Discuss the environmental and social risks that follow from an institutional investor's portfolio strategy

Environmental risks include physical climate risk, such as floods, heat and drought damaging assets; transition risk from carbon regulation, technology shifts and changing demand, which can strand fossil-fuel assets. Social risks cover labour standards, health and safety, community relations, human rights in supply chains and data privacy. For institutions with long horizons and direct holdings, these risks can impair cash flows, raise costs of capital and damage reputation and public legitimacy, which matters greatly for sovereign and public funds. They should be identified, measured where possible, for example with carbon footprints or scenario analysis, and integrated into asset selection and engagement. A trap is treating these as purely ethical questions rather than financial ones.