Asset Management & Investment Funds: EU & International Developments – September 2025

ESAs annual report on voluntary principal adverse impacts (PAIs) disclosures under SFDR

The European Supervisory Authorities (ESAs) published their fourth annual report on PAI disclosures under the SFDR. The report finds that financial market participants (FMPs) are providing more complete and higher quality disclosures, particularly larger multinational groups, while smaller entities often mix general ESG or marketing information with their SFDR disclosures with no clear information whether PAIs are being considered or not.

The report highlights that more FMPs now publish entity level information in clearly labelled sustainability or SFDR website sections, improving transparency and accessibility. The report sets out good and below average practices on disclosures (some examples below) and includes recommendations for national competent authorities and for the European Commission ahead of the SFDR review.

Entity level disclosures 

Access:

• Good: disclosures in the same place as prior year, accessible via a direct link or keyword search.
• Below average: information scattered across website, hard to locate from the home page, non-intuitive links to find the section.

Clarity:

• Good: PAI statements follow Annex I of the SFDR Delegated Regulation, maintain indicator order, explain actions taken or planned and targets for the next reference period, clear language, may include colours or visuals or footnotes with extra information, description of escalation procedure in case of a lack of PAI reduction, a separate four-page summary.
• Below average: no explanation of measures taken or planned, nor the objectives set for the next reference period, large bulk of text, English instead of the national language of the jurisdiction, vague references to actions taken and overly technical or generic.

Completeness:

• Good: clearly explain year on year reasons for PAI data changes and detailed CO2 emissions indicators.
• Below average: no English summary, references to international standards without reference to PAI indicators.

Quality

• Good: comprehensive detailed statements with clear justification and context for each indicator, including disclosure of used calculation methodology, sources and assumptions, accompanied by specific targets and metrics and breaking down the change in PAI from one year to the next by specified factors.
• Below average: generic language, unclear structure, long, technical sentences without contextual explanation, not meeting minimum requirements and quality.

Quantification:

• Good: PAI statement includes all mandatory indicators, with actions and targets, detailed information on PAI monitoring, governance and escalation system within engagement initiatives and investment strategies.
• Below average: no explanation of actions or targets, generic and unclear reference to the actions envisaged to improve PAI in the invested companies.

Deadline

• Most FMPs met 30 June 2024 deadline, but some outdated statements, insufficient internal controls, processes and policies.

Product level disclosures

• Good: results disclosed for each indicator and description of suitability and coverage in %. Funds that have sustainable investment as their objective also disclose under Article 7(1) SFDR. Exclusion and stewardship measures help manage potential negative impacts on specific PAI indicators.
• Below average: for funds that choose to disclose their PAIs, the results are not reported on indicator specific basis.

Recommendations to the European Commission

• Consider the persisting value of PAI statements, possibly in shorter form with reduced indicators in machine-readable format available in the European Single Access Point (ESAP).
• Address lack of coverage findings, implement the best practice set out in ESAs Q&A IV.5, that FMPs distinguish proportion of investments covered by data or estimated.
• Consider other ways to introduce proportionality than “more than 500 employees” threshold.
• Reduction of frequency of ESAs annual report to every two or three years.

 Recommendations to NCAs

• Continue to engage with FMPs to support the necessary enhancements and ensure that disclosures improve in quality and relevance.
• NCAs should communicate supervisory expectations to support the effective integration of PAI into FMP’s decision making process.
• NCAs should remain vigilant about the level of coverage (all investments).

Savings and Investments Union and Capital Markets Union

The European Parliament adopted a report on facilitating the financing of investments and reforms to boost European competitiveness and creating a Capital Markets Union (CMU). It also published the text of the resolution that it adopted.

The report sets out the views of the European Parliament's Committee on Economic and Monetary Affairs (ECON) on measures intended to mobilise private investment and ease access to finance proposed by the Draghi report.

MEPs call for concrete measures to make financing more available and affordable, especially for SMEs and innovative ventures. To do this they want, among other things, larger venture capital and growth funds, financed in part through transforming personal savings into investments.

ESMA’s second risk monitoring report of 2025

ESMA published its second risk monitoring report of 2025, setting out the key risk drivers currently facing EU financial markets.

In the asset management sector, in H1 of 2025, EU funds experienced their highest episode of volatility since the COVID-19 outbreak but exhibited positive performance amid muted flows. While funds have been overall resilient, leverage and liquidity risks persist in parts of the sector. In the real-estate fund sector, market prices seem to have bottomed out, but real-estate funds continued to experience sustained outflows in some jurisdictions. In this context, ESMA and the IMF performed a stress test showing the resilience of funds to a market shock but potential spillovers to the underlying bond markets.

T+1

On 10 September 2025, the European Parliament adopted the proposed regulation to shorten the settlement period for EU transactions in transferable securities through amendments to the Central Securities Depositories Regulation (CSDR).

The Council will next adopt the proposed regulation. Following adoption, the proposed regulation will enter into force on the 20th day following publication in the Official Journal of the European Union and will apply from 11 October 2027.

For more information on these topics please contact any member of A&L Goodbody's Asset Management & Investment Funds team.

Date published: 28 September 2025