A taskforce set up by the UK’s Department of Work and Pensions (DWP) is calling for feedback on 30 recommendations about the integration of social issues into pension-industry thinking.
The Taskforce on Social Factors (TSF) was established earlier this year, and its members include representatives from the Church of England Pension Board, Local Authority Pension Fund Forum, the Impact Investing Institute, Railpen and the Pension Protection Fund.
Among its recommendations, the TSF is calling for pension trustees to set “objectives” for their consultants in relation to the way they approach social factors, and to consider asset managers’ performance on social factors when awarding mandates.
“Trustees should make sure their asset managers have a strong engagement track record, appropriate exclusion policies and display responsible behaviour as businesses,” the taskforce said, adding that proxy voting policies and outcomes should also be considered.
TSF identifies four key areas for social issues: direct workforce, supply chains, affected communities, and consumers or end users.
It includes a framework for pension trustees to evaluate their exposure to these factors and find appropriate sources of data, encouraging country, sector and entity-level assessments.
“We envisage that trustees, with the support of their appointed investment consultants where required, conduct a top-down review of their portfolio,” the authors said.
Speaking to IPE, Luba Nikulina, the chair of the TSF and chief strategy officer at IFM Investors, said the taskforce was required to “ensure close alignment with the work being done by ISSB” when it was given its mandate by DWP, and that consequently, it “had pretty close contact with them”.
The International Sustainability Standards Board (ISSB) is the global standard-setting body for sustainability reporting. Its focus so far has been on general disclosures and climate change, but it is expected to produce guidelines for social issues and recently closed a consultation on human rights and human capital.
The UK government has committed to adopt ISSB’s standards into regulation where appropriate.
“Our work is slightly ahead of what they’re doing,” said Nikulina, referring to time frames. “So I hope that some of the work we’ve done will be picked up by them, because why wouldn’t it?”
In addition to DWP hosting its secretariat, the taskforce counts a number of other government departments and regulators among its official observers, including the Department for Business, Energy and Industrial Strategy, the Department for Culture, Media and Sport, the Financial Conduct Authority, the Financial Reporting Council, HM Treasury, and The Pensions Regulator.
Some of TSF’s recommendations are levelled directly at regulators.
The report is out for consultation until 1 December.
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