The recently published annual report of the European Supervisory Authorities (the “ESAs”) sheds light on the extent of voluntary disclosure of principal adverse impacts (“PAIs”) under the Sustainable Finance Disclosure Regulation (“SFDR”). The report followed a survey based on eleven probing questions about various aspects of PAIs under SFDR. This survey was sent out to the National Competent Authorities (the “NCAs”).
PAIs, in the context of SFDR, are integral in maintaining transparency in the financial system. Through this report, ESAs seek to understand the frequency and effectiveness of voluntary disclosures by corporations. It is especially important for legal professionals to be cognizant of these disclosures as it carries immense implications pertaining to compliance and transparency norms within the corporate sector.
It is observed that the clarity in disclosures impacts the level of public trust in corporations and has significant influence on business prestige. Therefore, these voluntary disclosures extend beyond mere legal requirements but also contribute significantly to the reputation and credibility of an organisation.
For a comprehensive understanding of the report, its methodology and the subsequent legal implications, refer to the full annual report that was published on the 28th of September.
The deep dive into PAIs under SFDR as conducted by ESAs and subsequently documented in this report is instrumental in understanding the landscape of voluntary financial disclosures, providing a significant foundation for further analysis and adjustment of practices to better conform to SFDR.
Proskauer Rose LLP was responsible for the dissemination of this vital information surrounding the ESAs’ annual report and the key findings therein.