Demand for human rights solutions intensifies

Ahead of launch in September, the social equivalent of the TCFD has unveiled its key functions as a UN body turns the spotlight on passive funds to do more on human rights.

The UN Working Group on Business and Human Rights says investors must engage with index providers to do tackle human rights concerns.

An article published by FS Sustainability in March found that some firms tracking ESG indices failed to follow human rights due diligence and address human rights risks and impacts.

Inequality should be treated as a systems-level risk, according to the Taskforce on Inequality and Social-related Financial Disclosures (TISFD) which has revealed for public consultation its proposed scope, mandate, and governance model in the lead up to launch.

The TISFD will address inequality and social-related "impacts, dependences, risks, and opportunities" by strengthening the development of financial disclosures.

To help entities manage this risk, disclosure requirements will be interoperable from an impact materiality perspective and a financial materiality perspective.

"Inequality is the defining social issue of our time. While the prevalence of extreme wealth has risen, many people continue to earn too little to meet their basic needs," the TISFD said in a statement.

"Companies and investors each have a critical role to play in reducing the accumulation of social risks in society and the economy. Yet there is a lack of clarity on the ways in which their actions impact people and contribute to inequalities - and how these inequalities affect business and finance in turn.

"Launching in September 2024, the Taskforce on Inequality and Social-related Financial Disclosures (TISFD) is a multi-stakeholder initiative that will develop a global framework and recommendations that enable companies and investors to identify, assess, and report on their inequality and social-related risks, opportunities, and impacts."

The taskforce is the result of a merger of the Taskforce on Inequality-related Financial Disclosures (TIFD) and the organisations preparing a Taskforce on Social-related Financial Disclosures (TSFD).

The TISFD framework will be aligned with international codes of conduct, including the UN Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises, and the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy.

It will be interoperable with the International Sustainability Standards Board (ISSB), the Global Reporting Initiative (GRI), the European Sustainability Disclosure Standards (ESRS), the Taskforce on Climate-related Financial Disclosures (TCFD), and the Taskforce on Nature-related Financial Disclosures (TNFD).

The working group seeks feedback from companies, financial institutions, business associations, scientific and academic institutions, and non-profits.

The initiative is supported by the World Business Council for Sustainable Development (WBCSD), the Council for Inclusive Capitalism (CIC), and Shift.