On 9 September 2025, the Joint Committee of the European Supervisory Authorities (ESAs) published its fourth annual report on the extent of voluntary disclosure of principle adverse impacts (PAIs) under the Sustainable Finance Disclosure Regulation (SFDR).
Background
Article 18 of the SFDR provides that the ESAs must take stock of the extent of voluntary disclosures at entity and product level and publish a report on an annual basis.
The annual report is based on the findings from a survey that the ESAs conducted of Member State competent authorities (NCAs) which gathered input on the current state of entity-level and product level voluntary PAI disclosures under the SFDR. The annual report refers to PAI disclosures published by 30 June 2024 for the reference period from 1 January to 31 December 2023.
Key finding
The annual report confirms the trends of previous years, such as that financial market participants (FMPs) that are part of larger multinational groups disclose the information on sustainability in a more detailed and appropriate manner, and that smaller entities mix information on ESG / general marketing information with SFDR disclosures (i.e. a lot of text, but no clear information whether principal adverse impacts are considered or not).
Next steps
The annual report sets out recommendations to both the European Commission (Commission) and NCAs.
The recommendations to the Commission include:
- The Commission should consider the persisting value of PAI statements, possibly in shorter form with reduced indicators, in machine-readable format and made available in the European Single Access Point.
- The Commission could implement the best practice recommended by the ESAs in joint SFDR Q&A IV.5, which is that FMPs could disclose the proportion of investments covered by data and distinguish that from the proportion that is estimated.
- The ESAs reiterate that the Commission could consider other ways of introducing proportionality for FMPs, as the “more than the 500-employees” threshold may not be a meaningful way to measure the extent to which investments may have principal adverse impacts on sustainability factors.
- The Commission reduce the frequency of the annual reports published under Article 18 of the SFDR to every two or three years, as opposed to the current annual publication.