On 28 February, the Department for Work and Pensions (DWP) launched the Taskforce on Social Factors (TSF) which aims to help pension scheme trustees and the wider pensions industry seize the opportunities of the “social” element in the context of pension scheme investments.
The TSF was first proposed last July, in the DWP’s response to the March 2021 call for evidence on the effectiveness of occupational pension scheme trustees’ current policies and practices in relation to social factors. In the response, Guy Opperman, the then Minister for Pensions and Financial Inclusion, stated his plan to establish the new Minister-led taskforce in order “to identify reliable data and metrics and ensure that focus on social factors continues to grow throughout the investment chain.”
Aim of the taskforce
The aim of the taskforce is to support pension scheme trustees and the wider pensions industry with some of the key challenges schemes face around managing social factors and has three key objectives as identified by the DWP: to identify reliable data sources; to monitor and report on developments with the International Sustainability Standards Board as well as with other international standards; and to develop how trustees can manage risks caused by certain social factors.
Trustees and pension scheme managers should be able to draw on the data sources and resources identified by the taskforce to inform investment decisions and also to help identify, assess and manage financially social risks and opportunities.
The TSF’s focus on social factors aims to go beyond environmental and climate change issues. As Guy Opperman stated in the DWP’s response last July, while progress has been made in bringing environmental and climate issues up the pensions agenda, it was never his intention that climate change should be trustees’ sole ESG consideration.
Instead, social factors in the context of pension scheme investments includes a breadth of issues such as organisations’ workforce conditions and supply chains, community engagement, consumer protection and modern slavery.
The taskforce will operate for one year and includes representatives from pension schemes, asset managers, data providers, cross-industry collaboration groups and civil society. Government departments and regulators including the Financial Conduct Authority and The Pensions Regulator will be observers on the taskforce, while the DWP is to provide secretariat support.
With expertise and experience in this area, our pensions team can help you understand your obligations in this area.
Should you wish to consider any ESG issues further, do take a look at our interactive guide, which has been designed to help you easily navigate the law and guidance surrounding ESG.
This blog was written by Scarlett Sullivan.
The “S” of ESG is one area in which the risk management of pension schemes can be strengthened. In my view, trustees who do not factor in financially material social factors are at risk of not fulfilling their fiduciary duty.