Taskforce aims to standardise social impact disclosures for investors

The Taskforce on Inequality and Social-related Financial Disclosures (TISFD) has published its recommendations on how to standardise social impact disclosures.

The report comes at a time when social issues have long been seen as ill-defined, difficult to measure, or peripheral to corporate interests.

Furthermore, unlike climate-related financial risks, social factors lack a cohesive framework for disclosure.

The TISFD Proposed Technical Scope paper aims to help investors better assess the risks and opportunities associated with inequality and social factors.

The TISFD was launched last year to develop a global framework to help firms produce transparent disclosures about impacts, risks, and opportunities related to social issues, including inequality.

Created at a time when greater emphasis is being placed on taking social and climate issues into consideration when making financial decisions, the group said it aims to put people at the heart of the transition to a fairer economy.

“More and more, however, providers of capital are displaying an interest in managing not just these reputational, operational or legal risks at the entity level, but also system-level risks, including those associated with inequalities,” said the TISFD.

In a recent survey among signatories of Principles for Responsible Investment (PRI), 63% of asset managers and 72% of asset owners indicated they intend to adopt a more comprehensive approach to responsible investment in the future – one that addresses real world-sustainability outcomes, rather than only entity-level risks.

A global framework that aligns with existing disclosure standards like the Task Force on Climate-related Financial Disclosures (TCFD) and the Taskforce on Nature-related Financial Disclosures (TNFD) is currently being developed by the TISFD.

A key element of the new framework is its approach to materiality. As such, the TISFD is pushing for “double materiality’, which would mean companies disclose how social risks affect their financial performance, as well as how their own business practices contribute to broader societal challenges.

The latest report comes after the group published its People in Scope paper in January, which set out its scope, governance structure and proposed work plan.

Inequality

Investors are becoming increasingly aware that social issues pose real financial risks. For example, rising inequality can destabilise economies.

Speaking at the time of the groups launch, Gabriela Ramos, TISFD co-chair and assistant director-general for social and human sciences at UNESCO said: “Deep inequalities of income and opportunities in many countries around the world are preventing our societies to come together and address effectively other major challenges such as the climate, digital and demographic transitions.”

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