The Rise of the S in ESG and the Role of Public Pension Funds

Early pension fund investors that focused on “S”—or social investing—were concerned with human rights abuses in emerging markets, including sweatshops in the garment and shoe industry, and child miners in the Democratic Republic of Congo. These types of social issues usually manifested themselves as reputational risks for the corporations in the funds’ investment portfolios. Since then, S risks have become more complex and systemic. They are no longer limited to human rights or emerging markets, and they are affecting organizations with strong positive cultures in developed markets, as these firms face difficult decisions regarding workforce management and capital allocation. Some current “S” risks include human rights, human capital management, and a variety of other risks such as responsible firearms, supply chain transparency, anti-corruption, and equitable taxes.

• Publication date: December 2020