Should PAI indicator 4 in Table 1, Annex I of the SFDR Delegated Regulation ("Exposure
to companies active in the fossil fuel sector") be calculated on a look-through (i.e. share
of fossil fuel activi

Question

Should PAI indicator 4 in Table 1, Annex I of the SFDR Delegated Regulation ("Exposure
to companies active in the fossil fuel sector") be calculated on a look-through (i.e. share
of fossil fuel activities) or pass/fail (i.e. whole company active within the fossil fuel
sector) basis? I.e., is there a threshold level of fossil fuel related economic activity
required before a company becomes "active in the fossil fuel sector" or is any activity
sufficient to make a company "active in the fossil fuel sector"?

ESA Joint Committee (EBA, ESMA, EIOPA) · Accepted Answer

In accordance with the definition set out in point (5) of Annex I of the SFDR delegated Regulation,
companies qualify as “companies active in the fossil fuel sector” when they “derive any revenues
from exploration, […] of fossil fuels […] “.
Thus, it follows that:
• the calculation of PAI indicator 4 should be performed on a pass/fail basis; and
• a company is considered to be active in the fossil fuel sector as soon as it derives any
revenues from any of the activities mentioned in the definition”.
The financial market participant has therefore to include the aggregated investments in all
companies that are active in the fossil fuel sector (i.e. “failing” companies) under its disclosure of
PAI indicator 4 in Table 1 of Annex I of the SFDR Delegated Regulation.

Should PAI indicator 4 in Table 1, Annex I of the SFDR Delegated Regulation ("Exposure to companies active in the fossil fuel sector") be calculated on a look-through (i.e. share of fossil fuel activi

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