Chapter 4: Social Factors Flashcards
What are social megatrends?
___ are long-term social changes that affect governments, societies, and economies permanently over a long period of time.
Why do social megatrends matter?
They could have an effect on the businesses of the investee companies.
The chapter focuses on 9 social megatrends. List them.
- Globalization
- Automation and AI
- Inequality and Wealth Creation
- Digital disruption/social media/access to electronic devices
- Changes to work, leisure and education
- Changes individual rights and responsibilities and family structures
- Changing demographics, including health and longevity
- Urbanization
- Religion
Which environmental megatrends could have a severe social impact and how?
Climate change and transition risks, water scarcity and mass migration could have social impacts as they could cause mass migration.
Globalization
The integration of local and national economies into a global (and less regulated) market economy, which is caused by a rapid increase in cross-border movement of goods, services, technology, and capital.
Automation
Technology by which a process or procedure is performed with minimum human assistance. It is associated with faster production and cheaper labor costs, replacing hard, physical, or monotonous work.
How will AI impact Automation?
AI will accelerate Automation. It will have significant effects on healthcare, automotive, financial services and auditing, security and creative industries.
What negative impacts for the overall economy can inequality have?
There is growing evidence that inequality reduces educational opportunities, thereby limiting total economic growth.
Digital disruption
The change that occurs when new digital technologies and business models affect the value proposition of existing goods and services.
Where should investor start when implementing social factors in their investment decision?
A good starting point is to determine which social factors are most controversial or financially material in each industry. As a next step, investors can assess how exposed certain companies are to these sector-specific social factors and if and how the company manages these risks. This might depend on their business models or on the nature and geographical location of their business operations. Finally, where relevant, investors should assess critical social factors in the supply chain.
Internal Social Factors
Social factors within a company, such as fatalities, employee treatment, gender balance, and pay ratios. They include:
1. Human Capital Development
2. Working Conditions, Health, and Safety
3. Human Rights
4. Labor Rights
Human Capital Development
Good human capital management generates a culture and behaviors where the workforce is positively disposed and productive, rather than taking excessive risks or harming customer relationships.
Where do human rights violations occur?
They usually occur deep in the supply chain.
Consumer protection
Laws and other forms of government regulation designed to protect the rights of consumers.
Environment
The sum of all external conditions affecting the life, development, and survival of an organism.
