Today Eurosif responded to the consultations of the EU Platform on Sustainable Finance regarding the Social Taxonomy and an extended framework for the Environmental Taxonomy.
We support a Social and a Significant Harm Taxonomy but we harbor reservations on the Intermediate Performance and the No Significant Impact categories, as the usability of the Taxonomy remains a priority for sustainable investors. Policies to price negative externalities and derisk investments in sustainable investments will still be necessary to re-orient capital towards green and socially sustainable activities on a large scale. A science based green Taxonomy should remain the top priority.
The statement summarising Eurosif’s submission to the Platform is available here.
Here’s a summary of the key points:
On an extended Environmental Taxonomy
- A Significant Harm Taxonomy could help bring more transparency to financial markets.
- An Intermediate Performance category would cover a large set of activities with very diverse sustainability performance, thus potentially increasing the risk of perceived greenwashing, and making the Taxonomy excessively complex.
- A No Significant Impact category is less relevant as it would cover sectors whose transition is not material to reach the climate objectives.
On the Social Taxonomy
- A Social Taxonomy would bring more transparency to investors on the social impact and performance of their investments.
- A vertical dimension would be useful to identify economic activities making a substantial contribution to social objectives. That said – we acknowledge the complexity involved in developing a list.
- On the horizontal dimension, for some sectors there may be no universally acceptable answer as to what should constitute substantial contribution and/or satisfy the DNSH criteria.
- It is crucial that the Platform coordinates this workstream with other EU initiatives on corporate governance and supply-chain due diligence, as well as with the work of the EFRAG on the Sustainability Reporting Standard and the revision of the SFDR social Principle Adverse Impact Indicators.
- Both the Social Taxonomy and Significant Harm Taxonomy could easily become politically very sensitive topics. Therefore, it will be vital for the Platform and the European Commission to be very clear in their communication about these tools.
- Both the Significant Harm Taxonomy and the Social Taxonomy will certainly not be enough to achieve the stated climate, environmental or social objectives. A social taxonomy should not be seen as an alternative to robust policies and funding by governments. Equally, re-orienting international capital flows away from fossil fuel investments will require making sustainable investments financially more attractive, while making existing carbon intensive investments less attractive.
- The completion of a science-based Taxonomy on the climate objectives, as well as on the other environmental objectives, remains a priority.
Eurosif’s full statement on the extended Environmental Taxonomy is available here
Eurosif’s full statement on the Social Taxonomy is available here
Both contributions have been sent to the EU Platform on Sustainable Finance as part of the responses to the public consultations (further information here).