In July 2022, as part of its response to the Consideration of social risks and opportunities by occupational pension schemes consultation, the DWP announced the launch of a new minister-led taskforce to ensure that focus on social factors continues to grow throughout the investment chain.
On October 19, 2023, the DWP's Social Factors Taskforce published its Issues Guide for consultation, which includes more than 30 suggestions for the UK pensions sector about how it can better incorporate social factors into investment decisions. The recommendations include the following targeted areas:
- Pension scheme trustees. Pension trustees should ensure their asset managers consider social factors and integrate them into their investment strategy and stewardship. The guide sets out example "request for proposal" questions and mandate terms. Further guidance from the DWP, the Pensions Regulator and the Financial Conduct Authority (FCA) on social factor investment expectations and disclosures is suggested.
- Pension scheme regulators. The guide states that the DWP should consider formally setting out expectations on addressing social factors, while the FCA should consider setting out reporting expectations, in alignment with those required for environmental factors.
- Asset managers. Asset managers should be able to demonstrate that they have influenced social outcomes through transparent reporting on engagement, voting and investment outcomes, including any social investment metrics.
- Legal advisers. Legal advisers should stay "up to date" with developments to aid trustees with integrating social factors and developing strategies for this. They should also offer more support to the stewardship function. This can include joining investor collaborations and collective engagement initiatives to help the industry with the goal of improving the sustainability and resilience of the global economy.
The consultation closes on December 1, 2023.
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