How should I handle timing differences between current investments and enterprise value in PAI calculations?
SFDR Delegated Regulation (EU) 2022/1288, Article 6(3) and Annex I, Section II & Annex I (PAI indicators)
In simple words
For PAI calculations you should use the current value of the investment at the end of the quarter and multiply it by the investee’s enterprise value at fiscal year-end. The ESAs warn that differences in dates can over- or under-represent impacts, but the requirement in Article 6(3) is to base quarterly calculations on the current value of investments, not to re-align all dates. You should be consistent in how you apply this method across all investee companies and indicators.
Official question
In the delegated regulation, the timing of the amount of the current investments in an investee company (holding date) and the enterprise value (company’s fiscal year end) are not aligned. Given market movement between those dates, the calculation of the percentage owned will be inaccurate. Art 6 (3) states for the PAIs it is an average of the impacts on four dates, so this will lead to problems in some cases and will lead to over/under representation of the emissions of some investee companies.
Official answer
The ESAs are aware that there is a potential misalignment between the timing of the (at least) quarterly calculations of the adverse impacts under Section II and Annex I of the Delegated Regulation. The quarterly impacts should be based on the current value of the investment derived from the valuation the individual investment (e.g. share) price valued at fiscal year-end multiplied by the quantity of investments (e.g. shares) held at the end of each quarter. In such manner the composition of the investments at the end of each quarter is taken into account, but the valuation reflects the fiscal-year end point in time.
Answered by
European Supervisory Authorities
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