The EACB welcomes the possibility to comment on the Platform on Sustainable Finance’s draft proposal for a social taxonomy.
We believe that a social taxonomy would provide a clear and easily accessible framework to describe what a social activity is. Our Members are aware of the fact that it will be more difficult to find quantifiable criteria for a social taxonomy than for an environmental taxonomy. However, providing the definitions for “social sustainability” will be key for making the initiative tangible and useable for financial institutions in order to direct financial flows to social undertakings and economic activities. Although especially with climate mitigation scientific research allows to attach highly relevant quantitative criteria to economic activities, social sustainability is at the moment described in more qualitative terms. There are promising attempts to translate these into quantitative indicators, the probably most famous being the UN Development program with its annual report on human development. Acknowledging the need to materialize concrete proposals in indicators, our Members underlined the need to take an objective approach as much as possible.
Taxonomy should focus on incentives rather than distancing citizens by radical intervention. Certain concepts developed by the Platform’s experts appointed by the EC (such as classification of economic activities as socially harmful) seem premature and call for an open democratic societal and political debate and require parliamentary legislation.
We would also like to point out the importance of public incentives for the success of a future social taxonomy adoption. Where the legislators express desire for increased social economic activities, we believe they should also support the transformation through incentives. As much as we welcome both the green and social initiatives, European undertakings will incur costs. Undertakings that promote social economy activities should therefore also receive incentives from the public sector.
Moreover, we believe that at entity level the following recommendations could be taken into account in developing the criteria for the future social taxonomy:
- The support to local economies by serving decentralized areas, rural areas, and municipalities with no other alternative access to investment and financing.
- The democratic nature of the governance, ensuring representation of different economic/social sectors in the supervisory board of the bank, active shareholders and community engagement.
The future classification system could take into account some of those criteria to be applicable to all companies that would like to start assessing their own activities and governance practices according to the EU Social Taxonomy, with the aim to avoid a too narrow and strict classification system.
You will find more information and the EACB’s official answer here attached.
For further details or questions please contact:
Ms. Elisa Bevilacqua, Head of Department (firstname.lastname@example.org)
Mr. Volker Heegemann, Head of Department (email@example.com)
Mr. Giovanni Betti, Adviser Sustainable Finance (firstname.lastname@example.org)
Ms. Maryia Sulik, Adviser Accounting, Audit, Taxation & Co-operative Affairs