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

The JC of the ESAs has released their second annual report on the voluntary disclosure of PAI under the SFDR. The report reveals an overall improvement in compliance with SFDR requirements compared to the previous year, although significant variations still exist in the quality of compliance among financial market participants and across jurisdictions. Notably, disclosures have become more accessible on websites.
Some key findings from the report include the importance of financial market participants explaining their reasons when they do not consider PAIs, the lack of disclosure regarding the alignment of investments with the Paris Agreement, and the intention to analyze voluntary PAI disclosures by financial products in future reports. Additionally, the report provides recommendations for the EC to consider in the upcoming comprehensive assessment of SFDR.
The recommendations for the EC include exploring alternative ways to introduce proportionality in disclosure, considering the size of investments, ensuring consistency between product-level and entity-level disclosures under Article 7 SFDR, and possibly reducing the frequency of the SFDR Report to allow for more meaningful analysis.