It means you must explain the adverse impacts AND describe the procedures you use to manage or mitigate them. You cannot only show the PAI numbers, you must also show how you deal with them.
PAI consideration: What is the meaning of “consider” in Article 7(1), point (a), SFDR? Could “consideration” of principal adverse impacts by a financial product mean that a financial product only discloses the relevant principal adverse impacts of the investments, for example total greenhouse gas emissions, or does “consideration” require the disclosure of the action taken by the financial market participant to address the principal adverse impacts of the product’s investments, such as engagement with investee companies, and are there any minimum criteria for such actions?
Article 7(1), point (a) SFDR imposes a disclosure obligation on financial market participant for those financial products for which a financial market participant applies Article 4(1), point (a), Article 4(3) or Article 4(4)⁵. That disclosure obligation refers to how a financial product considers principal adverse impacts on sustainability factors. In that respect, recital 18 specifies that “where financial market participants, taking due account of their size, the nature and scale of their activities and the types of financial products they make available, consider principal adverse impacts, whether material or likely to be material, of investment decisions on sustainability factors, they should integrate in their processes, including in their due diligence processes, the procedures for considering the principal adverse impacts alongside the relevant financial risks and relevant sustainability risks. […] Financial market participants should include on their websites information on those procedures and descriptions of the principal adverse impacts”. Consequently, the description related to the adverse impacts shall include both a description of the adverse impacts and the procedures put in place to mitigate those impacts.
European Commission
