Methodology

Our methodology is founded on Impact Finance as an investment or financing strategy that aims to accelerate the fair and sustainable transformation of the real economy, providing evidence of its beneficial effects*: what we call the ESG Impact.

The ESG finance is broken…

We launched IMPACTIN with the very purpose in my mind to provide a concrete solution to the following 6 main issues we see today in the market approaches to ESG Rating:

• ESG Risk-based methodologies, lost in intention-checking;
• Subjectivity, due to a human-based analysis;
• Qualitative approaches;
• Rating dilution, often aggregating hundreds of indicators;
• Black-box rating methodologies, often non-repeatable;
• Long update cycles (sometimes > 24 months), due to a limited workforce vs. thousands of emitters to analyse;

IMPACTIN approach to ESG Impact rating

At IMPACTIN, we approached the problem the other way around, and built natively our quantitative ESG impact rating methodologies on the following principles:

• ESG Impact scoring approach, based on a small set of relevant ESG impact indicators;
• Objectivity, due to a our quantitative and automated approach;
• Quantitative approach;
• Key ESG indicators (quantitative SMART Data)—screened and selected for their relevancy, coverage, quality, etc.;
• Repeatable and deterministic method;
• Frequent and automated updates , thanks to our quantitative approach and our automated data-analysis pipeline, leveraging Cloud and Data platforms and tools.

ESG Impact: methodologies and toolkit

IMPACTIN’s quantitative ESG Impact rating methodologies allow to measure and rate the ESG impact, and are applicable to listed companies (or any company) and to bond issuers such as countries, regions or cities, in order to be able to then rate whole investment portfolios, funds or indices. Those ESG Impact rating methodologies laid the foundation of our ESG Impact toolkit, composed of:

• Key ESG Risk mapping for 158 sub-industries
• ESG Impact rating methodologies;
• ESG Impact rating datasets:
  • Countries, territories, and companies ESG Impact rating datasets;
  • Countries, territories, and companies Climate Change and Physical Risk Rating datasets.
• ESG Impact scorecards: ESG Impact, SDG, 5P, Climate Change and Physical Risks…

Our ESG Impact rating methodologies are the not only the key to assess the ESG Impact of investment portfolios and emitters, but also to complys with new ESG regulations and align with Sustainable Finance initiatives: EU Taxonomy, SFDR, NFDR, CSDR, ECB Climate stress tests, UN SDGs, PRI…

Customization is also possible at the dataset level: both our own ESG data, sourced from public sources or data brokers, or your own ESG data can be used in our ESG rating and reporting.

Frameworks and regulations

Our methodologies have been designed, from their inception, with compliance with th EU Taxonomy and other ESG regulation in mind. For that reason, our ESG Impact scoring datasets, for instance, precisely provides scores adressing the regulatory needs:

• Climate Change Mitigation scores;
• Climate Change Transistion scores;
• Climate Change Adaptation scores;
• Physical Risk score;
• etc.

Furthermore, measuring and rating the true ESG impact of a business activity, investment funds or territory in a scale scoring from 0 to 5, our methodologies allows thus to provide a measure of the ESG impact, ranging from adverse impact, to positive impact.

* cf. Impact Finance: a (good) definition