Example description of DNSH in pre-contractual disclosures

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The EU Sustainable Finance Disclosure Regulation (SFDR) requires financial undertakings (e.g. asset managers) to explain how they make sure that their sustainable investments are in line with the DNSH principle. The explanation ought to be included e.g. in pre-contractual disclosures for Article 9 funds.

The exact content of the explanation is left for the individual financial undertakings to decide. The explanation should, however, include a discussion of how the SFDR Principal Adverse Impact indicators are taken into account.

Upright has created a template answer for providing this explanation as part of SFDR pre-contractual disclosures when using Upright data.

Example text for pre-contractual disclosures section "How do sustainable investments not cause significant harm to any environmental or social sustainable investment objective?"

According to the EU Sustainable Finance Disclosure Regulation (SFDR), sustainable investments must not significantly harm any environmental or social objective.

Within the investment process of this fund, this is ensured primarily by three separate screening criteria that ensure that negative impacts are minor in relation to the size of the investee company and the size of its positive impacts.

The criteria are as follows:

  • The net impact ratio of the investee company should be non-negative, AND

  • The negative score for the Environment dimension should not be less than -8.0, AND

  • The negative score for the Society dimension should not be less than -2.0

If all of the above criteria are not satisfied, the investee company must have a credible plan to address the issues in the future.

As a supplementary layer of assurance that sustainable investments do not significantly harm any environmental or social objective, Principal Adverse Impact indicators (part of Regulation (EU) 2019/2088) are taken into account as described in the following section (Section 2.2.1).

How are indicators for adverse impacts on sustainability factors taken into account?

Principle adverse impacts are considered separately for each individual investment according to the following process:

  1. Identification of relevant adverse impact indicators for an investment. This step is skipped for indicators that are considered "mandatory" in the Regulation (EU) 2019/2088 and its regulatory technical standards, as such indicators are always treated as relevant.

  2. Assessment of the scale of possible adverse impacts related to an investment, in relation to the scale of its positive impacts. The assessment is done based on disclosed and modeled data for individual principal adverse indicators and relevant correlated indicators. Correlated indicators are used when no data is available for specific principle adverse indicators that would be relevant to consider. Used correlated indicators include, but are not limited to, Upright net impact metrics and UN Sustainable Development Goals (SDG) alignment metrics.

  3. Based on the assessment, a conclusion is made on whether:

    • The potential harm related to the investment is insignificant.

    • There is insufficient data to conclude on whether there is significant harm related to the investment.

The above assessment is performed for both new and existing sustainable investments. The analysis for existing investments is updated every 6 months. The assessments are primarily driven by data from external data provider Upright.


Adapt the language around the criteria if all investments are not into companies.

Example of using correlated indicators: case "pollutants"

The SFDR draft technical standards include indicators for three different types of pollutants: "inorganic", "air pollutants", and "ozone-depleting substances".

Among other pollutants, all of these pollutants are captured within the Non-GHG emissions category in the Upright net impact model. Therefore, if a company has a low negative score in the Non-GHG emissions category, it would be expected to also not have adverse impacts related to the mentioned three types of pollutants.

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