Brainie Series Chapter 4: Social Factors

Chapter four of the CFA in ESG Investing curriculum delves deep into social factors, including systemic relationships, material impacts, and approaches to social analysis at the country, sector, and company levels, and covers key megatrends, concepts, and risks associated with social factors.

Chapter 4: Social Factors

Social factors are relevant from both a business and an investment perspective and are increasingly being factored into investment analysis and investment decisions. In many cases, Investors expect companies to manage these issues by using a best-in-class approach, whereby a company is better than its peers on several material issues relevant to its sector. In other cases, a social issue can become the focus of an investable opportunity. Companies are increasingly expected to engage with their stakeholders openly, transparently, and responsively. Thus, chapter four of the CFA in ESG Investing curriculum delves deep into the social factors of systemic relationships, material impacts and approaches to social analysis at the country, sector and company levels.


As mentioned, throughout this chapter, the student covers the systemic relationships and activities between business activities and social issues. Some of these social issues include globalization; automation and artificial intelligence (AI); inequality and wealth creation; digital disruption, social media, and access to electronic devices; changes to work, leisure time, and education; changes to individual rights and responsibilities and family structures; changing demographics; urbanization; and religion. 

On top of that, this chapter will help you assess key megatrends influencing social change in terms of their potential impact on companies and their social practices: climate change; transition risk; water scarcity; pollution; mass migration; and loss and/or degradation of natural resources and ecosystem services.

In studying all this, one would also learn what the main key social concepts are, including human capital: development, employment standards, and health and safety; product liability/consumer protection: safety, quality, health and demographic risks, and data privacy and security; stakeholder opposition/controversial sourcing; social opportunities: access to communications, finance, and health and nutrition; social and news media; animal welfare and microbial resistance.

This chapter also covers the dangers and risks of all these factors by including ​​ways of analysing risk assessment; quality of management; ratio analysis; and financial modelling.

Check out our video to learn more about what you can expect when studying for the CFA in ESG investing certificate. 

Brainie Series

Check out The Brainie Series, on our YouTube channel which is a series of 9 videos, each covering a chapter of the CFA ESG or CFA Institute Certificate in ESG Investing curriculum. Our goal with these videos is to provide you with additional guidance and help you pass your CFA ESG exam.