The Taskforce on Social Factors in the UK’s pensions industry has released a guide for trustees, asset managers, and service providers to consider social factors in their investments. The guide defines social factors as practices within a company, its supply chain, product selling practices, and impact on communities that may affect its financial performance. The guide emphasises that trustees have the fiduciary duty to integrate financially material social factors into their investment decision-making. Pension funds with a broader ESG strategy can also invest in social impact investments to generate a positive, quantifiable social impact with financial returns.

Recommendations include undertaking a materiality assessment of the scheme’s key risks and opportunities for social factors, including using a materiality assessment framework aimed at broader ESG considerations. Trustees should consider including socially responsible investing in their fund strategies and develop a clear voting policy on social factors that is publicly accessible. Trustees should include social factor-related questions and reporting requirements in their selection and ongoing monitoring of investment managers.

The guide also suggests that investors should take a wide range of social factors like human rights into account. Investors can identify and prioritise the most salient social issues by considering the severity of the issue using scope, scale, and remediability. The guide recommends engaging with a wide range of stakeholders, including pension scheme members, to understand different perspectives on social issues. The report lists various sources of social data providers, urging trustees to understand the lens applied by each service provider to hold their asset or investment managers accountable.