SFDR Principal Adverse Impacts Statement Template (EU 2022/1288 Annex I)

Principal Adverse Impacts Statement: [Financial market participant name]

Entity-level statement on principal adverse impacts (PAI) of investment decisions on sustainability factors, prepared under Article 4 of the Sustainable Finance Disclosure Regulation (SFDR, Regulation (EU) 2019/2088) and Articles 4 to 10 and Annex I of Commission Delegated Regulation (EU) 2022/1288 (the SFDR RTS, applicable from 1 January 2023), as in force in October 2026. It covers the applicability decision, the summary, the 18 mandatory Table 1 indicators, the additional Table 2 and Table 3 indicators, actions taken and planned, policies, engagement, international standards, historical comparison, calculation methodology and the data controls behind every figure. SFDR 2.0, the Commission proposal COM(2025) 841 to amend Regulation (EU) 2019/2088, is a proposal and not law as of 2026-10: the European Parliament and the Council have adopted their negotiating positions and trilogue negotiations are under way; check the current status. The proposal would remove this entity-level statement; the current regime applies until amending legislation is adopted and applies. Replace every [bracketed] value and every row marked Example. Obtain the regulation and the delegated regulation for the normative text and check the consolidated versions on EUR-Lex. This is a document format, not legal, investment or regulatory advice.

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Revision history

Contents

• 1. Scope, applicability and route
• 2. Publication and presentation requirements
• 3. Summary
• 4. Description of the principal adverse impacts on sustainability factors
• 5. Calculation methodology
• 6. Description of policies to identify and prioritise principal adverse impacts
• 7. Engagement policies
• 8. References to international standards
• 9. Historical comparison
• 10. Data governance and controls
• 11. Link to product-level disclosures
• 12. Production workflow and calendar
• 13. Alternative: no consideration statement
• 14. Regulatory change watch
• 15. Glossary
• 16. References
• Standard and licence note

1. Scope, applicability and route

Article 4 of SFDR gives a financial market participant two options: consider principal adverse impacts and publish a statement on its due diligence policies for them (Article 4(1)(a)), or explain clearly why it does not consider them and whether and when it intends to (Article 4(1)(b)). Two groups lose the option to explain and must publish the statement: participants that exceed an average of 500 employees during the financial year, measured on the balance sheet date (Article 4(3)), and participants that are parent undertakings of a large group, where the group exceeds that average on a consolidated basis (Article 4(4)). Both obligations have applied since 30 June 2021.

1.1 Applicability decision

Record the decision even when the result is obvious. If the employee count falls below 500 in a later year, the firm moves back to comply or explain, and the change of route must be reasoned and dated rather than silent.

1.2 Entities and investments in scope

List every legal entity covered by a consolidated statement. The Annex I template allows one statement for the participant and its named subsidiaries. State which investment decisions are in scope: discretionary portfolio management mandates, funds managed by the entity, own-account investments of an insurer backing insurance-based investment products, or a combination.

State the treatment of derivatives, cash, funds of funds (look-through or not) and assets for which the participant has no investment discretion, and keep that treatment stable from year to year. Financial advisers publish a different statement under RTS Article 11 with its own title; if the entity also gives investment advice, keep that statement in a separate document and cross-refer to it here.

2. Publication and presentation requirements

Archive previous statements in the same section. Article 10 of the RTS requires comparison with earlier periods, and readers expect to find the earlier statements to check the comparison.

3. Summary

The summary must name the participant, state that principal adverse impacts are considered, give the reference period and summarise the principal adverse impacts. Use the following structure and translate it into each language required in section 2.

Statement header. [Financial market participant name] (LEI [code]) considers principal adverse impacts of its investment decisions on sustainability factors. The present statement is the consolidated statement on principal adverse impacts on sustainability factors of [name] [and its subsidiaries, namely: list]. This statement covers the reference period from 1 January [year n] to 31 December [year n].

Summary of principal adverse impacts. Describe in plain language, in about 400 to 800 words:

• the three to five adverse impacts the firm prioritised and why (severity, probability, irremediable character, materiality to the portfolios);
• the direction of change against the previous period for each prioritised indicator, with the main driver (portfolio change, data coverage change, issuer behaviour or methodology change);
• the main actions taken during the period (engagement, voting, exclusions, portfolio construction) and the actions planned or targets set for the next period;
• data coverage limits that a reader needs to interpret the figures.

Example (extract): "Kestrel Bay Capital Europe prioritised greenhouse gas emissions (indicators 1 to 3), exposure to the fossil fuel sector (indicator 4), violations of the UN Global Compact principles and OECD Guidelines for Multinational Enterprises (indicator 10) and board gender diversity (indicator 13). The carbon footprint of investments in investee companies fell from 131 to 118 tonnes CO2 equivalent per EUR million invested, mainly because of portfolio reallocation in the utilities sector. Exposure to companies active in the fossil fuel sector averaged 3.5% of investments over the four quarter-end dates. The firm engaged with 42 investee companies on climate transition plans and escalated two engagements through voting against directors."

4. Description of the principal adverse impacts on sustainability factors

The Annex I table has five columns after the indicator: metric, impact for the reference year, impact for the previous year, explanation, and actions taken with actions planned and targets set for the next reference period. Keep the regulation's numbering (1 to 18 in Table 1) so that readers can compare statements across firms.

Conventions for this section: currency EUR; "per EUR million invested" uses the current value of all investments as the denominator unless the indicator says otherwise; impacts are the average of the values on 31 March, 30 June, 30 September and 31 December (RTS Article 6(3)); data coverage is the share of the relevant investments, by value, for which reported or estimated data was available.

4.1 Indicators applicable to investments in investee companies

4.2 Indicators applicable to investments in sovereigns, supranationals and real estate assets

Indicators 15 and 16 apply to sovereign and supranational investments; indicators 17 and 18 apply to real estate assets. Where the firm holds no investment in a category, say so in the explanation instead of deleting the rows. A reader cannot tell a missing row from an omission.

4.3 Additional climate and other environment-related indicators (Table 2)

Select at least one indicator from Table 2 of Annex I. Record why it was chosen: the selection must follow the methodology in section 6, not data convenience alone.

4.4 Additional social, human rights and anti-corruption indicators (Table 3)

Select at least one indicator from Table 3 of Annex I.

Other indicators. Add any further indicator the firm uses to identify and assess additional principal adverse impacts (RTS Article 6(1)(c)), in the Table 2 or Table 3 format. Define the metric precisely, name the data source and state whether the value is reported or estimated.

4.5 Actions taken, actions planned and targets

RTS Article 6(2) asks for the actions taken during the reference period and the actions planned or targets set for the next period to avoid or reduce the principal adverse impacts. Each action has an ID so that the indicator tables, the engagement section and next year's comparison can refer to it.

Targets marked Example are illustrations only. Set real targets through the governance route in section 6 and avoid targets that depend only on data coverage improving.

5. Calculation methodology

Annex I of the SFDR RTS sets formulas for GHG emissions, carbon footprint, GHG intensity of investee companies, GHG intensity of sovereigns and inefficient real estate assets. The formulas below restate them in notation; check the Annex for the authoritative form.

Definitions used by the formulas: the current value of an investment is the value in EUR of the firm's investment in the investee; enterprise value (EVIC) is the sum at the investee's fiscal year end of the market capitalisation of ordinary and preferred shares and the book value of total debt and non-controlling interests, with no deduction for cash; the current value of all investments is the EUR value of all the firm's investments.

Attributed GHG emissions of the portfolio, for each scope:

$E = \sum_{i=1}^{n} \frac{V_i}{\text{EVIC}_i} \times \text{Emissions}_i$

Carbon footprint, in tCO2e per EUR million invested:

$CF = \frac{\sum_{i=1}^{n} \frac{V_i}{\text{EVIC}_i} \times \text{Emissions}_i}{V_{\text{total}}}$

GHG intensity of investee companies, in tCO2e per EUR million of revenue:

$GI = \sum_{i=1}^{n} \frac{V_i}{V_{\text{total}}} \times \frac{\text{Emissions}_i}{\text{Revenue}_i}$

Here $V_i$ is the current value of the investment in company $i$ (EUR million), $V_{\text{total}}$ the current value of all investments (EUR million), $\text{Emissions}_i$ the Scope 1, 2 and 3 emissions of company $i$ in tCO2e, and $\text{Revenue}_i$ its revenue in EUR million. The sovereign GHG intensity (indicator 15) follows the same weighting with country emissions divided by GDP in EUR million.

5.1 Worked example: one quarter-end date

Example: a simplified mandate of Kestrel Bay Capital Europe on 31 December, total investments EUR 50 million, of which EUR 45 million in three investee companies and EUR 5 million in cash.

Results for this date: attributed emissions 5,900 tCO2e; carbon footprint 5,900 / 50 = 118 tCO2e per EUR million invested; GHG intensity 128 + 45 + 10 = 183 tCO2e per EUR million of revenue. Cash contributes nothing to the numerator but stays in the denominator. In this Example the simplified mandate is taken as representative of the whole entity: applying its footprint to the EUR 3,200 million in scope (section 1.2) gives the entity-level 31 December value of 118 x 3,200 = 377,600 tCO2e used in section 5.2. In a real statement, sum the attributed emissions of every holding in scope. Document how the firm treats holdings without data and check the current ESAs questions and answers on the denominator and on coverage.

5.2 Worked example: quarterly averaging

The Impact column reports the average of the four quarter-end values (RTS Article 6(3)).

Check: (396,800 + 387,200 + 374,400 + 377,600) / 4 = 1,536,000 / 4 = 384,000; the 31 December value equals the section 5.1 footprint applied to the assets in scope (118 x 3,200 = 377,600); and (4.0 + 3.6 + 3.2 + 3.2) / 4 = 14.0 / 4 = 3.5%. In section 4.1 the carbon footprint and intensity Example values show the 31 December figure from section 5.1 for traceability; in the real statement report the four-quarter average.

5.3 Methodology choices to document

Explain each change in the indicator's explanation column and in the historical comparison, and restate the previous year where practical.

6. Description of policies to identify and prioritise principal adverse impacts

6.1 Identification and prioritisation method

Describe how the firm moves from the full indicator set to the principal adverse impacts it acts on. A clear method has four steps: measure every mandatory indicator at portfolio and issuer level; screen issuers against thresholds and norms-based flags; score each adverse impact for severity (scale, scope, irremediable character) and for probability; and prioritise the impacts and issuers with the highest combined scores for action.

Explain the link to the firm's double materiality work where the group also reports under the European Sustainability Reporting Standards; see the Double Materiality Assessment (finance/sustainability-double-materiality-assessment).

6.2 Margin of error

Quantify where possible. Example: "Scope 3 emissions are estimated by the data provider for 64% of covered issuers; the provider states a typical range of plus or minus 30% around estimated values; total attributed emissions are therefore subject to a margin of error that we estimate at plus or minus 15%." State how the margin was derived and which indicators are most affected.

6.3 Data sources

Best efforts for missing data. Record the actions taken where data is not readily available: direct requests to investee companies, additional research, cooperation with third-party providers or external experts, and reasonable assumptions. Give the number of requests sent, the response rate and the assumptions used, so that the reader can judge the effort.

7. Engagement policies

Provide brief summaries of the engagement policy under Article 3g of the Shareholder Rights Directive (Directive 2007/36/EC, as amended by Directive (EU) 2017/828), where it applies, and of any other engagement policy used to reduce principal adverse impacts.

Keep the engagement records (issuer, indicator, objective, status, next step) in the stewardship log and report outcomes in the Stewardship Report (finance/stewardship-report) and keep only a summary here.

8. References to international standards

8.1 Forward-looking climate scenario

9. Historical comparison

Mark restated figures and give the reason. Where the firm started publishing recently, "n/a" means no earlier statement exists, which is expected and should be stated in a footnote.

10. Data governance and controls

Apply the firm's Data Quality Standard (data/data-quality-standard) for completeness, accuracy and timeliness thresholds, and record data issues and remediation in a log that the next year's preparer can read.

10.1 Traceability matrix

11. Link to product-level disclosures

Where the firm applies Article 4(1)(a), 4(3) or 4(4), SFDR Article 7 requires each financial product's pre-contractual disclosures to explain whether and how the product considers principal adverse impacts (or why not), and the periodic reports to show how they were considered. Keep the entity statement and the product documents consistent.

PAI consideration is also one of the forms of sustainability preference that a client may express in the MiFID II suitability assessment. Make sure the product data given to advisers and portfolio managers matches what the entity statement says; see the Client Risk Profile (finance/client-risk-profile) and the MiFID Suitability Report (compliance/mifid-suitability-report). The firm's broader ESG integration and exclusion approach belongs in the Responsible Investment Policy (finance/responsible-investment-policy).

12. Production workflow and calendar

13. Alternative: no consideration statement

Website section title: "No consideration of adverse impacts of investment decisions on sustainability factors".

Review this decision annually, and immediately if the average employee count approaches 500 or the firm becomes the parent of a large group.

14. Regulatory change watch

15. Glossary

16. References

Standard and licence note

Based on Regulation (EU) 2019/2088 (SFDR) and Commission Delegated Regulation (EU) 2022/1288, Articles 4 to 13 and Annex I, as published in the Official Journal of the European Union and available on EUR-Lex (reuse authorised with acknowledgement of the source under Commission Decision 2011/833/EU). Article and table numbers are cited and the requirements are summarised in original wording; indicator names follow the Annex I table so that statements stay comparable, and no other legal text is reproduced. SFDR 2.0 (COM(2025) 841) is described as a proposal only. International codes and standards are named without reproducing their content, and their mention implies no endorsement by their owners. All examples, including Kestrel Bay Capital Europe and the companies in the worked example, are fictional. Check the current consolidated texts on EUR-Lex, adopted amendments and the current ESAs questions and answers before use. This is a document format, not legal, investment or regulatory advice. Template licence: MIT.