Annual report on principal adverse impact disclosures
Published 16 October 2025
Category: Impact and ESG
The European Supervisory Authority (“ESA”) has published an annual report on principal adverse impact (“PAI”) disclosures (the “Report”) in accordance with Article 18 of the SFDR. The Report touches upon the PAI disclosures published by 30 June 2024 for the reference period from 1 January to 31 December 2023.
The Report can be accessed here and draws upon a survey conducted previously this year among National Competent Authorities (“NCA”) with the purpose of gathering input on the state of voluntary PAI disclosures. Further, an analysis has been made of publicly available PAI statements from, among others, the insurance sector, asset management as well as PAI disclosures for financial products.
In general, PAI entity-level disclosures according to SFDR Article 4 are mandatory for financial market participants with more than 500 employees. If the financial market participant has less than 500 employees, it may decide not to consider PAIs (opt out), meaning that it shall disclose the reasons for not doing so. However, if it decides to consider PAIs (opt in), regardless of the number of employees, the financial market participant must disclose information in accordance with the SFDR Level 2 Regulation. PAI product-level disclosures are regulated in SFDR Article 7.
The Report is divided into the following sections:
- Section 1: Background, methodological approach and the coverage of the market
- Section 2: ESA’s desk-based research and assessment of entity and product level statements
- Section 3: Overview of good as well as less good practices and examples of non-compliance
- Section 4: Conclusions, including recommendations for the EU Commission and the NCAs
Further, the Report includes an annex with a full list of (i) good, (ii) below average and (iii) non-compliant practices by sector.
Overall, the Report shows some improvements when it comes to the quality of PAI disclosures on product and entity level where information has become more compliant with disclosure requirements set out in the SFDR. As in previous years, it is clear from the Report that larger financial market participants are better at providing more detailed disclosures whereas smaller entities have a less detailed information level and often include general ESG and marketing information in the SFDR disclosures.
The Report underlines, however, that there is still room for improvement of some elements in the disclosures. This includes, among others, providing clearer explanations on actions taken and planned, targets for the next reference period and data quality.
Next steps: The EU Commission may include findings and recommendations from the Report in their assessment and review of the SFDR. The Report emphasizes that the NCAs shall continue to overview the quality of PAI disclosures and that financial market participants shall include good practices in their work with PAI disclosures going forward, securing clear and non-misleading information.
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