Key takeaways
In 2024, over 2,000 financial institutions across Europe published their Principal Adverse Impact (PAI) Statements — a requirement under the Sustainable Finance Disclosure Regulation (SFDR). On paper, it’s a transparency measure. In practice? It’s becoming the most public ESG credibility test financial market participants face.
Last year at Datia, we took the opportunity to analyze 40 PAI statements from across 15+ countries to understand how firms are approaching this task. Some stood out. Many fell short. And a few raised big questions about what the industry really means when it says "ESG-aligned."
Let’s dive into what we found — and why it matters more than ever.
First things first, what is the PAI Statement?
If you're new to the term, the PAI Statement is a mandatory disclosure (for many firms) under SFDR, requiring financial market participants (FMPs) to report on the negative impacts their investment decisions have on sustainability factors — from carbon emissions to labor rights violations.
It’s filed annually and must include:
- Quantitative data on 18 mandatory adverse impact indicators
- Qualitative commentary explaining those impacts
- Description of actions taken (or planned) to reduce them
- Disclosure of at least one additional environmental and one social indicator
On the surface, it’s a regulatory requirement. Underneath, it’s a window into your real ESG performance, not just your promises.
What We Found in 40 PAI Statements from 2024
After combing through disclosures from firms across Europe, the UK, and the U.S., we noticed a few powerful patterns — some encouraging, others not so much.
1. Data Coverage Transparency Exceeded Expectations
The good news: 75% of the PAI statements disclosed data coverage — a pleasant surprise considering the lack of standardization in how it’s reported.
The not-so-good: firms are still highly inconsistent in how they describe coverage. Some give detailed breakdowns of scope and data sources. Others provide vague numbers with no explanation.
Takeaway: Coverage clarity isn’t just good practice — it’s what stakeholders expect.
2. "Explanations" and "Actions Taken" Are Often Alarmingly Vague
This was one of the most obvious red flags. The Regulatory Technical Standards (RTS) require firms to explain their results and describe actions taken or planned.
What we found instead:
- Generic phrasing like “emissions will decrease over time”
- Copy-paste policy boilerplate with no relation to the specific data
- A few reports skipped these columns entirely
Why does this matter? Because these two sections are where you demonstrate accountability — and show investors you’re not just measuring ESG impact, but managing it.
Takeaway: Be specific. Reference engagement activity, exclusions, targets, and portfolio decisions tied to your indicators.
3. YoY Restatements and Methodology Shifts Break Comparability
Over half the statements we reviewed showed significant (+/-30%) differences from 2023 to 2024 — not always due to actual change, but because of:
- Updates in data sources
- Revised scopes
- Methodology recalibrations
While some level of change is expected (and healthy), many firms didn’t clearly explain why the numbers shifted. That damages trust.
Takeaway: If you're revising values, add a note on methodology or scope changes. Comparability without context can be misleading.
4. Qualitative Content Is Still the Hardest — and Most Important
We consistently saw firms struggle with the qualitative components of the PAI — especially in explaining how they identify and prioritize adverse impacts.
There were bright spots: firms that outlined internal processes, stakeholder engagement, and policy triggers. But for many, this section was either minimal or missing entirely.
Takeaway: Use this as an opportunity to tell your ESG story. This is where you turn data into insight — and insight into leadership.
5. Everyone’s Picking the Same Additional Indicators
Out of 46 possible “additional” PAIs, the most common ones selected were:
- PAI 4: Investments in companies without carbon reduction initiatives (chosen by 31 out of 40)
- PAI 15: Lack of anti-corruption and anti-bribery policies (16 out of 40)
- PAI 9: Lack of human rights policy (15 out of 40)
There’s nothing wrong with these. But when everyone chooses the same ones, how you report on them becomes your differentiator.
Takeaway: If you select a common indicator, invest in quality explanations and action plans. That’s what sets strong statements apart.
What’s Coming Next — And Why You Should Prepare Early
Here’s a quick timeline refresher:
- June 30, 2025: Deadline to publish the next PAI statement, covering calendar year 2024
→ This includes year-on-year comparisons from your 2023 report - Firms must ensure alignment with Level 2 RTS, with more rigorous qualitative expectations
- Clients and regulators will increasingly benchmark firms against one another — and not just on the numbers
If you haven’t already started prepping, now is the time.
What Does a Strong PAI Statement Look Like?
From our analysis, the top-performing disclosures had:
- Transparent breakdowns of data sources and methodologies
- Clear Year-over-Year narratives with context
- Specific actions tied to ESG policies (not just promises)
- Detailed explanations with measurable targets
- Internal consistency across sections and indicators
Want Help? Start Here
Looking to level up your next PAI statement? Automate data gathering, avoid greenwashing pitfalls, and report with confidence?
Check out our brochure including our PAI solution and many others: Transform Your PAI Reporting with Datia
Whether you're new to the PAI process or refining your second-year submission, our tools and team are here to help.
Final Thoughts
The PAI Statement has officially moved from niche ESG disclosure to mainstream reputation driver.
Done right, it can be a powerful signal of authenticity and accountability. Done poorly, it’s just more noise — or worse, a credibility risk.
As scrutiny increases and sustainability becomes embedded in every investment decision, your PAI statement is no longer a back-office task. It’s a message to the market.
Will yours say what you want it to?
