European Large Asset Managers Now Unable to Opt Out of Article 4 SFDR

After June 30, 2021, large asset managers will no longer have the option to "explain" noncompliance with Article 4 of EU Regulation (EU) 2019/2088 on sustainability‐related disclosures in the financial services sector ("SFDR").

Until now, large asset managers—asset managers with more than 500 employees or the parent undertaking of a group with more than 500 employees—had the option to not comply with the requirement in Article 4 SFDR to publish a statement on their website regarding their due diligence policies with respect to principal adverse impacts of investment decisions on sustainability and ESG factors ("PAI Statement"). Instead, large asset managers have been able to simply explain why they do not consider such adverse impacts. "Sustainability factors" means environmental, social, and employee matters; respect for human rights; and anti‐corruption and anti‐bribery matters. However, per Article 4(3) and Article 4(4) of SFDR, large asset managers, from June 30, 2021, will no longer have an option and will have to publish PAI Statements on their websites. They will also need to implement the due diligence policies underpinning their PAI Statement. 

June 30, 2021, therefore, presents a significant shift for large asset managers that have previously opted out of publishing PAI Statements. 

PAI Statement—Format and Contents

The high-level obligation in SFDR requires that PAI Statements at least include: (i) information on the identification and prioritization of adverse impacts; (ii) summaries of engagement policies; and (iii) reference to the asset manager's adherence to responsible business codes and other internationally recognized standards. 

The Joint Committee of the European Supervisory Authorities has published a final report containing draft regulatory technical standards ("RTS") on the content and presentation of PAI Statements. The draft RTS provide for a mandatory reporting template and a set of indicators for identifying and assessing principal adverse impacts.  

The draft RTS show that publishing PAI Statements in line with Article 4 SFDR will involve granular reporting. While large asset managers will need to publish PAI Statements in line with the high-level text of Article 4 from June 30, 2021, the detailed RTS guidance will not come into force until January 1, 2022.

Insights by Jones Day should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, to be given or withheld at our discretion. To request permission to reprint or reuse any of our Insights, please use our “Contact Us” form, which can be found on our website at This Insight is not intended to create, and neither publication nor receipt of it constitutes, an attorney-client relationship. The views set forth herein are the personal views of the authors and do not necessarily reflect those of the Firm.