Workforce conditions and supply chains are among the issues that the Taskforce on Social Factors’ (TSF) has highlighted in their latest guidance, aimed at helping pension trustees better consider and incorporate social factors into their investment and stewardship decision-making.
The guide includes more than 30 recommendations for the UK pensions sector about how it can develop a common understanding and assessment of financially material socials risks and opportunities.
Set up by the Department for Work and Pensions, the taskforce includes representatives from pension schemes, asset managers, data providers, cross-industry collaboration groups and civil society, aiming to help pension schemes address the risks and seize the opportunities of the ‘social’ element in ESG investing.
Luba Nikulina, chair of the taskforce and chief strategy officer at IFM Investors, said: “We want to ensure that the recommendations are useful, practical and actionable, and support pension scheme trustees and the wider industry manage some of the key challenges around integrating social factor considerations into their work.
“I encourage the pension scheme sector to provide us feedback on the current draft of the report, as well as useful additions that we should take into account for the final report.”
Among the recommendations, pension trustees are encouraged to ensure their asset managers consider social factors and integrate them into their investment strategy and stewardship. The paper provides example RFP questions and mandate terms.
For regulators, TSF says that the DWP should consider formally setting out expectations on addressing social factors, while the FCA should consider setting out reporting expectations, alongside those required for environmental factors.
Meanwhile, asset managers should be able to demonstrate that they have influenced social outcomes through transparent reporting on engagement, voting and investment outcomes, including any social investment metrics.
The TSF is requesting written feedback on its recommendations by 1 December, and are hoping for responses from across the industry, including pension scheme trustees, asset managers, regulators, government, data providers, investment consultants, lawyers, industry groups and trade bodies, NGOs and other businesses. It will also hold a series of roundtable discussions as part of the consultation process.
“Social factors have not yet enjoyed as much prominence in the pensions industry as climate has had,” concluded Maria Nazarova-Doyle, co-chair of the taskforce and global head of sustainable investment at IFM Investors.
“It is our hope that this guide will provide useful support to elevate the approach to social factor integration into investment decisions and stewardship across the whole industry. We look forward to receiving the industry’s feedback to help shape it further.”