Date: 3rd July 2023

BETTER FINANCE supports the newly suggested mandatory social indicators under the Sustainable Finance Disclosure Regulation (SFDR), which aim to measure principal adverse impacts (PAI). It is crucial for these indicators to align with the current Corporate Sustainability Reporting Directive (CSRD) and the associated European Sustainability Reporting Standards (ESRS) to ensure consistency. The implementation of these indicators would greatly benefit retail investors, as they would have comprehensive social information to inform their investment decisions. However, the effectiveness of these indicators relies on synchronised legislation. The current proposal from the European Commission suggests subjecting disclosure requirements to materiality assessment within the ESRS. This could have a negative impact on the proposed social indicators in the SFDR and their reporting. To address this concern, it is essential to ensure mandatory disclosures within the ESRS to ensure compliance with the PAI in the SFDR.

As representatives of financial services users, BETTER FINANCE prioritises clarity and transparency and agrees with the proposal to mandate the disclosure of the portion of information related to PAI indicators that the Financial Market Participant (FMP) relies on from investee companies. This disclosure would provide valuable insights into the direct data obtained from companies.