Principles-Based Social Taxonomy for Sustainable Investing

The report outlines a framework for a social taxonomy that classifies business activities based on their contribution to social well-being and governance. It establishes a system of minimum social safeguards as a mandatory threshold, followed by two Guiding Principles (GP1 for positive social impacts and GP2 for governance improvements). The taxonomy uses a color-coded performance scale (Red to Dark Green) to categorize companies and activities, providing illustrative examples across sectors such as construction, finance, and agriculture to guide investors and regulators in identifying socially sustainable investments.

• The proposed social taxonomy is structured around two primary Guiding Principles: GP1, which focuses on "promoting overall social well-being (enhancing positive social impacts)", and GP2, which focuses on "enhancing respect for human rights and enhanced company conduct (through company-level governance improvements on social issues)".
• To be eligible to use the taxonomy, a company must first meet mandatory minimum social safeguards, which include avoiding risks to human health, employees, and communities, as well as complying with domestic laws and minimum environmental safeguards.
• The taxonomy employs a five-tier color-coded system to assess social performance: Dark Green (substantial contribution to both GP1 and GP2), Light Green (substantial contribution to GP1 with an improvement plan for GP2), Yellow (substantial contribution to GP1 without a GP2 plan), Orange (meets safeguards but no substantial contribution to either GP), and Red (does not meet minimum social requirements).
• A 'substantial contribution' to the guiding principles is defined by three criteria: meeting international best practices, norms, or standards; demonstrating positive benefits and measurable outcomes; and maintaining robust reporting and disclosure systems.
• The report emphasizes the necessity of integrating social and environmental taxonomies to ensure that 'green' projects do not cause negative social impacts and to support a 'just transition' for workers and communities moving away from fossil fuels.
• The taxonomy provides illustrative qualifying activities for several key sectors, such as creating affordable housing in the construction sector, providing microloans to women or low-income entrepreneurs in financial services, and implementing reskilling for workers in the energy transition within extractive industries.
• The framework is designed to be applicable not only to a company's direct operations but also to its business counterparties, including contractors, suppliers, distributors, and borrowers, thereby extending the social impact beyond corporate boundaries.

APA

Aizawa, M., Gouett, M., Rahim, S., Saravade, V., & Uzsoki, D. (2022). Principles-Based Social Taxonomy for Sustainable Investing. International Institute for Sustainable Development. https://www.iisd.org/system/files/2022-08/social-taxonomy-sustainable-investing.pdf

Chicago

Aizawa, Motoko, Matthew Gouett, Safa Rahim, Vasundhara Saravade, and David Uzsoki. Principles-Based Social Taxonomy for Sustainable Investing. International Institute for Sustainable Development, 2022. https://www.iisd.org/system/files/2022-08/social-taxonomy-sustainable-investing.pdf.

Wikipedia

{{cite report |last1=Aizawa |first1=Motoko |last2=Gouett |first2=Matthew |last3=Rahim |first3=Safa |last4=Saravade |first4=Vasundhara |last5=Uzsoki |first5=David |title=Principles-Based Social Taxonomy for Sustainable Investing |publisher=International Institute for Sustainable Development |date=August 2022 |url=https://www.iisd.org/system/files/2022-08/social-taxonomy-sustainable-investing.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{aizawa2022principlesbased, author = {Aizawa, Motoko and Gouett, Matthew and Rahim, Safa and Saravade, Vasundhara and Uzsoki, David}, title = {{Principles-Based Social Taxonomy for Sustainable Investing}}, institution = {International Institute for Sustainable Development}, year = {2022}, month = aug, url = {https://www.iisd.org/system/files/2022-08/social-taxonomy-sustainable-investing.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }