Taskforce on Social Factors launched with DWP support

A Taskforce on Social Factors has been established following the Department for Work and Pensions’ (DWP) consultation on consideration of social risks and opportunities by occupational pension schemes.

The taskforce will aim to support pension scheme trustees and the wider pensions industry with some of the key challenges around managing social factors, including the identification of reliable data and metrics.

Under the current plans, the taskforce will operate for one year and deliver guidance and recommendations to the pensions and investment industry, with this work expected to contribute to further development of wider social factor principles, standards, and metrics.

The DWP, which will provide secretariat support, identified a number of specific objectives for the taskforce, including identifying reliable data sources that can be used by pension schemes to identify, assess and manage financially material social risks and opportunities.

This was alongside monitoring and reporting on developments relating to the International Sustainability Standards Board (ISSB) and developing thinking around how trustees can identify, assess and manage the financial risks posed by modern slavery and supply chain issues.

The taskforce includes representatives from pensions schemes, asset managers, data providers, cross-industry collaboration groups and civil society, as well as a number of government departments and regulators, such as the Financial Conduct Authority and The Pensions Regulator (TPR).

Members of the taskforce include representatives from: Aegon, the Association of British Insurers, Church of England Pensions Board, IFM Investors, Impact Investing Institute, Investment Consultants Sustainability Working Group, Local Authority Pension Fund Forum, Minerva Analytics, Pension Protection Fund (PPF), Phoenix Group, the Pensions and Lifetime Savings Association (PLSA), Railpen, Scottish Widows, ShareAction, and the UK Sustainable Investment and Finance Association.

Commenting on the launch, Taskforce on Social Factors chair and IFM Investors chief strategy officer, Luba Nikulina, stated: “Every investment has an impact on people as well as the planet and social factors are crucial for long-term investors.

"Right now, the investment industry doesn’t have a comprehensive way to measure these factors, and that’s why I’m so excited to lead this taskforce created with the specific purpose to help pension trustees identify, assess and manage social risks and opportunities.”

The launch of the taskforce was also welcomed by TPR, with executive director for regulatory policy, analysis and advice, David Fairs, stating: “Savers’ pension pots are at risk if trustees do not adequately manage financially materially social factors.

“I welcome industry taking the lead in supporting trustees by launching the Taskforce on Social Factors (TSF).

“We look forward to collaborating with the TSF and the seeing the development of its guidance and recommendations.”

Adding to this, Scottish Widows head of responsible investments, Maria Nazarova-Doyle, argued that it is "vital" to find ways to help trustees of UK pension funds ensure that financially material social considerations are fully addressed in their investment strategies and stewardship approaches.

She stated: “It is fantastic to play a part on this much needed taskforce looking to tackle a crucial area of social risks and opportunities.

"A good measure of success for this work would be to see social factors receiving as much focus as climate change to ensure these often interconnected factors are fully embedded into pension scheme management in line with trustees’ fiduciary duty.”

PPF stewardship manager, Daniel Jarman, also emphasised the need for the taskforce, noting that while the importance of understanding and integrating social factors into the investment process has come to the top of the agenda for investors in recent years, the range and quality of data on social factors continues to be a challenge.

"That’s why I am thrilled to be a part of this initiative that aims to boost understanding of the risks and opportunities presented by social factors, increase transparency and promote best practice across the pensions industry on these important issues,” he stated.

Also commenting on the launch of the group, Aegon head of responsible investment, Hilkka Komulainen, emphasised that "social issues are not new considerations for investors: our economy is built on people".

She continued: "Through this taskforce we seek to address the barriers of measuring and managing social matters, progress on which has to date lagged other responsible investment topics.

"Recognising that not every social issue that counts can be measured, I see our collective effort as a way to further bring people to the forefront of pensions investing.

"I am excited to help develop pragmatic but meaningful guidance that will boost alignment between savers, asset owners and asset managers to move the dial on management of social opportunities and risks.”

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