Sustainability-related disclosures in the financial services sector (SFDR) requires financial market participants at entity, service and product level to disclose pre -contractual and contractual information on how they address sustainability risks, pre-contractual and periodic sustainable investment disclosures for investment products as well as Principal Adverse Impacts (PAIs) with the aim to prevent greenwashing and ensure comparability.

PAI is defined in SFDR as “Negative, material or likely to be material effects on sustainability factors that are caused, compounded by or directly linked to investment decisions and advice performed by the legal entity.” Examples include GHG emissions and carbon footprint.

Financial market participants are required to make a statement of how they incorporate PAIs in their investment decision process on sustainability factors, including their due diligence processes.

The statement of PAIs include 14 mandatory corporate indicators that are listed in the SFDR Regulatory Technical Standards (RTS) that also includes a mandatory reporting template to use for the statement.