Incorporation of environmental, social and governance (ESG) analysis into investment processes represents arguably the largest advance in investor thinking of the past 20 years. And while environmental and governance risks have captured most of the attention, social risks are now moving to centre stage.

Unlike environmental and governance risks, social dynamics are generally not well understood. Compared with environmental remediation or board independence, social factors cover more subjective areas including human capital, the social impact of companies’ operations, product sourcing and social licence to operate.

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