Only 21.6% of European investment management firms have issued a publicly accessible Principal Adverse Impact (PAI) statement, according to the report – Principal Adverse Impact Statements in the AWM Industry: Mind the Gap – by PWC Luxembroug.
Being the first report of its kind, PwC analysed two-thirds of the total 3,212 management companies (ManCos) registered either with a UCITS (UCITS ManCo), Alternative Investment Fund (AIFM), or both licenses (Super ManCo) with European Securities Markets Authority (ESMA).
It found that most had failed to produce the statement, which is required under the Sustainable Finance Disclosure Regulation (SFDR) Regulatory Technical Standards.
“Sustainability regulations are only going to continue to expand in scope and complexity in the coming years. Our analysis shows much work remains to be done if PAI statements are to play a pivotal role in informing stakeholders about investments’ adverse impacts on sustainability and progressing sustainable investments,” said Olivier Carré, deputy managing partner at PwC Luxembourg.
He added, “To achieve this, management companies need to ensure they have reliable and technologically advanced data collection mechanisms to efficiently track progress, alongside a systematic methodology with well-defined benchmarks.”
According to the report, 22.2% of surveyed firms have neither published a PAI statement, nor a declaration on why they did not report on PAIs at entity-level.
In addition, a further 7.5% of companies have committed to disclosing the PAI data are not compliant with SFDR Level II while almost 40% of surveyed said they did not consider the PAIs of their investment decisions on sustainability factors.
The most frequently cited reasons for this were insufficient availability of satisfactory and pertinent non-financial data, and uncertainties on required data collection methods.
The report also noted wide variations in the quality of data included in publicly available PAI statements, with a considerable number of declarations incomplete or left entirely blank.
“PAI statements are the first step for many firms into sustainability reporting and may provide relevant actionable insights for stakeholders into what impacts firms’ investment decisions have on sustainability factors, but expected growing pains are clearly evident,” added Michael Horvath, partner and regulatory advisor at PwC Luxembourg.
He added, “The required sustainability information is, in many instances, not easily accessible or available at all from the invested companies, and for reported PAI results it is in general unclear what controls and quality management measures were put in place.
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