ESAs Report 2025 highlights progress in SFDR disclosures – quality gaps between large and small market participants remain
The European Supervisory Authorities (EBA, EIOPA and ESMA – jointly referred to as the “ESAs”) have published their fourth annual report on the voluntary disclosure of Principal Adverse Impacts (PAIs) under the Sustainable Finance Disclosure Regulation (SFDR). The report highlights a notable increase in both the quality and completeness of information disclosed. An ever greater number of financial market participants now provide more comprehensive statements, thereby achieving a higher level of compliance with SFDR requirements – both at entity level and with regard to specific financial products.
However, the extent of disclosure varies considerably depending on the size of the market participant. Large, internationally active financial institutions tend to deliver structured and detailed reports, while smaller entities often fall short. In many cases, these firms blend general ESG or marketing-related information with SFDR-relevant statements, without clearly explaining how they address the most significant adverse impacts of their investments.
On a positive note, the report acknowledges that several market participants have taken on board recommendations and good practices outlined in previous years’ reports and improved their disclosure practices accordingly. At product level, the number of PAI statements has also increased, particularly for funds with environmental or social characteristics or sustainable investment objectives. Nevertheless, the quality of these disclosures remains uneven, and supervisory authorities continue to face challenges in monitoring them effectively.
Looking ahead, the ESAs recommend that national competent authorities apply stricter standards when reviewing PAI disclosures and communicate their expectations more clearly to the market. In addition, the findings of the report are expected to inform the upcoming review of the SFDR by the European Commission. Potential adjustments could include lowering the current employee threshold of 500 staff members or amending the frequency and depth of reporting obligations.
