TISFD Offers Support for Social Investors

Due in September, the inequality-focused taskforce will create a cross-sector framework following in the footsteps of the TCFD and TNFD.

Institutional investors with a social mandate will receive a boost later this year through the launch of a Taskforce on Inequality and Social-related Financial Disclosures (TISFD), which intends to heighten information availability and reduce reporting burdens.

Set to launch formally in September, the TISFD is a global initiative aiming to develop a set of recommendations to enable companies and investors better identify, assess, and report on inequality and social-related risks, opportunities, and impacts.

The taskforce has been developed by a working group counting 25 organisations stemming from business, finance, labour, and civil society backgrounds. These includes the California Public Employees’ Retirement System, the International Labour Organization, the Organisation for Economic Co-operation and Development and the World Benchmarking Alliance.

“In our conversations with institutional investors, we consistently hear the need for more consistent and reliable information on how private sector actors are dealing with inequality and social issues, including how these issues relate to systemic market risks,” Delilah Rothenberg, Executive Director at non-profit the Predistribution Initiative – a TISFD working group member – told ESG Investor. “We thus see an urgent need for an initiative like TISFD to meet this gap and help provide a path forward for investors and companies alike.”

Data drive

According to the developing TISFD, institutional investors are increasingly recognising inequality as a system-level risk and a defining social issue. Risks stemming from this include impeding ‘just transition’ progress and undermining support for addressing climate change and biodiversity loss, as well as exacerbating associated vulnerabilities – such as people from poor and marginalised communities facing more severe impacts.

Institutional investors have long sought more granular data on social factors alongside those related to climate and nature, the availability of which has evolved more rapidly in recent times. This year, the release of final recommendations by the UK’s Taskforce on Social Factors, the International Sustainability Standards Board’s commitment to human capital disclosures, and the Global Reporting Initiative’s review of workforce-related standards, have all contributed to this momentum.

According to recent analysis of reporting by Principles for Responsible Investment (PRI) members, 2,195 signatories had publicly available guidelines on social factors and 1,385 on human rights – representing US$114 trillion and US$89 trillion in AUM respectively.

Nikolaj Halkjaer Pedersen, Senior Lead for Human Rights and Social Issues at the PRI, said this underlined the materiality of the topic for investors, but flagged persistent challenges.

“Asset owners and their fund managers rely on comparable and quality data on social issues and inequality to understand exposure to issues across their global portfolios,” he added. “The TISFD over time may pave the way for a better understanding of key data points to understand risk and opportunity – both at entity and systemic level – and support the disclosure of these across markets.”

These, Halkjaer Pedersen explained, are necessary prerequisites for asset owners to further their understanding of exposure and risk in these areas.

Aligning transition efforts

Last year, the Taskforce on Inequality-related Financial Disclosures and the Taskforce on Social-related Financial Disclosures merged to form the TISFD. Since the merger, the taskforce’s main focus has been on developing a proposed governance structure and technical scope, and seeking feedback on those.

The TISFD has stressed the importance of interoperability with both the Task Force on Climate-related Financial Disclosures (TCFD) and the Taskforce on Nature-related Financial Disclosures (TNFD) to ensure holistic reporting and reduce the reporting burden on companies and investors. As such, it used experiences from both the TCFD and TNFD as lessons to help generate its scoping document.

“We cannot achieve our climate goals without a just transition, that mitigates risk of increasing inequality as a result,” said Madeleine Evans, Director at Generation Investment Management. “We believe TISFD is in a strong position to help companies and investors to grasp the materiality of inequality and social outcomes and provide this information in financial disclosures, enabling more effective capital allocation and engagement toward our intertwined goals of sustained long-term returns and a sustainable world.”

The taskforce is currently hosting and participating in several informational sessions to raise awareness and build momentum ahead of the September launch, including one due to be hosted by the PRI – a member of its working group – next week.

The TISFD has set a 1 August deadline for feedback on its proposed governance structure and technical scope, some of which will be incorporated into its scoping document. This document will be the taskforce’s primary public-facing output, to be published upon the September launch – when co-chairs that will lead its next phase of growth will also be confirmed.

Next year, the TISFD will look to establish a secretariat, define its conceptual foundations and build a beta disclosure framework. This will be followed by consultations, pilot testing and refining of the framework – as well as guidance on how to use and implement the framework starting in September 2025.

Project benefits of the framework for asset owners include increased clarity on how companies and investors impact people and contribute to reducing inequalities and system-level risks; addressing gaps and weaknesses in existing social metrics on impacts, dependencies, risks, and opportunities; and reducing reporting burdens by consolidating supporting harmonisation and ensuring interoperability with a wide range of different disclosure frameworks.

The taskforce is currently targeting a September 2026 launch for its framework, and will advocate for cross-sector adoption.

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