On 28 February 2022, the EU Platform on Sustainable Finance (the Platform) published its Final Report on a potential Social Taxonomy. This sets out the Platform's proposals for a structure for a social taxonomy under EU sustainability legislation.
The purpose of the proposed social taxonomy (Social Taxonomy) would be broadly to direct capital flows to activities that operate with respect for human rights and support capital flows to investments that improve living and working conditions, especially for the disadvantaged. The Social Taxonomy will be largely based on internationally agreed norms and principles such as those under the Universal Declaration of Human Rights and European Social Charter.
The Social Taxonomy would largely follow the structure of the Environmental Taxonomy under the EU Taxonomy Regulation and would be based on three main social objectives; detailed substantial contribution criteria; "do no significant harm" (DNSH) criteria, and minimum safeguards.
To be aligned with the Social Taxonomy an economic activity would need to make a substantial contribution to one of the social objectives while also ensuring that it does no significant harm to the other objectives and complies with the minimum safeguards. Unlike the Environmental Taxonomy, the three social objectives would also contain specific sub-objectives.
We discuss the Platform's proposals in further detail below. Further work on a Social Taxonomy is expected in due course but no timings are provided in the Final Report.