The EU Platform on Sustainable Finance will recommend that the green taxonomy’s minimum social safeguards are to be built on the European Commission’s proposed due diligence directive, a rapporteur has confirmed to Responsible Investor.
Antje Schneeweiß, managing director at German church investment group Arbeitskreis Kirchliche Investoren and rapporteur of the Platform subgroup focused on extending the taxonomy to social objectives, clarified this following remarks she made during a European Economic and Social Committee hearing on Tuesday.
“The minimum safeguards are built on the present suggestion for the due diligence law in the EU, and our suggestion will be that if companies fulfil that, that’s fine,” she said at the time.
The minimum social safeguards are part of Article 18 of the taxonomy regulation, which states that “procedures implemented by an undertaking that is carrying out an economic activity [need to align] with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights”.
On due diligence, Schneeweiß was referring to a directive which would see companies required to identify and – where necessary – prevent, end or mitigate adverse impacts of their activities on human rights and environmental issues.
In February, the Commission adopted a proposal on the directive. The next stage is for the proposal to be presented to the European Parliament and the Council for approval. Once adopted, member states will have two years to transpose the directive into national law and communicate the relevant texts to the Commission.
Moving forward, Schneeweiß told RI that the Platform will “probably” publish its report on the minimum safeguards, with the recommendation, on 11 July.
The main focus of the hearing this week was the social taxonomy. Mirroring its environmental counterpart, its intended aim is to establish a comprehensible and shared way of defining what a socially sustainable activity or company is.
In February, the Platform launched a report on what a social taxonomy could look like. Schneeweiß and many of the other speakers, however, expressed concerns about the lack of momentum behind the initiative.
Aleksandra Palinska, senior research and advocacy officer at Finance Watch, said the NGO had been informally told that there would be no legislative proposals in this Commission’s mandate.
She later told Responsible Investor: “We understand this is largely due to the controversy caused by gas and nuclear around the green taxonomy and fierce lobbying of the defence industry with regards to the social taxonomy.”
Following the hearing, Palinska explained to RI that, although Finance Watch supports the creation of a social taxonomy, due to the controversies a more pragmatic approach might be useful.
“Start with something simple and more politically acceptable, focusing on identifying non-controversial economic activities and sectors that everyone can agree that are socially beneficial, developing it further over time,” she said. “Such a classification, whether labelled as a social taxonomy or a standard for social investments, could follow an architecture of the green taxonomy or take a different, possibly simpler form.”
She added: “Finally, given the political challenges, a social taxonomy could be developed by a cross-industry market group building on the recommendations of the Platform on Sustainable Finance and taking into consideration the practicalities and specificities of financial markets. Once up and running, such a social taxonomy/social investment standard could become a legally binding framework in a few years’ time.”
In response to the concerns raised about the social taxonomy and the upcoming recommendation from the Platform on safeguards, a Commission spokesperson told RI: “We thank the Platform for all their hard work on this report and on social taxonomy. The report will be carefully analysed in due course. The Platform on Sustainable Finance is an independent, advisory body for the Commission. The Platform’s report therefore does not prejudge any decision by the Commission on the matter.”
They continued: “As mentioned, the Commission will publish its own report on the merits of possible provisions to extend the taxonomy regulation to cover social objectives in due course, something which is required by the taxonomy regulation.”