The end result means we are able to report to our clients on the overall impact of our portfolio, as well as the impact of individual holdings. Secondly, it provides our clients with a quantifiable indication of how their capital allocation is helping achieve positive impact, as aligned to the 17 UN Sustainable Development Goals. First, it allows us as investors to trace and account for each investment, providing a means through which we can monitor a company and ensure its impact intentionality as a business.
Nevertheless, all portfolio companies are assessed using at least one solutions-based metric and one operations-based metric.Īssessing the impact of companies at such a granular level with quantifiable outcomes allows us to achieve two important objectives. Some themes may include solutions and operations-based metrics, such as Climate Change which looks at both operations metrics for carbon emissions and solutions metrics for emissions avoided whereas Gender Equality currently only contains operations based metrics. They are used to capture the impact of all the companies in which we invest. We have carefully chosen 20 impact metrics, which have been grouped into 11 relevant themes. As well as leveraging our expertise as impact investors at the international business of Federated Hermes, we used an external consultant to help aggregate data from company, sector and impact industry reports. In building our database, we have used traditional equity research methods, in combination with impact modelling techniques. Indeed, the majority of pre-existing tools used aggregate modelling and artificial intelligence (AI) insights that, while impressive, at times yielded inaccurate and incomplete results for individual companies. After looking at the tools available in the market to analyse impact data, we did not believe that any one provider had the depth of understanding and granularity we required at a company level.
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