Key takeaways
Last week, the European Commission launched a Public Consultation about the Implementation of the Sustainable Finance Disclosure Regulation (SFDR). Hidden in one of the pages, we found an important statement:
“As a general rule, the SFDR requires financial market participants who consider PAIs to disclose them at entity level on their website” - Consultation Document, Implementation of Sustainable Finance Disclosure Regulation (SFDR), page 8.
Up until now, the market seemed to find the requirements around the Principal Adverse Impact (PAI) statement unclear. It is relatively common to see on the websites of different FMPs some information about how they consider PAI indicators in their investment process, but no statement is available. It is also common to find documents available to download named “Principal Adverse Impact statement”, but these documents do not follow the template presented in the Regulatory Technical Standards under SFDR (Annex 1).
In this article, we will show a breakdown of who exactly is expected to publish a PAI statement following the template.
Who needs to publish a PAI statement
- Financial market participants with over 500 employees
- Financial market participants with fewer than 500 employees who publicly wrote, on their websites, that they consider principal adverse impacts in their investment processes.
See the same information in the simplified decision tree below:
Where should you go from here?
Given the explanation above, if you found that your institution should have published a PAI statement but still did not, we recommend you take the following steps:
- Access the Regulatory Technical Standards under SFDR to get familiar with the official template for the Principal Adverse Impact statement
- Collect principal adverse impact indicators from all your investee companies and bonds, or as many as possible, in order to increase your coverage
- Calculate the indicators for your entity based on the weight that each asset has in your portfolios - follow the formulas also displayed in the Regulatory Technical Standards under SFDR
- Besides the indicators, your PAI statement should present qualitative information such as “actions taken” in relation to each of the PAI indicators. Another type of information that can be shared is the description of policies to identify and prioritize principal adverse impacts on sustainability factors.
Principal Adverse Impact on the Product Level
SFDR does not require principal adverse impact indicators to be calculated for each financial product. Nevertheless, it is becoming common practice in the industry to share such information with distributors and clients, for example, through documents such as the European ESG Template.
How Datia can help you
Datia enables FMPs of any size with data sourcing, automatic calculations, and reporting following the latest European standards. On our web platform, we offer:
- PAI indicators from +36,000 companies, +210,000 public funds, and +210 sovereign nations (or you can use your own data)
- Transparent and traceable data (with origin, reporting periods, and links to the sources)
- Automatic calculations based on portfolio snapshots
- PAI statement ready to download in pdf or editable format, and in multiple languages
- PAI indicators can be automatically inserted into the EET files of your financial products
If you need help with your PAI statement, we would be happy to assist you. Reach out to hello@datia.app.
More resources:
For inspiration, read Datia's analysis of 30 PAI statements
Watch Datia’s team presentation of the analysis in this 30-minute webinar
Read a full guide about the European ESG Template (what is it and how to start creating one)
