The Taskforce on Inequality and Social-Related Financial Disclosures (TISFD or the Taskforce) is a novel initiative, launched late in 2024, aimed at addressing the growing importance of inequality and social (or, if you like, people-related) risks in the financial sector. It is a global coalition of more than 20 companies, financial institutions, labor unions, civil society organizations, and international organizations, bringing together a wide range of voices to address the complex issue of inequality and social-related financial risks.
Building on the success of the disclosure regimes established by the Taskforce on Climate-related Financial Disclosures (TCFD) and the Taskforce on Nature-related Financial Disclosures (TNFD), TISFD is a global initiative that seeks to develop a reporting framework for businesses and financial institutions (“market actors”) to disclose how they address impacts and risks to the human rights of workers, communities, and consumers and adequately account for their inequality and social risks. The structure of the framework will be aligned with TCFD’s and TNFD’s covering governance, strategy, risk management, and metrics and targets, thematic areas representing four core elements of how organizations operate.
The Importance of Inequality and Social Disclosures
The inequality and social risks faced by market actors are increasingly recognized as significant factors that can impact their financial performance. For example, labor rights, human rights, community engagement, diversity and inclusion, and supply chain management can have far-reaching consequences, including reputational damage, regulatory fines, and financial losses. By disclosing their inequality and social risks, market actors can help investors, lenders, and other stakeholders make informed decisions about their investments and business relationships. Additionally, such disclosures can incentivize market actors to adopt more sustainable and equitable practices.
The TISFD Framework
The TISFD framework will be developed to provide a comprehensive approach to reporting inequality and social disclosures and will focus on both financial materiality (how inequality and social issues can affect the disclosing organization’s financial performance, of particular interest to investors and lenders) and impact materiality (the real-world impact of the organization's practices, of particular interest to stakeholders concerned with potential impacts).
The framework is expected to cover a wide range of inequality and social issues, including:
- Human rights: ensuring that an organization's operations do not violate human rights.
- Labor practices: promoting fair labor practices, including fair wages, safe working conditions, and freedom from discrimination.
- Community engagement: building positive relationships with local communities and contributing to their development.
- Diversity and inclusion: creating a diverse and inclusive workplace.
- Supply chain management: ensuring that an organization's suppliers are complying with ethical and sustainable practices.
Benefits of Adopting the TISFD Framework
Market actors that adopt the TISFD framework can benefit from several advantages, including enhanced reputation, reduced financial risk, improved stakeholder relationships, and competitive advantage. By demonstrating a commitment to inequality and social issues, they can improve their reputation among investors, customers, and employees. Addressing inequality and social risks can help to mitigate financial losses associated with reputational damage, regulatory fines, and legal liabilities. The TISFD framework should help market actors build stronger relationships with investors, lenders, customers, employees, and communities. Leaders in inequality and social disclosures will likely have a competitive advantage in the marketplace.
The Taskforce has only just embarked on its journey; its next steps are to
- equip stakeholders with the knowledge base to engage meaningfully with the taskforce and provide feedback on the development of the framework;
- develop the conceptual foundation of the framework and assemble a body of evidence on financial and system-level risks;
- develop a beta version of the framework from late 2025 with a view to releasing the first public version of the framework (accompanied by guidance and recommendations on its implementation) in late 2026; and
- partner with standard-setters, jurisdictions, and market actors to support implementation of its recommendations.
While the TISFD framework represents a significant step forward in the field of corporate social responsibility, accountability, and reporting. By providing a clear and consistent approach to inequality and social disclosures, it will help to drive continued change towards a more sustainable and equitable future for people and the planet. How it is received by investors and stakeholders globally remains to be seen.
How We Can Help
Morgan Lewis lawyers stand ready to assist organizations navigate the TISFD framework, from drafting comprehensive ESG disclosures to reviewing existing policies and procedures.