The Danish Financial Supervisory Authority has published review findings indicating that the financial firms examined generally have adequate methods and processes to identify, assess and address breaches of international standards covering human rights, corporate responsibility, climate and the environment. The review concerned firms’ work underpinning disclosures about compliance with these standards under the Sustainable Finance Disclosure Regulation (SFDR). The SFDR requires certain financial firms to publish a statement on whether they consider the principal adverse impacts (PAI) of investments on sustainability factors at entity level. These statements must include information about compliance with the international standards firms reference. Most firms examined use environmental, social and governance data and external data providers to monitor portfolio companies for breaches. Active ownership is a central tool for addressing breaches, with divestment a possible last resort. The European Commission’s proposed SFDR revision, presented on November 20, 2025, would remove the PAI statement requirement, a proposal supported by the Council and European Parliament. If adopted as proposed, firms would no longer have to explain how they support international standards at entity level. Any voluntary disclosures about compliance, including in marketing materials, would still need to be accurate. The firms examined indicated that removing the requirement would change only the scope or format of their external reporting, not their investment practices concerning international standards.
Danish Financial Supervisory Authority finds firms’ processes for applying international sustainability standards generally adequate
In newly released review findings, the Danish Financial Supervisory Authority’s indicates that firms generally have adequate processes to identify, assess and address breaches of international sustainability standards, using external data, active ownership and, ultimately, divestment. The proposed revision of the Sustainable Finance Disclosure Regulation would remove the requirement for entity-level principal adverse impact statements, but voluntary claims about compliance with international standards would still need to be accurate. Firms examined indicated that removal would affect their reporting rather than their investment practices.