More Methodology

Scoring Methodology

Our Approach

Real Impact is the impact that you have on other investors, policymakers, and the general public through your investment decisions.

Our Real Impact scoring is based on a rigorous review of academic literature covering all the pathways to impact in public equity investing. Based on the findings our review, we consider the Real Impact of investors in three broad categories: shareholder advocacy, public sphere impact, and incorporation of Environmental, Social, and Governance (ESG) issues into investment decisions. In addition to a fund’s direct contribution to these three impact areas, we look at a fund’s participation in organizations that help other funds to have impact as well.

What’s Different

Current impact investing tools can only tell you about the environmental and social impact of the companies a fund invests in. That’s only a small part of your impact equation.

The more important question is the impact that you have on companies and the public. How much are you helping a solar company install more panels by investing in it? How much can you improve a company with bad practices? How much are your investments changing public opinion and advancing good public policy?

We look holistically at a fund’s work to improve companies it invests in through dialogues, and through formal proposals and votes. We assess how much a fund advances good policy and works to shift public opinion on important environmental and social issues. We consider how much a fund advances impact investing, through research and bringing new people to impact investing. Real Impact Tracker finds which funds not only share your values, but also which funds advance your values.

Shareholder Advocacy

Shareholder advocacy is the process of an investor attempting to change a company through conversations or raising issues for a vote.

By communicating with companies about environmental and social issues, investors have historically been able to convince companies to improve their impact on the world. We therefore gave points to funds for having communications with companies. We gave additional points for reported successes and for activities increase the chance of a successful dialogue, such as effort, follow-through, and collaboration.

Investors can also file shareholder resolutions, which are formal proposals for a change in a company’s policies or practices that all investors in the company vote on. Shareholder resolutions have often times contributed to significant changes in company operations, but they have also had spillover effects of supporting related campaigns and changes at non-targeted companies that observe resolutions with their peers. We gave points to companies that filed resolutions. We gave extra points for reported successes and factors that increase the likelihood that a resolution will have a positive impact on the world, such as effort and innovation. Also, resolutions can only be impactful if other investors show support with their votes, so we also looked at how funds vote on resolutions.

Public Sphere Impact

We gave points to funds that work to influence the public sphere. Investors have positively influenced public policy through joint statements and direct communications with policymakers and regulators. Additionally, investors have historically been able to influence public perceptions of certain companies, and the business practices of those companies, through participation in and support of campaigns such as divestment.

ESG Investing

Integration of ESG issues into investment decisions only makes a difference at scale. When more investors focus more on social and environmental issues, companies will care more as well. So investors can have impact increasing the number of investors that care about environmental issues. Investors that perform well financially using ESG investing strategies shine a positive light on ESG, encouraging others to follow. Similarly, ESG research and promotion help to grow the number of investors that consider ESG issues.

More On Scoring

All these pathways to impact factor into our total score, with weights determined by our review of the academic literature surrounding investor impact in public equities. If we were unable to find the data pertaining to a particular scoring category, we allowed funds a chance to provide us with updated information. If data fields remained unreported, we assigned the lowest score for the category.

We believe our scoring gives a fairly accurate picture of which funds have the most Real Impact.

Process Methodology

At Real Impact Tracker, we looked at the world’s largest financial institutions managing public equity, covering approximately 70% of global assets under management, and firms focused on social and environmental impact. Included in our coverage are funds managed by the largest asset managers in the U.S. (Blackrock, Fidelity, etc.), members of the US Sustainable Investment Forum, and large European firms with U.S. funds.

We used publicly available information to analyze firms’ impact, looking primarily at integration of environmental, social and governance (ESG) factors into the investment process, shareholder engagement, policy advocacy and public facing activities.  We then sent them our analyses, using a 2016 baseline, and engaged in conversations and email dialogues to confirm and update our impact analyses. We have not verified self-reported information.

We then looked at specific funds of these institutions, choosing those funds that focus on ESG factors, and/or one of an institution’s larger funds by assets under management. We are releasing a selection of over 60 funds as an initial tool to compare relative impact. We left smaller institutions out of our initial sample, but it should be noted that smaller U.S. fund managers generally have less impact than our starting universe.