Where's the S in ESG? Addressing the overlooked pillar in sustainability

Wealth Management and Private Banking

09 June 2022

ConsumerCOVIDDataRegulationSocialsustainableWealth Management and Private BankingWealth Management and Private Banking

Expert: Richard Saldanha and Vaidehee Sachdev, Aviva Moderator: David Barks, Savanta


  • The macro and micro impacts of social inequality of rights and resources can impede economic growth as well as fuel social unrest
  • The financial profitability of companies and sustainability of their business models are linked
  • The benefits of investments incorporating social factors include tackling inequalities and helping identify companies which are likely to perform better in the long term


There are three emerging trends that will be catalysts for increased focus/awareness of social factors and resulting investment opportunities:

1) Increased regulation e.g., in Europe on human rights due-diligence

2) Increasing consumer awareness e.g., recent unionisation efforts in US

3) Impact of the Covid pandemic on existing inequalities in society

Company engagement is key but there are challenges given that the measures needed to address social inequality require companies to take a much longer-term mindset rather than prioritising short-term profits.

Regulators and policy makers have a key role to play in encouraging companies to reduce social inequalities and risk factors within their direct operations and supply chains.

Certain geographies were discussed as a potential exclusion, but a more sophisticated view of company or sector practices is thought to be required to support transition, especially given the globalised nature of companies’ operations and supply chains.

Generally, reporting disclosure for social factors needs to improve significantly, though we have certainly seen with environmental and climate reporting that companies have made progress over the past few years and we would hope to see the same for social as well.

Social factor certifications exist and can be helpful, but we also need companies need to take the lead on their own due diligence and take proactive steps to mitigate against social risks.

There’s a need for investors to consider companies that are transitioning their business models to help address social inequality as well as those that are providing solutions directly through their products and services.

Response to regulation is an important next step as policy makers focus further on the area and we get more clarity on frameworks such as the EU social taxonomy. 

Key Takeaways:

  • Accurate, reliable and meaningful data remans a challenge from a reporting standpoint
  • Investors need to look beyond traditional ESG data providers to gain a better understanding of how companies are managing social risks. The likes of NGO datasets can be beneficial here
  • Better alignment/transparency in the reporting of data is also important, and the industry needs to engage with companies to ensure it is a focus and ultimately helps reduce risks for investors as they are able to make sensible decisions when evaluating investments from a social standpoint