As the world grapples with the impact of multiple crises compounded by the global pandemic, corporations are increasingly under pressure to consider the “S” (social) performance component in the world of Environmental, Social and Governance (ESG) investing. Yet the integration of a social performance assessment has been plagued by many challenges and misperceptions.
The Thomson Reuters Foundation, Refinitiv, International Sustainable Finance Centre (ISFC), Robert F. Kennedy Human Rights, White & Case, Eco-Age, The Mekong Club and the Principles for Responsible Investment (PRI) (as an observer participant) have together produced a white paper emphasising the importance of the social dimension of ESG investment criteria for investors and addressing some of these challenges
Titled ‘Amplifying the “S” in ESG: Investor Myth Buster’, the white paper aims to debunk five common myths related to the “S” in ESG and provides practical calls to action on how to strengthen social metrics in investment management.
Convened by the Thomson Reuters Foundation, the working group behind the white paper aims to promote greater understanding around social themes as the focus on sustainable finance grows. Following the Me Too and Black Lives Matter movements and in the wake of COVID-19, the desire to ‘build back better’ and address inequality has highlighted the importance of measuring a company’s direct impact on the human rights of its communities and individuals.
The social aspect of ESG, the “S”, is becoming increasingly significant to investors and the public, while a growing number of companies are putting more focus on addressing social issues connected to their business such as inclusion, labour standards, modern-day slavery in supply chains, health and safety, human capital, culture and well-being. The challenges around clear global reporting standards and consistent global data are already well-articulated but are more extensive in social themes.
“The world is reeling from an overwhelming set of challenges in 2020: a devastating pandemic, economic uncertainty and a cry for racial justice and gender equality,” said Antonio Zappulla, CEO of the Thomson Reuters Foundation. “As we come together to map a path to recovery and sustainability, there is increased scrutiny on the impact of businesses on their communities. In response, the Thomson Reuters Foundation convened this working group with the aim of producing a valuable resource for investors when integrating ’S’ factors into their decision-making and management. By improving understanding of social issues and their importance, we hope this resource will further ignite the conversation on the benefits and the importance of reporting on social criteria, and in doing so, positively address some of the world’s gravest human rights issues.”
“This myth-buster couldn’t be timelier and more useful exactly as the “S” in ESG has finally come to the forefront. From inequality and racial injustice to human rights and worker rights, social issues are more salient—and often material—than ever. This report should clear away the misperceptions that have held investors back from taking these issues and risks as seriously as they should, “ said Bennett Freeman, Former Senior Vice President for Sustainability Research and Policy at Calvert Investments.