ℹ️ For a list of the mandatory PAIs, see our other article

The regulatory technical standards set out in the Delegated Regulation supplementing Regulation (EU) 2019/2088 set rules for reporting on the principal adverse impacts on sustainability factors considered during the investment decision-making process.

This mandatory framework was set with the intention to have financial market participants (FMPs) have access to comparable information which can inform their decision-making regarding their sustainable ambitions.

The Commission further published, annexed to this Delegated act, a template for reporting the Principal Adverse Impact statement (PAI Statement).

FMPs are thus required to disclose a filled-in version of the PAI statement if they have opted-in for the PAI framework as a Fund Manager (i.e., for all of its managed Funds). The statement must include the minimum set of 14 mandatory indicators, and:

i) information on one or more additional climate or other environmental indicator;

ii) information on one or more additional indicator for social and employee matters, respect of human rights, anti-corruption and anti-bribery matters; and

iii) information on any other indicator outside those lists that was used to assess additional principal adverse impacts on sustainability factors.

If you choose to opt-in only for a specific Fund you manage (i.e., on 'product-level'), you do not need to produce a PAI Statement for your Fund, but will need to disclose on your PAI results in your periodic disclosure.

This means that for your Fund, you still need to report on the mandatory set of indicators, and include at least one additional climate and one social voluntary indicator to monitor your portfolio companies.

ℹ️ You are allowed to choose as many more voluntary indicators than the minimum (i.e., one) as you deem relevant.

How can I choose the right additional indicators?

Step 1: Carefully go through Tables 1 and 2 below.

Step 2: Think about which indicators might be easiest to measure in more than one of your portfolio companies.

Step 3: Choose those indicators that you believe most of your portfolio companies have in common.

Additional Environmental Indicators

Indicator	Explanation/Question for Company
Emissions of inorganic pollutants	Inorganic pollutants are mostly caused by inorganic chemical waste (water).
Emissions of air pollutants	Air pollutants are direct sulphur dioxides emissions, direct nitrogen oxides emissions, direct non-methane volatile organic compounds emissions, direct particulate matter, direct ammonia and direct total heavy metals emissions.
Emissions of ozone depletion substances	These substances are defined in the Montreal Protocol on Substances that Deplete the Ozone Layer.
Investments in companies without carbon emission reduction initiatives	Do you have carbon emission reduction initiatives that are aimed at alignment with the Paris Agreement?
Breakdown of energy consumption by type of non-renewable sources of energy	What non-renewable energy source do you use in your company? (Drop-down) Per source, indicate your energy consumption in GWh.
Water usage and recycling	This refers to the average amount of water consumed and reclaimed by your company
Investments in companies without water management policies	Do you have water management policies (guidelines for the collection, preparation, use, disposal and protection of water resources) in place?
Exposure to areas of high water stress	Do you operate in areas of high water stress (these are regions where the percentage of total water withdrawn is high (40-80%) or extremely high (greater than 80%) in the World Resources Institute’s (WRI) Water Risk Atlas tool “Aqueduct”) and do not have adequate water management policies for those areas?
Investments in companies producing chemicals	Do you manufacture pesticides and other agrochemical products?
Land degradation, desertification, soil sealing	Do your company's operations lead to land degradation, desertification or soil sealing (the diminishing capacity of the soil to provide ecosystem goods and services as desired by its stakeholders)?
Investments in companies without sustainable land/agriculture practices	Do you have sustainable land and agricultural practices in place?
Investments in companies without sustainable oceans/seas practices	Do you have sustainable ocean and seas practices in place?
Non-recycled waste ratio	A sum of all the waste that is recyclable
Natural species and protected areas	Do your operations affect threatened species (listed in the European Red List or the IUCN Red List)? Do you have a biodiversity protection policy covering operational sites owned, leased, managed in, or adjacent to, a protected area or an area of high biodiversity value outside protected areas?
Deforestation	Do you have a deforestation (the human-induced conversion of forested land to non-forested land) policy in place?

2) Additional Social Indicators

Indicator & Metric	Explanation/Question for Company
Investments in companies without workplace accident prevention policies	Do you have a workplace accident prevention policy in place?
Rate of accidents
Number of days lost to injuries, accidents, fatalities or illness
Lack of a supplier code of conduct	Do you have a code of conduct against unsafe working conditions, precarious work, child labour and forced labour in place?
Lack of grievance/complaints handling mechanism related to employee matters	Do you have a grievance/complaints handling mechanism related to employee matters in place?
Insufficient whistleblower protection	Do you have a policy on the protection of whistleblowers in place?
Incidents of discrimination	How many incidents of discrimination were reported and how many led to sanctions?
Excessive CEO pay ratio	What is the average ratio of the annual total compensation for the highest compensated individual to the median annual total compensation for all employees (excluding the highest -compensated individual)?
Lack of a human rights policy	Do you have a human rights policy in place?
Lack of due diligence	Do you have due diligence processed to identify, prevent, mitigate and address adverse human rights impacts in place?
Lack of processes and measures for preventing trafficking in human beings	Do you have prevention policies against human trafficking in place?
Operations and suppliers at significant risk of incidents of child labour	Are your operations and suppliers at significant risk of incidents of child labour exposed to hazardous work in terms of geographic areas or type of operation?
Operations and suppliers at significant risk of incidents of forced or compulsory labour	Are your operations and suppliers at significant risk of incidents of forced or compulsory labour in terms in terms of geographic areas and/or the type of operation?
Number of identified cases of severe human rights issues and incidents
Lack of anti-corruption and anti-bribery policies	Do you have anti-corruption and anti-bribery policies (consistent with the United Nations Convention against Corruption) in place?
Cases of insufficient action taken to address breaches of standards of anti-corruption and anti-bribery
Number of convictions and amount of fines for violation of anti-corruption and anti-bribery laws