In our view, it is imperative that all investee companies generate a positive impact that can be measured quantitatively, as well as qualitatively. We have created our proprietary Impact Database, which enables us to quantify the impact of companies held within our portfolio. The Database also provides a clear framework for us to assess companies on our watchlist.
Building the Impact Database [1]
In building our database, we have used traditional equity research methods, in combination with impact modelling techniques. 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.
Reporting our portfolio’s impact
We have carefully chosen 20 impact metrics, which have been grouped into 11 relevant themes. They are used to capture the impact of all the companies in which we invest. 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. Nevertheless, all portfolio companies are assessed using at least one solutions-based metric and one operations-based metric.
Assessing the impact of companies at such a granular level with quantifiable outcomes allows us to achieve two important objectives. 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. 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. 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.
Total company level impact of stocks held, 2019 highlights [2]
Using our proprietary Federated Hermes Impact Database, we are able to present our impact data on an aggregated, cross company basis. Put simply, it depicts our estimation of the total impact that the companies in which we are invested have delivered in 2019.
Highlights include:
Source: Federated Hermes, as at 31 December 2019. Note: The Impact Opportunities portfolio has been harmonised for calendar year impact.
Read the full report here or visit the new Federated Hermes sustainability hub to access more in-depth analysis, research and commentary on sustainability, direct from our investment teams.
For Wholesale clients only. All distribution of the products in Australia is carried out by Federated Investors Australia Services Pty Ltd which holds an Australian Financial Services Licence (No. 433831).
The value of investments and income from them may go down as well as up, and you may not get back the original amount invested.
Federated Hermes Investment Funds plc (“FHIF”) is an open-ended investment company with variable capital and with segregated liability between its sub-funds (each, a “Fund”). FHIF is incorporated in Ireland and authorised by the Central Bank of Ireland (“CBI”). FHIF appoints Hermes Fund Managers Ireland Limited (“HFMIL”) as its management company which is authorised and regulated by the CBI. Registered address: The Wilde, 53 Merrion Square, Dublin 2, Ireland.
[1] As it stands, the database calculates the impact our portfolio had in the calendar year 2019. We are in the process of rolling this analysis forward to calculate impact for the calendar year 2020, as each of our investee companies start to publish their annual earnings and sustainability reports. We expect to be able to report to clients on the 2020 impact of our portfolio by the end of June.
[2] Once each of our investee companies publish their annual earnings and sustainability reports, we will be able to update our figures to reflect 2020.
