The Taskforce on Inequality and Social-related Financial Disclosures (TISFD) aims to bring clarity and consistency to the reporting and management of social-related matters. The TISFD is comprised of a diverse set of organizations across the public, civil society, corporate, and financial sectors. The stated objectives of the initiative are to develop a global disclosure framework to encourage businesses and financial institutions to adopt practices that create fairer, stronger economies and societies through better understanding and disclosure of impacts, dependencies, risks, and opportunities related to social issues, including inequality. S&P Global Ratings has found that the social dimension of ESG remains poorly understood and further clouded by measurement and reporting practices that are often qualitative or reliant on incomplete or inconsistent data--particularly by comparison with the environmental dimension (see "What Gets Measured: Social factor coverage in corporate ESG frameworks," HEC Paris, Inclusive Economy Center, November 2022). But the TISFD's path is unlikely to be quick or easy.
What's Happening
The TISFD's launch, in September 2024, establishes a forum for businesses, financial institutions, labor and civil society groups, and international organizations to develop recommendations and guidance on a new and globally consistent disclosure framework. The goal is to improve business and financial institution reporting on and thus management of risks, opportunities, and impacts relating to their workforces, supply-chain labor, customers, and communities.
Why It Matters
Social-related issues have proven more difficult to identify, manage and integrate into institutions' decision-making in large part because there isn't broad consensus on what to measure, let alone how. Nevertheless, social factors, including but not limited to accessing a qualified workforce, maintaining strong community relationships, and safeguarding supply chain labor rights amid new regulations, are material issues in many sectors.
Though much is yet to be defined, TISFD's ability to develop an effective and usable framework that takes hold in the market likely hinges on:
- Maintaining the stated inclusive, multi-stakeholder approach.
- Aligning with existing standards on business conduct such as the UN Guiding Principles on Business and Human Rights or the OECD Guidelines for Multinational Enterprises
- Interoperability and integration with existing standards, like those of the Global Reporting Initiative (GRI), International Sustainability Standards Board (ISSB) or EFRAG, to drive efficiency and adoption.
- Taking an approach that considers both financial risk and the systemic societal impacts of social and inequality issues.
- Demonstrating relevance of key data and metrics to their associated risks and impacts.
Developing a comprehensive disclosure framework for inequality and social-related issues will be slow and complex. Relative to the Taskforce on Climate-related Financial Disclosures (TCFD) and Taskforce on Nature-related Financial Disclosures (TNFD), the TISFD will aim to address a broad range of issues, including workers' rights, occupational health and safety, local community engagement, consumer protection, data privacy, and a just and fair energy transition. The TISFD's first challenge, therefore, will be defining those topics--a task complicated by the lack of reliable and consistent data needed to demonstrate links between social-related factors, financial risks, impacts, and dependencies.
What Comes Next
Work is only just beginning. The appointment of the TISFD´s Steering Committee will be made by early 2025, followed by creation of expert working groups that will co-create the framework. The first public version of the framework is not expected until the end of 2026, following periods of stakeholder consultation, drafting, and testing. After that, the road doesn't get easier. Implementation and uptake in the market will also take time.
Background In Brief
S&P Global Ratings acts independently in the determination of its credit ratings and credit ratings methodologies. Our approach to incorporating the impact of ESG credit factors in our credit analysis is set forth in our ESG criteria and our sector specific criteria which are publicly available on our website.
Related Research
- Evolving Risks For Credit Quality In U.S. Capital Goods, June 18, 2024
- ESG In Credit Ratings Deep Dive: ESG Factors Drove 13% Of Corporate And Infrastructure Rating Actions Since 2020, March 13, 2024
- Labor: A critical component of supply chains under growing pressure, Feb.21, 2024
- How Changing Workforce Dynamics May Affect U.S. Companies, Aug. 1, 2023
- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
External Research
- What Gets Measured: Social factor coverage in corporate ESG frameworks, HEC Paris, Inclusive Economy Center: M Huysentruyt, HEC Paris; L Nardi, HEC Paris; B Thomson, S&P Global Ratings; B Faivre-Tavignot, HEC Paris, November 2022
This report does not constitute a rating action.
| Primary Analyst: | Bruce Thomson, New York +1 2124387419; bruce.thomson@spglobal.com |
| Secondary Contact: | Bruno Bastit, Madrid +34 914233215; bruno.bastit@spglobal.com |
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