SFDR PAI

 

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SFDR: 2025 ESAS REPORT ON PAI DISCLOSURES

 


EXTERNAL ARTICLE

Estimated reading time: 2 min.

 

In September 2025, the three European Supervisory Authorities (EBA, EIOPA and ESMA) published their fourth annual report on Principal Adverse Impact (PAI) disclosures, in line with Article 18 of the SFDR. This report analyses the disclosures published by financial market participants for the 2023 reference period, both at entity and product level.


The conclusions are encouraging: the quality and completeness of information have improved significantly compared to previous years. Large multinational groups generally provide clear, detailed, and consistent disclosures, including methodologies, explanations, and quantified targets. Many Article 8 and 9 funds (almost 90% and 97% respectively) now consider PAIs, confirming a growing market trend.

However, several weaknesses remain. Smaller players often publish confusing disclosures, mixing marketing content with regulatory information. Accessibility of documents is still uneven, and data coverage remains incomplete for certain key indicators (water, hazardous waste, gender pay gap). In addition, declared actions are rarely quantified and lack concrete follow-up.


National Competent Authorities also highlight the burden of supervision, as manual reviews remain resource-intensive and digital tools are limited. This reinforces the call for simplification and greater harmonisation.

The ESAs’ recommendations are clear: reduce the number of indicators and make disclosures machine-readable and accessible through the upcoming ESAP platform; reconsider the current 500-employee threshold, potentially linking obligations to assets under management; and decrease the reporting frequency to every two or three years.


In short, the PAI framework is maturing but still requires improvement. For asset managers and insurers, the challenge is to transform these obligations into genuine ESG management tools that bring transparency, comparability, and credibility to the impact of investment decisions.

 

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Source : 2025-09-10 | The ESAs note greater effort from financial market participants in their disclosure of principal adverse impacts - EIOPA
 

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COMMON QUESTIONS ABOUT THIS TOPIC


PAI (Principal Adverse Impacts) disclosures require financial market participants to report how their investment decisions negatively affect ESG-factors, in line with Article 4 and Article 6 of SFDR. The 2025 ESAs report assesses these disclosures for the 2023 reference period.


The report found significant improvements: large groups now publish clearer, more consistent disclosures (methodologies, quantified targets), and nearly 90% of Article 8 and 97% of Article 9 funds consider PAIs.


Smaller firms often mix marketing and regulatory content, have uneven document accessibility, incomplete data for key indicators (e.g., water, hazardous waste, gender pay-gap), and actions lack quantification and follow-up.


They suggest reducing the number of indicators, making disclosures machine-readable via the forthcoming ESAP platform, reconsidering the 500-employee threshold (linking obligations to AUM), and lowering reporting frequency to every two or three years.


They should incorporate PAI disclosures into their ESG management systems, move from compliance to genuine transparency and comparability, improve data quality and methodology disclosure, and align investment decisions with credible adverse impact monitoring.