Sustainable Investing
Principal Adverse Impact indicators
Companies affect the environment in various ways, both positively and negatively. Investors who own the equities and bonds of these companies need to report on adverse sustainability impacts at both the entity and financial product levels. The European Union (EU) defines these adverse impacts as “negative, material, or likely to be material effects on sustainability factors that are caused, compounded by, or directly linked to investment decisions and advice performed by the legal entity”.
The EU has identified 64 adverse impact indicators that must be calculated, 18 of which are mandatory to report, while the remaining 46 are voluntary. These indicators cover typical environmental, social and governance (ESG) factors familiar to investors. The compulsory indicators include a range of factors, such as carbon emissions, fossil fuel exposure and waste levels (Environmental); gender diversity and human rights due diligence (Social); and exposure to corruption, bribery, or other scandals (Governance).
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Sustainable investing
Although the regulation formalizes the disclosure process, identifying adverse impacts is not a new concept. Robeco has long integrated ESG aspects into its investment process to manage risk and minimize negative impacts. Since the implementation of the EU's Sustainable Finance Disclosure Regulation (SFDR), Robeco has been considering negative impacts as disclosable Principle Adverse Impact (PAI) indicators for the first time in June 2021.
Following the SFDR framework, Robeco established a methodology for measuring these indicators and developed a prototype to assess the impact on all its funds.
The Robeco Principal Adverse Impact statement discloses data for the period of 1 January to 31 December.