We study how retail investors respond to the social dimension of ESG when social risk becomes financially salient. We construct a novel news-based Human Capital Concern (HCC) index that captures shifts in media attention to financially material workforce-related issues, and examine its effect on U.S. mutual fund flows from 2015 to 2023. We show that retail fund flows become significantly more sensitive to funds’ social risk scores during periods of elevated HCC, with effects concentrated in severe and persistent episodes. In contrast, no comparable response emerges when media attention focuses on ethical or human-rights topics with lower financial materiality. We further document that funds with high social scores outperform following high-HCC periods, in a pattern consistent with a market-wide repricing of social risk rather than temporary demand pressure. Overall, our results indicate that retail investors incorporate social performance into their allocation decisions when it becomes financially relevant, highlighting the state-dependent financial materiality of the social pillar of ESG.
