PAI Statement — Content, Format, and Timing

The PAI statement is the primary output of the entity-level PAI consideration obligation. It is a formal, publicly disclosed document that brings together all PAI indicator data for a reference period, along with contextual information on the FMP's approach to PAI, actions taken, and targets set.

In plain English: the PAI statement is the firm's annual "impact report card." It shows, with numbers, what negative effects the firm's investment decisions had on the environment and society during the past year, and what the firm plans to do about it.

The RTS prescribes detailed requirements for the content, format, and timing of this statement.

The PAI Statement, Legal Basis

Article 4 of SFDR requires FMPs above the 500-employee threshold (or those that opt in) to publish a "statement on principal adverse impacts of investment decisions on sustainability factors." The RTS Articles 4-7 and Annex I elaborate on the precise content requirements for this statement.

The statement must be published on the FMP's website in a dedicated section clearly titled "Statement on principal adverse impacts of investment decisions on sustainability factors", this exact title is required.

Required Content of the PAI Statement

The RTS specifies the following mandatory content elements:

1. Identification of the Financial Market Participant

• Legal name of the FMP
• Date of the statement
• Reference period covered (1 January to 31 December of the previous year)

2. Description of the Principal Adverse Impacts Considered

The statement must describe:

• Which PAI indicators are being considered (all mandatory indicators and any optional indicators selected)
• The asset classes to which each indicator applies (investee companies, sovereigns, real estate)
• Any PAI indicators from the mandatory list that cannot be reported, with reasons (typically data unavailability) and actions planned to obtain the necessary data

3. Policies to Identify and Prioritise PAI

A description of the FMP's policies and due diligence procedures for identifying, assessing, prioritising, and monitoring PAI, including:

• How PAI are identified in the investment process
• How materiality is assessed across different sustainability factors
• How PAI information is used in investment decisions

4. Engagement Policies

Where engagement with investee companies is used as part of the PAI management approach:

• Description of the engagement strategy regarding PAI
• Overview of engagement activities conducted during the reference period
• Results of engagement activities related to PAI reduction

5. Reference to International Standards

An indication of whether the FMP adheres to responsible business conduct codes and internationally recognised due diligence standards (e.g., OECD Guidelines, UN Guiding Principles on Business and Human Rights, ILO standards).

6. Quantitative Data, The Indicator Table

The core quantitative section of the PAI statement presents results for each mandatory (and any optional) indicator in tabular format. For each indicator, the table shows:

• The indicator value for the current reference period
• The indicator value(s) for previous reference periods (where available)
• The methodology used
• Data sources used
• The proportion of data that is estimated versus reported

7. Actions Taken and Targets for the Next Period

The statement must describe:

• Specific actions taken during the reference period to reduce identified PAI (e.g., divestments, engagement outcomes, exclusion list updates)
• Targets set for the following reference period to reduce PAI
• For firms publishing their first PAI statement: information about the policies and targets they plan to adopt for the next period

Timing Requirements

Reference period: 1 January to 31 December of the year being reported.

Publication deadline: The PAI statement must be published by 30 June of the year following the reference period.

• First mandatory PAI statement: covered reference period 1 January, 31 December 2022, published by 30 June 2023
• Second mandatory PAI statement: covered reference period 1 January, 31 December 2023, published by 30 June 2024
• Ongoing: same annual cycle

Measurement dates: PAI indicators must be measured at a minimum of four dates during the reference period, spread across the year. The annual indicator value is the arithmetic average of the four measurements. More frequent measurement (e.g., monthly or quarterly) is permitted but the RTS minimum is four dates.

Language and Accessibility Requirements

The PAI statement must be provided in:

• At least one language customary in international finance (English)
• At least one official language of each Member State where the FMP's financial products are made available

A summary of the PAI statement must be provided in both languages. The summary is a distilled overview highlighting the most material PAI, the key actions taken, and the targets for the next period, written in plain language for a general investor audience.

First-Year Transitional Provisions

For FMPs publishing their PAI statement for the first time (either because they have grown above the 500-employee threshold or because they have voluntarily opted in):

• No historical comparison is required in the first-year statement
• The statement should focus on current-period data and the planned approach for future periods
• FMPs should describe what data gaps exist and what steps they are taking to address them

Quality and Verification

There is currently no mandatory external assurance requirement for PAI statements under SFDR. FMPs are self-reporting. However:

• Several NCAs have conducted supervisory reviews of PAI statements for completeness and consistency with the RTS requirements
• ESG data providers may provide data quality metrics that can be referenced to demonstrate the reliability of the data used
• Many FMPs voluntarily seek internal or external review of their PAI statements as part of their compliance assurance processes

As SFDR matures and supervisory capacity builds, expectations around PAI statement quality and accuracy are likely to increase. FMPs that invest in rigorous data management and verification processes now will be better positioned for enhanced scrutiny in future years.