Spotlight on Social: Investor coalition targets cost-of-living crisis

Arrow Stock photos by Vecteezy

As the United Kingdom grapples with the longest pay squeeze in two centuries, institutional investors are taking a stand. Fifteen leading organisations, representing a combined £2.37 trillion (US$2.93 trillion) in assets under management, are urging companies to address the growing cost-of-living crisis during this AGM season. This move comes alongside the announcement of a new initiative to develop a disclosure framework focused on inequality and social issues.

The Good Work Coalition’s call to action

ShareAction’s Good Work Coalition, which comprises prominent institutional investors such as Legal and General Management, Aviva Investors, AXA Investment Managers, and workplace pension scheme Nest, has issued a statement outlining three key demands for businesses:

1. Ensure the lowest-paid workers, who are disproportionately impacted by the rising cost of living, are adequately targeted in pay awards that meet the current rate of inflation;
2. Commit on a long-term basis to paying the real living wage to all employees across supply chains, including third-party contracted staff;
3. Provide secure work, through guaranteed working hours and fair and accurate contracts.

The urgency of addressing cost-of-living pressures

A recent report by the Joseph Roundtree Foundation highlights the dire situation low-income households face.

Approximately 7.2 million people lack access to basic goods and services, while 4.7 million struggle to keep up with bill payments. Dan Howard, Head of Good Work at ShareAction, emphasises that workers on low wages and insecure contracts bear the brunt of the cost-of-living crisis. He warns that companies failing to respond to these concerns may face increased pressure from shareholders in the coming year.

The emergence of a new disclosure framework

In a parallel development, it has been announced that the Taskforce on Inequality-related Financial Disclosures (TIFD) and the Taskforce on Social-related Financial Disclosures (TSFD) will join forces to create a disclosure framework akin to those established for climate and nature-related risks. The combined initiative aims to foster a co-creation process that involves various stakeholders, including investors, companies, regulators, academics, and advocates for those most affected by inequality.

This new framework will be designed to work seamlessly with the Taskforce on Climate-related Financial Disclosures (TCFD) and the Taskforce on Nature-related Financial Disclosures (TNFD). Further information about the Taskforce, including details on governance, processes, and substantive work, is expected to be released for public consultation in early Q3.

The collaboration between institutional investors and the development of a new disclosure framework signals a growing commitment to addressing the social pillar of ESG. As the UK endures a cost-of-living crisis, businesses must take decisive action to protect vulnerable workers and ensure a more equitable future.