‘Sustainability factors’ mean environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters (Article 2 point (24)of SFDR).

Disclosure of principal adverse impact (PAI) of investment decisions on sustainability factors has been explained in the document of European Supervisory Authorities (ESAs) of 2 June 2022 ‘Clarifications on the ESAs’ draft RTS under SFDR” (JC 2022 23).

In particular, the ESAs explained that the reference to sustainability indicators in the disclosures for financial products is to be understood with reference to the “sustainability indicators used to measure the environmental or social characteristics or the overall sustainable impact of the financial product” in Articles 10(1)(b), 11(1)(a) and 11(1)(b) SFDR.

Therefore, the ESAs consider that the “sustainability indicators” and the indicators for principal adverse impact referred to in Article 4 SFDR, and Chapter II and Annex I of the draft RTS in the ESAs’ final reports refer to different disclosures under the SFDR.

However, it is possible to use the indicators for principal adverse impact to measure the environmental or social characteristics or the overall sustainable impact of the financial product, e.g. by showing improvements of the investments against those indicators over time.