(Monday 28th February, Brussels) Today, the structure of a potential social taxonomy has been presented. In its advice to the European Commission, the social taxonomy subgroup of the EU Platform on Sustainable Finance presented its recommendations on how to extend the taxonomy to social objectives. The European Commission will review the recommendation and decide whether to go ahead with the project later this year.
Maria van der Heide, Head of EU policy at ShareAction said: “The subgroup did an amazing job identifying the ingredients a social taxonomy needs to be meaningful and efficient. This structure builds on and reinforces the environmental taxonomy. Against the backdrop of growing inequalities in our societies, further aggravated by health and climate crises, the introduction of the social taxonomy must not be delayed. We therefore urge the Commission to respond to the social taxonomy report swiftly and develop a social taxonomy without delay.”
The taxonomy, one of the cornerstones of the EU sustainable finance strategy, classifies which economic activities can be considered sustainable. This classification allows investors to steer their investments towards sustainable businesses, but currently only looks at sustainability from an environmental perspective. Biodiversity loss and climate change are, however, interconnected with social crises. There is a strong need for private social investment, in order to tackle these interlocking crises.
A social taxonomy will guide investors by defining what social sustainability looks like and will function as a tool to fight ‘social washing.’ It will facilitate investments for a fair, inclusive transition to a net zero economy, prioritising the needs of workers, consumers and communities.
Maria van der Heide: “We have seen investor demand for social investments grow, with Covid-19 having put the materiality of social factors in the spotlight. A consistent integration of these factors into investment processes will help to build resilience from social risks across investors’ portfolios.”