PAI 4 is pass/fail: if a company earns any revenue from fossil fuels, it must be counted as fossil-fuel-active. No thresholds apply.
Should PAI indicator 4 in Table 1, Annex I of the SFDR Delegated Regulation ("Exposure to companies active in the fossil fuel sector") be calculated on a look-through (i.e. share of fossil fuel activities) or pass/fail (i.e. whole company active within the fossil fuel sector) basis? I.e., is there a threshold level of fossil fuel related economic activity required before a company becomes "active in the fossil fuel sector" or is any activity sufficient to make a company "active in the fossil fuel sector"?
In accordance with the definition set out in point (5) of Annex I of the SFDR delegated Regulation, companies qualify as “companies active in the fossil fuel sector” when they “derive any revenues from exploration, [...] of fossil fuels [...] “. Thus, it follows that: the calculation of PAI indicator 4 should be performed on a pass/fail basis; and a company is considered to be active in the fossil fuel sector as soon as it derives any revenues from any of the activities mentioned in the definition”. The financial market participant has therefore to include the aggregated investments in all companies that are active in the fossil fuel sector (i.e. “failing” companies) under its disclosure of PAI indicator 4 in Table 1 of Annex I of the SFDR Delegated Regulation.
European Supervisory Authorities (ESAs)
