Social Taxonomy: Sustainability is more than just environment
The intention of the Social Taxonomy is to guide financial flows towards investment that substantially contribute to social objectives. It is the same as the existing environmental taxonomy (cf. EU Taxonomy) does for environmentally friendly investments. The Social Taxonomy will be established on international values and cultural standards and is intended to be structured similarly as the EU Taxonomy is. To that end the Platform on sustainable finance published a Final Report on Social Taxonomy outlining the new Social Taxonomy.
Last week the European Economic and Social Committee (EESC) held a public hearing on “A social taxonomy for sustainable investment – challenges and opportunities” with the intention of requesting feedback on that matter and creating a momentum towards implementation of a Social Taxonomy. In the hearing, the participants discussed the pros, cons, challenges, and objectives of the Social Taxonomy. The main challenges that were identified are:
- The social impact is context specific and difficult to compare;
- Lack or inadequate quality of data on issues such as modern slavery and diversity; and
- Cultural differences.
Proposed social objectives cover:
- Decent work (Social dialogue, living wages, health and safety);
- Adequate living standards and wellbeing for end users (healthcare, education); and
- Inclusive and sustainable communities and societies (access to basic social infrastructure).
Independent of these challenges, the Social Taxonomy will give rise to the opportunity to:
- Investors to contribute to the improvement of working and living conditions;
- Address negative impact and avoiding such to the society; and
- Gain reputation for businesses that implement the Social Taxonomy.
In the conclusion, the Social Taxonomy is of utmost importance as it will have a significant impact on the society. For the implementation anyhow there is still the need to address and solve the above-mentioned challenges.
