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EU Social Taxonomy Proposal: simpler and meaningful but half-way through

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 developed.

Alike the environmental classification, the purpose of a potential EU Social Taxonomy is to unambiguously define what constitutes a “social investment”. One remembers its future existence is hypothetical because such creation has not been decided yet and hurdles are manifold.

Indeed, the Platform’s report does not bind the European Commission on any decision on the matter. Nonetheless, it provides a compass for whoever is willing to properly embed social dimensions in sustainable finance approaches, initiatives, methods or even products. It offers guidance to define “social investments” and, to a less usable extent, provides measurement instructions. Such work is timely because the provision of basic goods and services (especially for vulnerable groups), in particular by private entities, must be spurred and framed without succumbing to social washing.

The most desirable impact of a Social Taxonomy would indeed be, quoting the Platform, to have a knock-on effect on economic entities, which would “strive to be recognised as ‘social’ investments, provide the necessary data, intensify efforts on social economic activities and implement the necessary processes”.




A long way to go 

PART I. Content of the Platform's Proposal

    1. A simplified yet substantial Proposal

    2. A comprehensive and diverse set of social sub-objectives

    3. Governance aspects as a separate layer

    4. A three-fold “substantial contribution”

    5. Selecting sectors and activities

    6. Assessment levels puzzle

    7. The AAAQ concept

    8. Articulating environmental and social taxonomies

PART II. Backstage concerns, discussions and proposal status

    1. What is missing or underexploited

    2. The socially harmful activities have been kicked into touch

    3. Enforcement and reliable verification mechanisms

    4. Sincere or feinted misunderstanding?

    5. What desirable status for such hypothetical Social Taxonomy?

    6. Natixis’ view on a shaded Social Taxonomy



A long way to go

Even though the Report will probably resonate within Brussels, the European legislators are not tied to the Platform’s recommendations. The Commission is poised to publish a communication presenting its own conclusions and intents on the matter by the end of the year. In our view, reaching a politically vetted and fully enforceable hard-law classification endorsed by the Parliament and the Council is more of a moonshot than a short-term regulatory development.

However, the Platform’s insightful work and related discussions could be instrumental. One should not be mistaken; the Platform’s report does not offer on the shelves usable criteria that EU Member States intend to object or dismiss. Nonetheless, it properly identifies the main methodological challenges, constraints and accordingly proposes design principles.

The Report encompasses structural elements around objectives, sub-objectives, substantial contribution, DNSH, and the different types of ‘substantial contribution’ (see Table 6 in Appendix, “Example of sector selection, substantial contribution and DNSH for decent work objective and living wage sub-objective”). This is a preliminary work, with extensive contextual information and approach guidance. It initiates the complex calibration and standardization of social matters.

Efforts towards consistency with the rest of the regulatory landscape are laudable (Corporate Sustainability Reporting Directive (CSRD); the Sustainable Finance Disclosure Regulation (SFDR); and the Sustainable Corporate-Governance (SCG) initiative).


PART I. Content of the Platform's Proposal

1. A simplified yet substantial Proposal

As compared to the Draft Report, analyzed in our June 2021 Newsletter [2], the suggested Social Taxonomy layout proposed has been wisely simplified. The horizontal and vertical dimensions of the initial Proposal have been replaced by a single outline based on three social objectives, inspired from the Environmental Taxonomy structure, specifically: i) decent work, ii) adequate living standards and well-being (iii) inclusive & sustainable communities and societies.

The three social objectives are linked to three types of stakeholders affected by business activities:

     A. Decent work for an entity’s own workforce (including value-chain workers);

     B. Adequate living standards and wellbeing for end-users [3] or consumers;

     C. Inclusive and sustainable communities and societies for affected stakeholders (directly or through the value chain).

This stakeholder segmentation is similar to the one in the approach to non-financial sustainability reporting by companies under the proposed Corporate Sustainability Reporting Directive (CSRD) [4]. Such consistency would limit the burden of deciphering EU legislative package (i.e. investors and companies facing different reporting requirements for different legislative Acts) [5].

The Report provides particular guidance around:

  • The development of sub-objectives;
  • Types of substantial contribution and how they could work;
  • The special role of DNSH and minimum safeguards in a Social Taxonomy;
  • The rationale for selecting sectors;
  • Linking substantial contribution to capital expenditure (CapEx), operational expenditure (OpEx) or turnover.


2. A comprehensive and diverse set of social sub-objectives

Contrary to the Environmental Taxonomy, the Social Taxonomy spells out different dimensions of the three social objectives. The document sets out a non-exhaustive list of sub-objectives which relates to health and safety, healthcare, housing, wages, non-discrimination, consumer health and communities’ livelihoods.  

Under this proposed Social Taxonomy architecture, it would be possible to make a substantial contribution to several of the objectives and sub-objectives simultaneously.

Table 1: The non-exhaustive list of sub-objectives set out in the EU Social Taxonomy



Decent work

Promoting decent work

  • Social dialogue improvement, freedom of association and promotion of collective bargaining;
  • Predictable and transparent pay levels, guarantee of decent lives to workers and families;
  • Excellent health and safety for workers;
  • Extensive and inclusive learning programmes;
  • Measures against precarious working conditions, forced labor, exploitation of work (with specific reference to workers with a migration background) and child labor.

Promoting equality and non-discrimination at work

  • Equal employment opportunities for women, equal representation for all backgrounds, gender pay gap reduction;
  • Working conditions improvement (parental leaves and other facilities) and improvement of the career prospect for disadvantage people;
  • Decent job creation for target populations (women, unemployed young people, disadvantaged groups) & attractivity measures to avoid gender-segregation;
  • Ensuring pay gap between executives and the average worker is not excessive;
  • Ensure a living income for farmers.

Ensuring respect for the human rights and workers’ rights of affected workers in the value chain by carrying out risk-based due diligence.


Adequate living standards and wellbeing for end-users

  • Healthy and safe products and services;
  • Durable and repairable products design (e.g., making spare parts available, ensuring the interoperability of spare parts with competitors) and smooth multimodal experience services (e.g., transport);
  • Cybersecurity and data privacy protection;
  • Responsible marketing practices;
  • Quality healthcare products and services;
  • Healthy and highly nutritious food for children access improvement;
  • Good-quality drinking-water access improvement;
  • Good-quality housing access improvement;
  • Education and lifelong learning access improvement.


Inclusive and sustainable communities and societies

Promoting equality and inclusive growth

  • Access improvement for target populations and/or areas to basic economic infrastructure (e.g., transport, telecommunications, financial services and electricity);
  • Childcare and support to children;
  • Inclusion of people with disabilities;
  • Creation and preservation of decent jobs, particularly as part of a just, green and digital transition, for example by retaining and reskilling workers;
  • Preservation of employment levels, recruitment of local workers and support of local suppliers in targeted areas;
  • Promotion of equality.   

Supporting sustainable livelihoods and land rights

  • Promotion of community-driven development;
  • Avoidance of negative impacts on communities affected by business operations (including but not limited to land and livelihoods, health, safety and security, culturally and spiritually sacred sites, access to basic services, such as water, sanitation, housing and education);
  • Meaningful consultations with affected communities, including on priorities development to ensure the engagement indigenous peoples.

Ensuring respect for human rights of affected communities by carrying out risk-based due diligence

  • Implementation of the “free, prior and informed consent” process when indigenous peoples are affected;
  • Support freedom of assembly and expression.

Source: Authors (based on the EU Social Taxonomy final report)

The sub-topics are numerous and heterogeneous. For instance, non-discrimination differs, by nature, from the other sub-objectives: it is the backbone of ensuring decent work, adequate living standards and inclusive societies. The level of granularity in the sub-objectives is also quite varied.

3. Governance aspects as a separate layer

As part of an Environmental and Social Taxonomy, the Platform recommends 2 objectives on governance with 7 sub-objectives in total. The first objective relates to sustainability aspects of traditional corporate governance, while the second deals with corporate-governance aspects that are important for sustainability (see the figure below). According to the Platform, because governance topics are so strongly linked to the undertaking (entity-level) which carries out the activity, its natural place within the Taxonomy framework would be in the minimum safeguards.

The Report states that “linking executive pay to ESG should be part of the EU Taxonomy as it is a reflection of what is happening in the real economy”.  To ease concerns around interferences, the Platform suggests that such linking would not be based on a fixed list of indicators for a company or even sector, but instead on the companies’ own sustainability strategy and KPIs.

Figure 1: Governance proposed objectives and sub-objectives

Source: Authors (Natixis GSH), based on Platform’s Report

4. A three-fold "substantial contribution"

The Platform suggests following steps similar to the Environmental Taxonomy by:

    (i) Setting social objectives;

    (ii) Setting out the substantial contribution that can achieve these objectives; and

   (iii) Drawing up criteria that apply the principle of not doing any significant harm, so that contributing to achieving one objective is       not detrimental to the others.

The Platform distinguishes three forms of substantial contribution: maximizing positive impacts, minimizing negative ones, and enabling other activities to provide social benefits (see table 2 below).

Table 2: The three types of substantial contribution for a Social Taxonomy envisioned by the Platform




#1. Maximizing positive impacts

Enhancing the inherent social benefits of activities, products or services contributing to adequate living conditions (additional benefits)

Goods & services related to basic human needs or economic infrastructures
(ex: food, water, education, access to housing, healthcare, transport, and telecommunications)

#2. Minimizing negative ones

Avoiding and addressing adverse impacts on workers, consumers and communities, for instance occupational health & safety; training workers for a just transition; paying wages agreed in collective agreements; and ensuring a decent life for the worker and his/her family

High-risk sectors with documented human-rights and labour-rights abuses track-record

#3. Enabling other activities to provide social benefits

Social auditing services which help guaranteeing decent working conditions for value-chain workers

Carrying out tests to discover harmful substances in consumer products

Economic activities have the potential to enable substantial risk reductions in other sectors

Source: Authors (Natixis GSH), based on the Platform’s Report


5. Selecting sectors and activities 

Unlike the environmental Taxonomy for which activities were selected based on high-emitting NACE sectors, there is currently no single authoritative research resource that covers a large number of economic sectors and identifies their associated social or human-rights risks.

Nevertheless, the Platform explains that there are several organizations, initiatives and resources offering detailed insights and guidance (see table 3 below).

Table 3: Sources offering insights and guidance on social and human right helping in sector selection

Sector-oriented standards and guidance

  • Relevant ILO reports;
  • OECD sectoral guidelines on responsible business conduct;
  • Sector standards set out by the Global Reporting Initiative;
  • Standards developed by international financial institutions industry and multi-stakeholder initiatives.

Sector-oriented benchmarks

  • Corporate Human Rights Benchmark;
  • The World Benchmarking Alliance benchmarks;
  • KnowtheChain;
  • The Access to Medecines Index;
  • Ranking Digital Rights.

The Business and Human Rights Resource Centre’s lawsuits and allegations databases

  • Cover the human rights impacts related to more than 20 000 companies.

Source: Authors (Natixis GSH), based on the Platform’s Report

Furthermore, the Platform suggests selecting economic sectors that are relevant for the “reducing negative impacts” substantial contribution at the sub-objective level (unlike the environmental Taxonomy in which sector selection is performed at the objective level).

Prioritization is proposed regarding economic sectors with the highest general severity of risks (where possible based on gravity, scale and irremediably considerations).  The Table 4 below describes examples of high risks sectors related to decent work and selected sub-objectives.

To take another example, for the sub-objective “training”, high impact sectors could for instance be selected based on skills shortages or sectors negatively affected by the green transition or digitalisation with particular risks of layoffs, and therefore a special need to train certain groups of employees.

Table 4: Examples of sectors of relevance regarding decent work and selected sub-objectives envisioned by the Platform



Sectors of relevance

Living wage

High-risk sectors including sectors with high prevalence of contingent workers and/or workers earning the minimum wage – including in countries where the minimum wage is below a living wage (for example, calculated as below 60% of the median wage).

Occupational Health and Safety (OHS)

High-risk sectors identified based on Occupational Health and Safety incident statistics, e.g., including:

  • B-Mining and Quarrying;
  • C-Manufacturing;
  • F-Construction;
  • A-Agriculture, Forestry and Fishing;
  • H-Transportation and Storage;
  • D- Electricity, Gas, Steam and Air Conditioning Supply


  • Sectors with skills shortages, according to OECD and EU data;
  • Sectors negatively affected by the green transition or digitalization with associated risks of layoffs;
  • Sectors with shortages of general skills.

Diversity and inclusion

Relevant in all sectors.

Source:  Authors (Natixis GSH), based on the Platform’s Report


6. Assessment levels puzzle

The Platform advises to develop both substantial contribution and Do No Significant Harm (DNSH) at the sub-objectives level (under the same “headline objective”), offering real granularity.
“Do No Significant Harm criteria” can be assessable either at activity or at entity level. Whether contribution must be assessed at entity or activity level is a daunting question. The Report rightly points out that the first type of substantial contribution (#1 maximizing positive impacts) is more relevant at activity-level, calling for activity linked information requirements. It would thus require going beyond CSRD which is a disclosure requirement for entities.

Conversely, corporate governance topics would be more linked to the entity level and eventually recognized as minimum safeguard criteria. The Platform mentions situations where neither turnover nor expenditures can meaningfully be linked to sub-objectives like freedom of association and taxation, topics closely related to measures at the entity level. In that case, DNSH may play a higher role.


7. The AAAQ concept

The Platform pinpoints that “most economic activities such as the creation of decent jobs, paying taxes and production of socially beneficial goods and services can be considered inherently socially beneficial”. The challenge is therefore two-fold: guaranteeing DNSH on other social sub-objectives and defining outstanding/additional social performances or benefits.

For the latter, the Platform states that “it must be possible to identify activities which are typically part of minimum standards or ‘business as usual’ and to exclude these activities”. In our view, it might prove difficult to avoid a situation where all/any pro-active risk mitigation is considered a substantial contribution. In the meantime, “business as usual “can also be highly contributive.

The Report proposes to reward measures at activity level that are:

    (i) Credible;

    (ii) ‘Best in class’ in terms of the design and implementation of human-rights due diligence or risk-management processes;

    (iii) Generate meaningful human-rights outcomes for stakeholders.

To develop such criteria, the Platform suggests using the concept of availability, accessibility, acceptability and quality (AAAQ). This framework is used as a tool to implement the rights included in the International Covenant on Economic, Social and Cultural Rights. It is applicable to both public and private products and services. It has been reportedly used for water, food or health related services and the Platform suggests using it for the development of a Social Taxonomy.

Figure 2: illustration of the AAAQ concept with an energy / utility company

Source: Authors (Natixis GSH), based on the Report

The use of the concept of AAAQ would allow to channel capital flows to situations where goods and services for basic human needs and basic economic infrastructure:

    (i) Are not met;

    (ii) Are not accessible to certain target groups; or

    (iii) Are in danger of not being met in the future (for example, because finance for maintenance is lacking).

Within the AAAQ concept, availability and accessibility could help defining substantial-contribution criteria (see figure 2 above). There is a need for dedicated guidance and criteria because the availability and accessibility of social products and services like health care products, social housing or public transport, are unlikely to be addressed under the CSRD.

The Platform suggests the following criteria for selecting or designing metrics or indicators for a Social Taxonomy (see figure below).

Figure 3: Suggested criteria for defining indicators in the context of a Social Taxonomy

Source: Authors (Natixis GSH), based on the Platform’s Report


8. Articulating environmental and social taxonomies

A Social Taxonomy incorporating strict DNSH and environmental minimum safeguards would be consistent with the EU’s ambition to increase corporate accountability for adverse human rights and environmental impacts.

Through the Corporate Sustainability Due Diligence Directive (CSDDD) legislative Proposal and its annex (published on February 23rd, 2022), the European Commission aims at improving corporate governance practices by integrating the identification, the prevention and/or the mitigation of human rights and environmental risks and impacts. It could provide new legal grounds for both dissuasive pecuniary sanctions (article 20) and civil liability (article 22) [6].

It is relevant and vital to have minimum environmental safeguards in the context of a Social Taxonomy and vice versa. The challenge lies in their definition as we are orphaned of a granular environmental Taxonomy defining significant harm criteria for non-sustainable activities. The 270 gCO2e/kWh threshold used for climate change mitigation DNSH purpose is an example. But it is limited to power generation. Such environmental safeguards cannot be based on inexistent list of “technologies deemed significantly harmful”. Simpler exclusions are always possible, but as of today, only solid fossil fuels are excluded from the Environmental Taxonomy.  

Another option, unrealistic in our view, would be to have a single taxonomy. As highlighted by the subgroup, that would amount to add together a company’s social and environmental sustainability which measures very different things and narrow the universe of eligible entities/activities or projects.


PART II. Backstage concerns, discussions and proposal status

1. What is missing or underexploited

Target populations and country specific context
It is meaningful to have sub-objectives that relate explicitly to target populations such as women, children, disadvantage people, young unemployed people, indigenous population, farmers. Know-your-stakeholders guidance could have been helpful because data regarding the socio-economic profiles and life conditions of companies’ end-users or customers is often lacking.
Furthermore, the lack of contextualization and geo-spatial criteria would make the concept of population targeting less relevant and actionable (there is a mere mention in the Report, for instance, of broadband expansion in under-served areas). In a second phase of work, it would be relevant for the Platform to develop a mapping of reliable databases or proxies to identify, for instance, situations with low levels of collectively agreed wages.

Jurisdictions with uneven requirements
Methods to deal with different national or even regional contexts is an area deserving further investigation, in particular for topics with discrepant regulations. The Report rightly underlines that such differences might lead “to a social taxonomy favouring companies located in jurisdictions with more stringent social legislation”, such effect is clearly undesirable. Conversely, companies should not either be “penalized” to operate in countries with demanding norms and practices.
In our view, taking national legislation (the Report mentions the national definition of social housing or the results of collective bargaining) as a starting point would not always be satisfactory. It would not allow to overcome national definition discrepancies (ex: on notice periods, parental leave, unionization). Criteria must be “cross-border” when feasible to be intelligible and usable. As an option, the Report mentions certification schemes such as fair-trade products or metals from certified mines.

The 2030 Agenda
The Sustainable Development Goals (SDGs), including their quantitative, timeframe and geographically bound features, could have been exploited to a fuller extent. This potential is largely untapped in the recommendations of the Platform.

The Report only indicates that “SDG indicators are also quantified, and they could be used for the corporate world by linking the SDG achievement (or lack of achievement) of a given country to its corporate contribution to SDG achievement”. Natixis Green & Sustainable Hub is carrying a consultancy mission for an international club of public development banks (the IDFC) on SDG alignment. As part of this work, we stress the importance of not using the SDG as a list of themes but rather as time-bound quantitative targets. Criteria around bridging the distance to these targets can be developed for both public and private entities (to get a glimpse on our work, see here).

Criteria scope of assessment across value chains
One wonders whether the DNSH on the second type of contribution (#2 minimizing negative impacts) and social minimum safeguards should be extended upstream and downstream along supply chains, in particular civil and political rights (e.g., the right to vote, the right to freedom of expression, the right to privacy, etc.).

Should such criteria cascade to the country or counterparts supplying raw materials? These countries are referred as “third countries” and products can be imported from them and distributed in Europe.

This question is topical considering the Russian case. The Platform asserts “it is important to consider working conditions in the supply chain”. Having the most comprehensive scope of criteria assessment is meaningful, although it is fraught with usability and accountability challenges (for instance, challenges to demonstrate or dismiss “involvement in violation” of the UNGC Principles in SFDR PAI Annex 1).


2. The socially harmful activities have been kicked into touch

The question of activities that are socially harmful under any circumstances was largely eluded by the Platform. It is only said that activities which are described as always harmful in one Taxonomy (such as coal-fired power generation in the Environmental Taxonomy) will also be excluded from the other Taxonomy.

On responsible marketing practices, the Report oddly urges “avoiding directing consumers towards products and services that are not in their interest”.  Such circumventing stance could be tactical to avoid frontal debate. Activities can either be dismissed or excluded by construction at the eligibility stage, or at the alignment stage when being de facto unable to meet substantial contribution or irremediably causing significant harm.

This raises the question of whether minimum social safeguards are needed, or whether the DNSH to other social sub-objectives should and could be enough and can be agreed upon.

Among the sectors that could steer intense political discussions, one could mention mining of coal and lignite, but also growing, manufacture or wholesale of tobacco, animal breeding (for various reasons, animal wellbeing but also health/diet concerns on top of environmental concerns), manufacturing of processed or sugary foods.

In the Platform’s Report, there are no concrete examples of harmful activities beyond a suggestion to use internationally agreed conventions on weapons.

As compared to the draft of the final report leaked in January 2022, one pinpoints that autonomous weapons, armaments end-use and geographical context have been removed : “investment in other armaments which for example, can easily be used by child soldiers or which is exported to conflict zones [geographical and political context] might be deemed socially harmful just as the development of lethal autonomous weapons without the possibility for meaningful human control over selection and engagement decisions when carrying out strikes against humans, not including early warning systems and countermeasures for defensive purposes”.


3. Enforcement and reliable verification mechanisms

The Platform mentions the existence of quantifiable metrics on safe and healthy working conditions; anti-discrimination; freedom of association; and employment generation. Internationally agreed thresholds can be derived in certain areas, for instance from ILO standards. In other areas, including those related to consumer and community criteria, the Platform pinpoints there may not always be internationally agreed norms and principles that can be used to determine thresholds.

Recent controversies proved that corporate commitments and processes to abide by norms is no longer a satisfactory nor a robust approach. Enforcement is fundamental and must somehow be evidenced. The difference can be large between formal commitments and implementation reality. The Platform states that investment must go beyond ‘business as usual’ risk-mitigation processes and any applicable legislative requirements.

The Platform states “quantitative metrics can help provide clear outcome-oriented performance benchmarks rather than relying only on policy- and procedure-level information that will remain proxies to some extent for actual impacts”.

Simply using commitment or endorsement of UNGPs and OECD guidelines is falling short to properly “ensure that basic social criteria are met”. The existence or lack of controversy is not a reliable proxy either. The Platform fairly criticizes providers of ESG ratings which “indicate that compliance with the minimum safeguards meant that one company was not subject to controversies suggesting that it fails to meet human rights standards in their operations”.

Alternative proxies can be explored around the intensity and/or frequency of breaches or incidents or allegations to deem an entity misaligned as well as the type of sources required (controversy, investigation, condemnation, audit conclusions, incident report). There is no reason to rely more on ESG agencies to opine on some sub-objectives than on trade unions or citizens (local communities, consumer associations). Stakeholders can also prove to be a reliable source of information. Such effectiveness proxies are crucial.


4. Sincere or feinted misunderstanding?

The Platform invites to apprehend social activities through the lenses of additional contribution to the social sphere. The release of the Report has already provoked lively reactions, in particular from sectors that could be in principle excluded from the EU taxonomy (“socially harmful sectors”). Intense debates relate first and foremost to the defense industry.

In that context, a Resolution was adopted earlier this year by the French Assembly to namely “protect the European defense and security industrial and technological base from the effects of the European taxonomy of sustainable finance”[7]. The defense industry is the object of renewed attention since the war in Ukraine and subsequent U-turn from many Members-States, in particular Germany.

One must bear in mind than the EU Taxonomy is not a public policy tool designed to steer capital towards “strategic” sectors from a sovereignty standpoint, but towards sustainable activities and sectors, both from an environmental and social standpoint.

Not being eligible and then possibly being hardly aligned with the criteria does not lead to funding dry up. If being aligned to the Taxonomy could possibly enhance funding access or conditions, not being aligned or eligible should not entail unfavorable funding terms.


5. What desirable status for such hypothetical Social Taxonomy?

Many sub-objectives are defined using aspirational objectives. Adjectives such as “not excessive” [when referring to the pay gap between executives and average workers], “meaningful” and “good faith” [referring to consultations with affected communities], are used. “Good-quality” housing or drinking water are cited without specifics.

Obviously, it was not the remit of the Platform to come along with thresholds or quantitative criteria (“working out concrete criteria” as it said). However, this is the reason why we are skeptical on the ability to reach a hard-law Social Taxonomy approved by Members States. The risk of endless negotiations ending up with a useless minimum common denominator is real

Overall, developing a common classification is always arduous and requires striking a balance between, on one hand, sophistication, and ambition, and on the other hand the inherent constraints of building a political consensus. Reaching a political agreement could take years and may unavoidably lead to a tiny common denominator, thereby making the Social Taxonomy barely actionable. Therefore, a comprehensive and systematic disclosure of companies’ activities alignment against its criteria from all market participants is therefore very unlikely and not desirable.

However, a Social Taxonomy with a lower legal status and less binding scope could be appropriate. It could be a level 3 text such as a “Recommendation”, adopted on the basis of a level 1 text only specifying the need to develop common definitions of social sustainability and the intent of the EU to encourage such standardization.

Unlike level 1 text (Regulations, Directives) which must be jointly approved by the Commission, Member States, Parliament, or level 2 text (Delegated Acts, Regulatory Technical Standards and Implementing Technical Standards) negotiated by technical authorities (European Supervisory Authorities) or the Commission, level 3 texts are more flexible.

Guidelines, guides, or Q&A are not binding and often based on a “comply or explain” approach.  An “illustrative” Social Taxonomy set out in such document could more easily detail fundamental notions and identify and recommend Key Performance Indicators (KPIs) as proxy of “social contribution”. It would help market participants in designing social investments. 

Such non-prescriptive Social Taxonomy would be used as a pool of guidelines in which market participants may select the most relevant concepts. As per our market analysis (as of end of January 2022), out of 218 SLB issuances there were 23 incorporating social KPIs. Out of the 34 social KPIs identified, 32% relate to affordable medicine, 38% to  gender equity and 5% to education. A Social Taxonomy could help standardizing KPIs or at least providing guidance on such fundamental notions, in particular to assess the ambition of Sustainability Performance Targets (SPTs).


6. Natixis' view on a shaded Social Taxonomy

The difference between inherent benefits and additional social benefits remains blurred to us. The suggestion to link CapEx, OpEx and turnover to social activities to differentiate between “reducing negative impacts” and “enhancing inherent social benefits” is a conundrum.

The strongest disagreement we have with the Platform relates to “investments in goods and services for basic human needs and basic economic infrastructure [which] already attract capital today, even without being classified as promoting social objectives”. There is no reason to dismiss such investments. It is both irrelevant and unpractical to focus solely on criteria “directing capital to underfinanced activities which at the same time have social benefits”. First, the purpose of a criteria is one thing, what really matters is the effects it unleashes. Second, assessing the purpose of a criteria seems hardly doable and the notion of “underfinancing” is hard to consensually evidence. Should it be possible, it would limit the investment universe to a niche. The difference between “business as usual” and “social merits” is ill-defined. The example of retail banking on SME financing and micro-finance or insurance remains too superficial.

Based on previous remarks and of our understanding of the Platform’s proposal, we have designed the template below. The role of the substantial contribution criteria envisioned by the Platform is to develop granular criteria on outcomes for rights-holders, setting the bar higher than existing legislation, therefore the right part of the table below would be accessible only for products and services outperforming legal requirements.

We believe a Social Taxonomy should be shaded with intermediary levels for a given sub-objective (see table #5 at the end of the article). An important question not answered here is whether maximizing positive impacts must be assessed in relative (against own and past performances, or peers), or in absolute.


Table 5 – Templates for a shaded typology of activities
(from the most harmful to the least contributive)

Step 1: Sub-objectives’ materiality identification for a determined activity (both SC and DNSH)

Activity in question
(NACE code): 

Significant contribution

Sub-objective A

Sub-objective B

Sub-objective F


Sub-objective E

Sub-objective H

Sub-objective G


Assessable at entity level:
Yes or No

Assessable at activity level:
Yes or No

Linkable to CapEx, OpEx:
Yes or No

Context-based adjustment:
Yes or No

Step 2: Analysis to be carried for each sub-objective





Positive Contribution

Highly positive Contribution


Harmful effects by nature on at least one of the sub-objectives

Those effects have been evidenced by long statistical series, science or facts and cannot be mitigated at the entity level in any context

An activity that has, by nature, harmful consequences on at least one of the sub-objectives.


Those effects can be partly mitigated, in some context, by a robust and thorough CSR demarch at the entity-level (adjusting the business model with careful population targeting).

An activity whose detrimental social and/or environmental consequences are neutral or moderate at the entity level and can be handled through a robust and thorough CSR demarch well-adjusted to each context. 

An activity performed by an entity that has, by nature, positive social and/or environmental impacts which are enhanced as proved through the AAAQ concept

An entity which belongs to a sector that has by nature, a positive social and/ or environmental impact


The entity is making additional efforts to increase its impact by “contextualizing” or “localizing” it for instance, with top performances and outcomes and granular vulnerable population targeting  

Impact proxy
 Formal commitments, processes, and incentives in place to meet objectives


Occurrence of violations & breaches of norms


Products & services negative performances


Respect of the norms and regulations, with adequate process and procedures


Average performances

Practices or performances beyond legal requirements contributions (extra-legem)

Outstanding performances

Impact effectivity (reality) Enforcement and/or performance  verification

Controversies and/or conviction judgements

Third party verification/audit

Scientific surveys

Third party verification/audit

Evidence building of enforcement

Labels/certifications schemes

End-users’ satisfaction survey

Scientific surveys


No significant harm to any other social sub-objective criteria (possibly drawn up for all sectors)

Social minimum safeguards (example: zero tolerance topics: child labour or forced labour)

Environmental minimum safeguards
Based, for instance, on a hypothetical list of unsustainable activities (activity-level or technology exclusion lists)
Bottom decile performances for TSC with quantitative thresholds

Source: Authors (Natixis CIB Green & Sustainable Hub)





The table below is a suggestion made by the Platform to illustrate the role of the structural elements between objectives, sub-objectives, substantial contribution and DNSH, in the case of decent work objective and living wage sub-objective.


Table 6: Example of sector selection, substantial contribution and DNSH for decent work objective and living wage sub-objective, envisioned by the Platform


Rationale for selecting sectors

Section of sectors

  • All sectors – in particular sectors with many workers on lower wages
  • Sector exposed to international competition (e.g., textile)
  • Sectors exposed to social dumping (e.g., agriculture)
  • Labour-intensive sectors with little added value (e.g., some construction sub-sectors)

Type of substantial contribution

Reducing negative impacts for workers

Substantial contribution

Entity has a time-bound target for paying all workers’ wages that:

  • (i) Provide for a decent standard of living
  • (ii) Fight in-work poverty
  • (iii) Are set in a transparent and predictable way according to national practices and respecting the autonomy of the social partners

In particular, genuine collective agreements (signed by independent and representative trade unions) are meant to set wages that:

  • (i) Provide for a decent standard of living
  • (ii) Make it possible to satisfy the needs of the workers and their families
  • (iii) Motivate the workforce to improve their performance and skills

The company or the concerned entity must describe how it determines decent wages through applicable collective agreements in all operations or regions in which it operates.

If there are no genuine collective agreements, companies will be obliged to report on how the wages paid to their workers are always above the poverty threshold of the country/region in which they operate, being the poverty threshold defined in SDG 1.

The company or the entity must also describe how all workers along the supply value chain are ensured a decent wage – regardless of their working contracts and regardless of whether they are employed by suppliers or subcontractors. Application of statutory minimum wages does not fulfil this requirement unless the minimum wage is equal to or above the poverty threshold.


Decent work

Adequate living standards and wellbeing for end-users

Inclusive communities and societies


Workers must be paid at least the national minimum wage, where one is available, or according to negotiations and collective bargaining by social parties.

ILO core labour standards must be met.

There must be adequate occupational health and safety. 


Activity does not harm communities, e.g., by polluting drinking water.

Source:  based on the Platform’s Report



Natixis Green & Sustainable Hub’s publications on social-related topics:

Taxonomies & Sustainable Finance regulation

  • Social Taxonomy: The EU Social Taxonomy Draft: promising building blocks, available here
  • Sustainable Taxonomy development worldwide: a standard-setting race between competing jurisdictions, available here



 Fair Transition

  • A growing momentum for Fair Transition Finance, available here
  • Brown Industries – The transition tightrope, available here



2030 Agenda and SDGs

  • Press release on Natixis advisory mission to IDFC, in French, available here
  • Solving the Sustainable Development Goals Rubik’s Cube, available here
  • Republic of Benin’s trailblazing €500m 12.5-Y inaugural issuance under its new SDG Bond Framework, available here
  • Success of AFD Group’s €2bn inaugural issuance under its new SDG Bond Framework, available here
  • Mexico’s €750m-7-year inaugural SDG Bond met strong investors’ appetite, available here



Impact reporting

  • The Art of Social Bond Impact Reporting, available here



Social Bonds & social topics

  • Novethic’s article on the rise for social investment entitled “La montée en puissance des investissements à vocation sociale” available in French here
  • The European Union’s plunge in the Social bonds Market, available here
  • Unédic issued the two largest social bonds ever in the midst of the covid-19 crisis, available here
  • Interview, with Patrick Artus, Former Chief Economist and Executive Committee Member of Natixis, on low-carbon transition Agenda: avoiding social quicksand, available here
  • France’s €100bn Recovery Plan: the government strikes a balance between socio-economic emergency and ecological transition, available here
  • Covid-19 crisis in Europe: a midwife for a federalist green & social leap forward, available here
  • State of the Green, Social and Sustainable Sovereign Bonds markets, what is next? Available here
  • ESG integration in Leverage Finance: where do we stand? Available here



[1] According to the §59 of the Taxonomy Regulation (June 2020): “The application of this Regulation should be reviewed regularly in order to assess, inter alia: the progress with regard to the development of technical screening criteria for environmentally sustainable economic activities; the possible need to revise and complement those criteria for determining whether an economic activity qualifies as environmentally sustainable; the effectiveness of the classification system for environmentally sustainable economic activities in channeling private investment into such activities and in particular as regards the flow of capital into private enterprises and other legal entities; and the further development of that classification system, including by expanding its scope beyond environmentally sustainable economic activities, in order to cover activities that significantly harm the environment, as well as other sustainability objectives, including social objectives.” (highlight and bold added by the authors).

[2] See our publication, The EU Social Taxonomy Draft: promising building blocks, available here.

[3] The concept refers to "ultimate user of a finished product. It includes consumers, i.e. persons that use/consumer the product for private purposes, but is expanded to end uses for professional use (workers, employed or self-employed, using certain products, i.e. medical doctors using a laptop or a MRI device, bus drivers driving a bus…).

[4] See the “Proposals for a relevant and dynamic EU sustainability reporting standard-setting” published by the European Financial Reporting Authority Group’s (EFRAG), available here.

[5] It addresses the main concern of the respondents to the public consultation:  58% of respondents said that they had at least one concern about a Social Taxonomy increasing administrative burden.

[6] Directive of the European Parliament and of the Council on Corporate Sustainability Due Diligence and amending Directive, available here.

[7] See Résolution nº 750 visant à protéger la base industrielle et technologique de défense et de sécurité européenne des effets de la taxonomie européenne de la finance durable », adopted on January 15, 2022, available here (available in french only)