The EU Sustainable Finance Agenda: A Strengthened Case for Human Rights in Times of COVID-19

Summary

ABSTRACT

Fuelled first by the climate crisis and since then by COVID-19, the European Union (EU, the Union) is actively pursuing an ambition of making the financial system sustainable for the planet as well as for people. An innovative policy instrument is that of a Sustainable Finance Taxonomy aiming to combat ‘sustainability washing’ and direct capital towards economic activities that contribute to sustainable development. Aside from a minimum safeguard clause in the current Taxonomy Regulation ((EU) 2020/852), international law and standards on human rights and respect for human rights by business have yet to feature as central components of the approach taken. This might change, however, as the European Commission considers extending the Taxonomy Regulation, currently focused on environmental sustainability, to social sustainability. This contribution examines the relationship between human rights and social sustainability, including in the context of EU regulation and policy. It identifies challenges and opportunities associated with incorporating human rights more firmly in the context of the taxonomy. Finally, it makes the case for human rights as key to ensuring policy coherence across EU level approaches to promoting responsible business conduct and private sector contributions to sustainable development.

INTRODUCTION

COVID-19 has exposed and exacerbated pre-existing fragilities and inequalities in business models, specific sectors and the financial system in its entirety. In addition to the health and social impacts of the pandemic, significant financial impacts have caused a shift in strategic priorities of public and private entities, sometimes with further negative consequences for human rights. The crisis has, however, also caused businesses, financial institutions, Member States and the European Union (EU, the Union) itself to take renewed action to ‘build back better’ and ensure recovery plans that are both green and just. A positive example is the EU's work on the green deal and sustainable finance, where a social dimension of sustainable development has been fast-tracked in part due to the underlining by COVID-19 of social vulnerabilities and impacts associated with our economies.

In a pre-COVID reality, the EU prioritised the development of a sustainable finance taxonomy as a key instrument to re-orient capital towards sustainable development.