the assessment shall be based on the extent to which the specific project funded qualifies as contributing substantially to climate change mitigation or adaptation (project specific information). Therefore the conclusion is that for known use of proceeds exposures, the assessment shall solely be based on substantial contribution criteria. 

If we extrapolate this conclusion to unknown use of proceeds exposures, the logical approach would be that “simplified approach” means assessing the substantial contribution of the main activities should be assessed while the ‘do no significant harm’ and ‘minimum safeguards’ assessments are not required. This would also be in line with the fact that DNSH have been developed based on European regulations which do not apply outside Europe or the fact that some exposures to be included in the BTAR are not subject to the EU taxonomy reporting requirements (e.g. SMEs).