Group 2

GABV’s initial assessment of the Final Social Taxonomy Report


16 March 2022

By Adriana Kocornik-Mina, Metrics and Research Sr Manager, Global Alliance for Banking on Values (GABV)

The Global Alliance for Banking on Values (GABV), an international movement of frontrunner banks and leaders in sustainable and inclusive finance, welcomed the publication on 28 February 2022 of the Final Report on Social Taxonomy by the Platform on Sustainable Finance.

The Platform on Sustainable Finance (PSF) is a permanent expert group of the European Commission that was established to assist the development of sustainable finance policies, including the EU Taxonomy.  In its final report, the Platform confirmed that it is crucial to define clearly what constitutes a social investment.



Access to the Final Report on Social Taxonomy


The Platform identifies three stakeholder groups – workers, consumers, and communities – three social objectives, each with several sub-objectives. The objectives proposed are (1) decent work, (2) adequate living standards and wellbeing for end-users, and (3) inclusive and sustainable communities and societies. In the report, the Platform also distinguishes between three types of substantial contribution of activities, reaffirms the principle of not doing significant harm (DNSH), and states the need for minimum safeguards. The proposed structure for the social taxonomy borrows from the environmental taxonomy.

The GABV appreciates the Platform’s significant effort to integrate the comments received during the public consultation and to streamline the taxonomy’s alignment with other relevant initiatives in the European Union. These include the Sustainable Finance Disclosures Regulation (SFDR), the proposed Corporate Sustainability Reporting Directive (CSRD), and the Sustainable Corporate Governance (SCG) initiative.

Looking ahead, the GABV calls for sincere stakeholder engagement around the proposed definition of substantial contribution. In its current form, the Platform borrows from the environmental taxonomy to distinguish three types of substantial contribution: (1) activities with an additional inherent benefit; (2) activities that avoid harm and address negative impacts; and (3) activities that enable other activities to provide social benefits.

It is now in the hands of the European Commission to prevent embedding biases in markets by incentivising, for example, a focus on entities participating in high-risk activities over those active in delivering additional inherent benefits, or investments in activities that indirectly and at unknown future might generate social benefits (e.g., investment in R&D by a pharmaceutical) over those with a direct time-bound benefit (e.g., investment to secure continued care for vulnerable groups in underserved markets).

Moreover, as our practice and experience delivering positive environmental and social impact and sustainability shows, where sustainability labels are used by market participants to maximise financial returns, the availability, accessibility, acceptability, and quality (AAAQ) concept cannot be relied upon to overcome the aforementioned biases.

Values-based banks know that tracking inputs and measuring outputs to claim impact are never sufficient on their own. Accordingly, we invite the European Commission to learn from the experience of values-based banks both to reappraise the proposed types of substantial contribution and for defining the set of screening criteria for an activity to qualify as one. As the collection of best practices of values-based banks to social impact examined in the paper “Social Impact of Value-Based Banking: Best Practises and a Continuity Framework” illustrates, a clear and ambitious set of social objectives are but proof points of progress towards achieving the envisioned future of communities driven by values of inclusion and empowerment, wellbeing and sustainability, human dignity and freedom.

The GABV Scorecard offers an example of criteria to classify which projects and investments can be considered to add a specific social or environmental value, beyond what is standard practice in the respective market and do no harm. The framework is aligned with the United Nations Sustainable Development Goals (SDGs). The tried and tested practices that inform the GABV Scorecard have delivered positive social impact for decades, and as such can inform and contribute to the EU’s sustainable finance ambitions. The scorecard typically facilitates the assessment of relative added value by financial institutions and serves as a reference for investors to assess positive social impact.

The Social Impact Model of Values-based Banks

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