How can you address social risks in client investments?

1 What are social risks?

Social risks are the factors that can affect the social performance of an investment, such as human rights, labor standards, health and safety, environmental protection, community engagement, social inclusion, and governance. These factors can influence the viability, profitability, and sustainability of an investment, as well as the reputation and trust of the investors and the investees. Social risks can arise from the nature, location, scale, or duration of an investment, or from the behavior, policies, or practices of the investees or their business partners.

4 How can you assess social risks?

The second step to address social risks in your client investments is to assess them. This means analyzing the likelihood and severity of the social risks, as well as their potential consequences and implications for the investment objectives and outcomes. You can use various methods and tools, such as risk matrices, scoring systems, or indicators, to quantify and rank the social risks. You can also use qualitative and participatory approaches, such as stakeholder mapping, consultation, or feedback mechanisms, to understand the perspectives and expectations of the affected stakeholders and their influence on the social risks.

5 How can you manage social risks?

The third step to address social risks in your client investments is to manage them. This means developing and implementing strategies and actions to avoid, minimize, mitigate, or compensate for the social risks, as well as to enhance the social opportunities and benefits of the investment. You can use various instruments and measures, such as policies, procedures, codes of conduct, contracts, agreements, or incentives, to establish and enforce the social standards and commitments of the investees and their business partners. You can also use various mechanisms and practices, such as training, capacity building, grievance redressal, or partnerships, to support and improve the social performance and impact of the investees and their business activities.

6 How can you monitor social risks?

The fourth step to address social risks in your client investments is to monitor them. This means tracking and measuring the progress and results of the social risk management strategies and actions, as well as the actual and potential social impacts and outcomes of the investment. You can use various tools and techniques, such as indicators, metrics, reports, audits, or evaluations, to collect and analyze data and evidence on the social performance and impact of the investees and their business activities. You can also use various channels and platforms, such as communication, disclosure, reporting, or engagement, to share and communicate the social performance and impact of the investment with the relevant stakeholders and the public.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?