Principles-based social taxonomy for sustainable investing

The IISD designed a social taxonomy (system of classification) of business activities that promote social good and social governance improvements, both inspired by international norms and good practices, which were turned into minimum threshold-level activities that must be met for the user of the social taxonomy to assess its levels of contributions. The taxonomy has two sets of broad guiding principles (GPs): GP1 on promoting overall social well-being (enhancing positive social impacts) and GP2 on enhancing respect for human rights and enhanced company conduct (through company-level governance improvements on social issues).

The minimum threshold-level activities are a prerequisite for the application of GP1 and GP2. The threshold refers mostly to social safeguards, but also to minimum environmental safeguards, in an effort to create reference points between the social and environmental taxonomy and promote an integrated approach to achieving social and environmental sustainability.

To these foundational principles, IISD added a progressive system of implementation assessment that is designed to help companies move from a state of being out of compliance with domestic law to achieving international good practice, over time and at their own pace, using a colour-coded system.

For the dominant sectors in the client country, such as construction and real estate; utilities and infrastructure; finance and financial services; extractive; technology and telecommunications; education; healthcare; agriculture; and cross-sectoral activities, the taxonomy provides illustrative qualifying business activities that can contribute toward GP1 or GP2.