According to the PSF, a Social Taxonomy must distinguish between the inherent benefits and any additional social benefits that directly contribute to the realisation of human rights, such as improving access to quality healthcare or ensuring decent jobs. We also use third-party cookies that help us analyze and understand how you use this website. This draft report focusses on support for the environmental transition needed in the whole economy it recommends further clarity on both: activities that are significantly harmful to environmental sustainability, and those that have no significant impact on it. You also have the option to opt-out of these cookies. If social factors feature more prominently in the existing Taxonomy Regulation, European corporates and investors will be better placed to achieve a just transition, experts say. . We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. Apro: Its war, but not even Russias elite wants to go there. We cant lift this agenda through just one puzzle piece, they all play different parts in front-loading the sustainability agenda within both public and private sectors, she says. The vertical axis concerns the promotion of adequate living standards, such as improving accessibility to products and services meeting basic human needs. If possible, recommend on the structure of a social taxonomy with substantial contributions and DNSH criteria for social issues Reflecting on other objectives linked to business ethics, governance, anti-bribery or tax compliance matters ii) Advise the European Commission on the functioning of Article 18 of the Taxonomy Regulation By the end of the year, in turn, the Commission actually wanted to prepare its own report based on it in the meantime, it is unclear whether a proposal will materialize at all in this legislative period. This means the reporting requirements for asset managers under the Sustainable Finance Disclosure Regulation (SFDR) are not as focused on the social impact positive or negative of their ESG-labelled products. The report recommends taking national legislation as a minimum standard and, in addition, using as a reference framework international rules recognised by all member states, such as the UN Guiding Principles on Business and Human Rights. Yesterday, EU foreign ministers discussed new sanctions against Russia on the sidelines of the UN General Assembly in New York a formal proposal is expected next week. While the current Taxonomy has an environmental focus, the EU is also considering creating a social Taxonomy, which will similarly identify socially sustainable activities. Under Article 18 of the Taxonomy, an entity engaged in a sustainable economic activity must also make sure that activity meets the minimum social safeguards. With regard to the development of the EU Taxonomy, there are discussions within the European Commission about developing a social taxonomy as well. Nevertheless, the executive wants to speed up its independence from Russian energy imports and intends to propose new measures before the crisis meeting of energy ministers on September 30. With regard to social sustainability, however, it still owes investors an answer. Platform on Sustainable Finance These could be represented as social pillars, including human rights, equality and non-discrimination matters. The draft acknowledged that a Social Taxonomy would add to the already heavy reporting burden the CSRD, SFDR and Taxonomy Regulation are beginning to impose on companies and investors, especially as there are currently no standardised social indicators on which companies usually report. For an equitable ecological transformation of the economy (just transition), it is important to take social and labour standards into account. These safeguards refer to social frameworks such as the United Nations Guiding Principles on Business and Human Rights, the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises and the International Labour Organisations (ILO) declaration on Fundamental Rights and Principles at Work. Rather, [social criteria] must be linked to the economic entity, the subgroup said. LinkedIn and 3rd parties use essential and non-essential cookies to provide, secure, analyze and improve our Services, and to show you relevant ads (including professional and job ads) on and off LinkedIn. In addition, issuers would receive guidance on how social investments were defined and which criteria they would need to apply if they wanted to create or invest in a financial product with social objectives. These cookies will be stored in your browser only with your consent. Therefore, it is highly needed to coordinate and align the different legislative processes and reporting obligations the EU has put into life in recent years. PDF EU Taxonomy & Platform - European Commission . Article 18 describes them as minimum safeguard procedures that the entity implementing a sustainable economic activity must follow and must be aligned with the relevant international instruments. Overview of the EU taxonomy regulation - AIMA Issues such as creating liveable urban neighborhoods, social justice, living together in the social space, and further improving diversity, should be addressed and, hopefully, these issues will be given greater focus with a Social Taxonomy. But it has yet to be decided whether the subgroups work will translate into the evolution of the existing Green Taxonomy into a broader Sustainability Taxonomy, which would have a dual focus on social and environmental factors, or whether there will be two separate taxonomies connected through minimum social and environmental safeguards. All of these relate to investor and company processes and to reporting on responsible business conduct and governance, the PSF report states. The draft was published by the Platform for Sustainable Finance, the successor to the Technical Expert Group (TEG) which drafted the original taxonomy. But this emphasis is changing. Necessary cookies are absolutely essential for the website to function properly. The European Green Deal has a climate-first agenda, ranging across eight policy areas: biodiversity; sustainable food systems; sustainable agriculture; clean energy; sustainable industry; building and renovating; sustainable mobility; eliminating pollution; and climate action. Social Taxonomy risks death by Commission neglect - Euractiv Furthermore, to achieve the sustainable development goals (SDGs) of the UNs 2030 agenda, social standards must be invested in. EU Taxonomy in brief. How can access to healthcare and education or job security be measured? Contrary to the Environmental Taxonomy, which relies on affirmed research results and international frameworks such as the Paris Agreement, the Social Taxonomy is based on international consensus documents which can be classified into three groups: i) International Conventions, ii) the European Pillar of Social Rights and iii) the UN Sustainable Development Goals. A Social Taxonomy will also need to clearly identify and distinguish between inherent social benefits and added social benefits to avoid blue-washing, the draft acknowledged. Or is the squabble among the right too great? 28 June 2021 5 The EU Taxonomy Regulation: An Overview - FactSet Social taxonomy is the classification of economic activities that significantly contribute to social goals in the EU and represent a common code for investors, businesses and regulators regarding what is sustainable from a social perspective and what is not. As one of the largest economic sectors, the real estate industry plays a significant role in peoples everyday lives and in the development of society as a whole and, therefore, bears a high level of responsibility to the society. It might have the same requirement framework as the environmental taxonomy with adjustments to social aspects. In the longer term, the Commission will further need to consider how core social and environmental objectives will interact with one another, says Lysgaard. Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings. EU Social Taxonomy: Report of the Platform on Sustainable Finance Professional clients only - not for Retail use or distribution, Receive all the latest stories from the ESG Investor editorial team, Sustainable Finance Disclosure Regulation (SFDR), United Nations Guiding Principles on Business and Human Rights, Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises, International Labour Organisations (ILO) declaration on Fundamental Rights and Principles at Work, Sustainable Corporate Governance initiative, TNFD Update Outlines Double Materiality Approach, Disparity Between Impact Initiatives Must End. EU Taxonomy and the Future of Reporting - The Harvard Law School Forum The current Taxonomy Regulation is far from finalised, with ongoing debate around whether more carbon-intensive transitional activities such as nuclear, natural gas and related technologies should be included. You can read all about the basics of the EU Taxonomy in our previous post.As of this January 2022, approximately 12,000 public interest companies are required to indicate whether their economic activities are eligible for the EU Taxonomy. 22 - minute read In line with the Taxonomy Regulation [1] and following the European Commission's request, the Platform on Sustainable Finance (hereafter the "Platform") published its final report on the relevance and avenues to extend the EU Taxonomy to social objectives.The study released by the Platform on February 28th attempts to answer whether and how a Social Taxonomy could be . The six environmental pillars need to be supported by social-specific core objectives, the subgroup said. report on social taxonomy - Regulation Tomorrow The Taxonomy Regulation1 (the "Taxonomy") defines a European Union ("EU")-wide taxonomy, or classification system, of environmentally-sustainable economic activities, . EU Taxonomy Regulation | Quentic While this patchwork of interconnected and expanding legislation can be headache-inducing, Lysgaard maintains that the potential development of a Social Taxonomy isnt too much, too soon. With the EU Taxonomy Regulation, the EU is establishing a comprehensive framework for the protection of six environmental objectives (climate change mitigation; climate change adaptation; protection of water and marine resources; transition to a circular economy; protection of biodiversity and ecosystems; pollution prevention). As much as it can be frustrating and overwhelming for practitioners to wrap their heads around, the spike in regulation is commensurate to the challenges were facing time is of the essence. Its advisory body has already presented ideas, but after the heated discussion on Environmental Taxonomy, there seems to be a lack of political will - and priority. If you disable this cookie, we will not be able to save your preferences. Taxonomy Regulation - Finance The social taxonomy will serve as a complementary classification system to the environmental taxonomy, outlining which economic activities are socially sustainable. Assuming social objectives are added into the existing Taxonomy, how will the Commission ensure that the E and the S have equal emphasis?. This Delegated Act supplementing Article 8 of the Taxonomy Regulation was adopted in July 2021. The EU Commission actually wanted to write a report on the planned Social Taxonomy by the end of the year. It defines those activities through six environmental objectives: climate change mitigation; climate change adaptation; sustainable use and protection of water and marine resources; transition to a circular economy; protection and restoration of biodiversity; and pollution prevention and control. The recommendation by the PSF is an important milestone for the EU market to push for an aligned understanding of social activities, and bring clear conditions within the market. . A Social Taxonomy will also need to clearly identify and distinguish between inherent social benefits and added social benefits to avoid blue-washing, the draft acknowledged. EU Taxonomy Regulation Explained | J.P. Morgan Asset Management The Commission originally wanted to deliver within this mandate and propose a social counterpart to the green taxonomy. This could include waste water management, social housing and providing free education. Draft report on a social taxonomy - Finance The classification of social activities could provide an additional incentive for investors to invest in assets that have been classified as "social", because it would safeguard that financial products and economic activities which establish particular emphasis on social compatibility are in principle worthy of financial support. The Platform gathered stakeholder feedback on the draft reports through two calls for feedback, which ran from 12July to 6September2021 at 12:00 CEST (midday), after the original deadline of 27August was extended. The social taxonomy would represent, in many ways, a change in the priorities of sustainable finance. ESG taxonomies - KPMG Global For more details, please for more details to the PSF final report on the EU Social Taxonomy: https://ec.europa.eu/info/sites/default/files/business_economy_euro/banking_and_finance/documents/280222-sustainable-finance-platform-finance-report-social-taxonomy.pdf, To view or add a comment, sign in Since its initial publication in mid-2020, the EU Taxonomy has been generating a lot of interest from companies and individuals alike. The final report continues with the two options of either designing the interaction between two taxonomies, environmental and social, or merging both dimensions into one taxonomy. But now it seems to have shelved the project. Right now, there are no particular efforts in the Commission to get a social taxonomy off the ground now, says Antje Schneewei. Most notably, social issues are arguably harder to quantify, says Elizabeth Gillam, Head of EU Government Relations and Public Policy at Invesco. For example, whereas the Taxonomy Regulation works by linking environmental criteria to economic activities, some social aspects collective bargaining or tax transparency, for example cannot be so easily connected. Towards social sustainability: a social taxonomy EU Taxonomy - 2022 update - Intire Inclusive and sustainable communities and societies. Gaining Specialist Clarity on ESG in Fixed Income, Explaining the Impact of EU MiFID II Regulation on Sustainable Investing Overworked compliance officers should not despair. The subgroup has proposed that the taxonomy is developed through vertical and horizontal dimensions. will be delayed in order to include rules on the additional product disclosures introduced via Articles 6 and 7 of the Taxonomy Regulation. In terms of congruence with other EU regulations, there is also an overlap with the EU Disclosure Regulation on negative sustainability impacts in terms of the data to be reported. SFDR explained | J.P. Morgan Asset Management The Commission will analyse and consider these reports in view of the continuous development of the EUtaxonomy, as anticipated in the new strategy for financing the transition to a sustainable economy. . Its important that everything is developed at the same time so that theres ample coordination and the different pieces all fit together. According to the final report, the most obvious impact of a social taxonomy would be on financial market participants (FMPs), as institutional investors. In February, the platform presented its report with ideas for a Social Taxonomy. The aim of a social taxonomy would be to identify economic activities that contribute to advancing social objectives. The Taxonomy Regulation introduces a sustainability classification system through which investment . The aim is to support transitions in areas currently of "significant harm". fair working conditions and social protection and inclusion); Enhancing inherently positive impacts on social goods and services and basic infrastructure: focusing on social goods and services sectors that include products and services for basic human needs and basic economic infrastructure to meet the right to an adequate standard of living (e.g. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. In addition to . The PSF has been asked by the Commission to advise separately on the application and functioning of the minimum safeguards as set out in Article 18 of the Environmental Taxonomy. These include, among others: health and safety; healthcare; housing; wages; non-discrimination; consumer health; and communities livelihoods. Information about the Regulation (EU) 2020/852 (Taxonomy) on the establishment of a framework to facilitate sustainable investment. The EU Platform on Sustainable Finance (PSF) has recently launched its final report on the EU Social Taxonomy. To avoid blue-washing (social-washing), we need a social taxonomy just as much as we need a green taxonomy, says Nikolaj Halkjr Pedersen, Senior Lead on Human Rights at the UN-convened Principles for Responsible Investment (PRI). The subgroup identified that a Social Taxonomy listing only vertical objectives may limit the scope of socially-led investments and thus a broader approach that supports all companies in their contribution to society and social sustainability is also needed. EU Social Taxonomy Proposal: simpler and meaningful but half-way In force since July 2020, the Taxonomy Regulation establishes a list of environmentally sustainable economic activities, with the aim of limiting the risk of greenwashing and outlining the behaviours companies need to adopt to be considered sustainable. From an ecological perspective, the EU has already answered this question or is in the process of doing so, as it is still fine-tuning some elements of the Environmental Taxonomy. It has recommended to the Commission as well that a social taxonomy should be structured similar to the way it has recommended and that this could be achieved by making changes to the Taxonomy Regulation. If properly designed, it has the potential to make the social effects of financial investments transparent, to direct resources to socially-responsible activities and companies, to contribute to a fair green transition and to promote good jobs. Listen to audio Leer en espaol It represents a change of course for sustainable finance. To ensure that the various aspects integral to these objectives are considered, a non-exhaustive list of sub-objectives for each objective has been defined. Without such an approach, pure social added value cannot be clearly determined and targeted. These are also differences that may make merging social and environmental factors under one taxonomy more difficult. But opting out of some of these cookies may have an effect on your browsing experience. WISF endorses the alignment within the market and sees the EU social taxonomy crucial for more capital flow toward social investments. The Taxonomy Regulation establishes an EU-wide classification system or 'framework' intended to provide businesses and investors with a common language to identify to what degree economic activities can be considered environmentally sustainable. Is the Social Taxonomy still coming? + Energy crisis: new Commission Her answer was sobering. Consequently, the . Covid-19 has helped underline the urgency of ensuring the inclusion of the social or human rights domain, so Im hoping stakeholders demonstrate their full support for the Commission to go ahead, she says. Conduct due diligence to avoid any breach of the minimum social safeguards specified in the Taxonomy Regulation. Within this framework, human rights and labor protection issues are only considered in the form of minimum safeguards. Or, if the taxonomies are to be separate, yet connected, these core objectives would alternatively be subject to minimum environmental safeguards. is carried out in compliance with minimum social and governance safeguards set out in the Taxonomy Regulation (these safeguards align with the OECD Guidelines on Multinational Enterprises and. EU Taxonomy - Deloitte This category only includes cookies that ensures basic functionalities and security features of the website. They havent really started thinking about the operational piece, such as what a reporting framework could look like. Get 30 days of free access to the Professional Briefing to read these and more quality news every day. presented its report with ideas for a Social Taxonomy, Energy crisis: Commission plans new proposals, EU foreign ministers consider new Russia sanctions, New political community: EU Council sends out invitations, EU data protector wants regulation articles deleted, UK to settle trade dispute with EU quickly, Circular Economy: Lemke announces dialogue process, Lfven wants to lead the European Socialists. Unsurprisingly, this added complexity has some investors asking: Is this all too much, too soon? To view or add a comment, sign in, Women In Sustainable Finance International, https://ec.europa.eu/info/sites/default/files/business_economy_euro/banking_and_finance/documents/280222-sustainable-finance-platform-finance-report-social-taxonomy.pdf. "As required by the Taxonomy Regulation, the Commission will publish its own report on the merits of possible provisions to extend the Taxonomy Regulation to cover social objectives in due . The Taxonomy Regulation: an overview - Lexology PDF EU Taxonomy Regulation - Debevoise & Plimpton The current environment consists of: (i) the existing legislation and proposed initiatives on the EU taxonomy; (ii) the proposed corporate sustainability reporting directive; (iii . Both vertical and horizontal objectives should rest on internationally agreed standards on human rights, including labour rights. Common classification, consistent language and transparency are critically important to enable the industry to act with confidence, and so the Taxonomy needs to expand beyond only defining what is green, she says. The social taxonomy is the planned classification of economic activities that contribute to the EU's social goals and provide guidelines for investors, businesses and regulators concerning what is and is not sustainable from a social perspective. A decision on whether and in what form an EU Social Taxonomy should be developed has not yet been taken. PDF European Commission | Choose your language | Choisir une langue
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