If you have decided to opt-in for the Principal Adverse Impact (PAI) framework, you need to report on how you and your portfolio companies monitor and address their Principal Adverse Impacts.
These indicators aim to measure the negative effects an investment decision might have on sustainability. In the scope of this Regulation, sustainability relates to environmental and social factors, but also employee and human rights matters, as well as anti-corruption and anti-bribery.
Currently, there are 14 mandatory and 35 voluntary indicators. To comply with the Regulation, you need to monitor and report on all mandatory and two or more additional indicators.
The procedure of disclosure is two-fold:
First, each investee company belonging to one fund needs to fill in their PAIs for the last fiscal year. These include indicators such as GHG emissions, but also adherence to human rights standards and gender ratios in boards.
Second, once all investee companies have filled in the indicators, the results will need to be aggregated for the entire fund. For this, we will need some financial data regarding the Fund from you.
Finally, the Fund Manager must decide on what measures it would like to implement to assist its investee companies in addressing their adverse impacts and ensuring their progressive minimisation.
ℹ️ For a list of the voluntary/additional PAIs, see our other article.
CLIMATE AND OTHER ENVIRONMENT-RELATED INDICATORS
Mandatory Environmental and Social Indicators: Explanations (Company Level)
Scope 1 GHG Emissions | These are the direct greenhouse gas emissions that occur from company-owned and controlled resources and include stationary, mobile, fugitive and process combustion. |
Scope 2 GHG Emissions | These are indirect emissions that are released from the consumption of purchased electricity, steam, heat and cooling. |
Scope 3 GHG Emissions | These are all indirect emissions that are not included in scope 2 and include any emissions that occur in the value chain of a company's operations. These emissions are separated into 15 categories and include e.g. business travel, commuting, waste etc. |
Operations in the fossil fuel sector | Any operations that derive revenues from exploration, mining, Any operations that derive revenues from exploration, mining, extraction, distribution or refining of hard coal, lignite and liquid fossil fuels as well as revenues from exploring and extracting fossil gaseous fuels or from their dedicated distribution (incl. transportation, storage and trade) |
Energy Consumption Intensity per High Impact Climate Sector | The ratio of energy consumption per unit of activity to the total energy consumption in 9 sectors i.e. agriculture, manufacturing, water supply etc. |
Renewable Energy Consumption | Renewable energy sources are wind, solar (solar thermal and solar photovoltaic) and geothermal energy, ambient energy, tide, wave and other ocean energy, hydropower, biomass, landfill gas, sewage treatment plant gas, and biogas. |
Negative effects on Biodiverse Sensitive-Areas | The biodiversity-sensitive areas are the Natura 2000 network, UNESCO World Heritage and Key Biodiversity Areas. Negative effects mean activities that lead to the deterioration of natural habitats and species, and where mitigation measures have not been implemented |
Emissions to Water | These are direct emissions of substances that are especially polluting to water, such as hazardous substances, phosphate emissions, pesticides, lead, nickel etc. |
Hazardous Waste | Hazardous waste contains substances that are explosive, (highly) flammable, toxic etc. as well as any form of radioactive waste 🔗 read more here |
INDICATORS FOR SOCIAL AND EMPLOYEE, RESPECT FOR HUMAN RIGHTS, ANTI-CORRUPTION AND ANTI-BRIBERY MATTERS
Violations of UN GC Principles & OECD | Any violations of the UNGC principles or OECD Guidelines for Multinational Enterprises |
Monitoring UN GC Principles & OECD | Any policies in place that monitor compliance with the UNGC principles or OECD Guidelines for Multinational Enterprises or grievance /complaints handling mechanisms to address violations. |
Female ratio board members | Percentage of females in the company's administrative, management or supervisory body |
Unadjusted gender pay gap | The difference between average gross hourly earnings of male-paid employees and of female-paid employees as a percentage of average gross hourly earnings of male-paid employees 🔗 read more here |
Weapon manufacture | Manufacturing of anti-personnel mines, cluster munitions, chemical weapons and biological weapons. |