ESAs analyse the extent of voluntary disclosure of principal adverse impacts under the SFDR

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Summary

The European Supervisory Authorities (EBA, EIOPA, and ESMA) published their second annual Report on the voluntary disclosure of principal adverse impacts (PAI) under the Sustainable Finance Disclosure Regulation (SFDR). The report shows an overall improvement in PAI disclosures compared to the previous year, but still significant variation in compliance and quality of disclosures. Disclosures are easier to find on websites, but financial market participants should provide better explanations for not considering PAI. The report also highlights the lack of disclosures on the alignment of investments with the Paris Agreement. The ESAs have developed a preliminary overview of good practices and areas for improvement, and provided recommendations for the European Commission ahead of the next comprehensive assessment of the SFDR.

Key Points

Overall improvement in PAI disclosures compared to 2022
Variation in compliance and quality of disclosures
Disclosures easier to find on websites
Financial market participants should provide better explanations for not considering PAI
Lack of disclosures on alignment with Paris Agreement
Preliminary overview of good practices and areas for improvement
* Recommendations for the European Commission ahead of the next SFDR assessment