Getting hold of high-quality, outcomes-based sustainability data has been a major pain point for investors and asset managers – but an innovative platform is changing the game.
When Sam Duncan was Head of Impact at LeapFrog Investments, one of the founding firms of impact investing, she found that she was spending oceans of time hunting for companies’ social and environmental outcomes data and keying it into the firm’s system.
As Duncan reflected on one of her previous roles as an analyst in the Investment Banking Division of Goldman Sachs, she felt that something was wrong. This was never an issue with financial data. At Goldman, she was practically swimming in it. Why, then, was it so difficult to build a similarly rich dataset of social and environmental outcomes data – especially when the objective, to use data as a means for pinpointing investment opportunities and measuring their performance, was the same?
Having felt that pain firsthand and decided there must be a better way forward, Duncan resolved to help ease the path for fellow investors facing similar hurdles. With that goal in mind, in 2018 she launched Net Purpose: a platform that streams data on the social and environmental outcomes of companies and portfolios, to assist investors with launching, growing and reporting on sustainable and impact-based funds.
A broader history
“We provide outcomes-based data around a variety of environmental and social themes,” says Net Purpose’s VP, Product, Christine Siu. “Essentially, we examine a large universe of listed companies that report on their operations and products and services. We collect relevant data from that reporting, put it through a series of quality assurance steps in our blended human and artificial intelligence (AI) pipeline and then make it available online for our users in the investment community.”
Investors and asset managers can load their portfolios into the platform and, following a set of calculations, the system will display the social and environmental outcomes of their investments. That enables users not just to report on their funds’ impacts, but communicate those benefits to their end-clients, too.
“We actually have two datasets,” Siu explains. “The first is raw data sourced straight from companies’ reports. But corporate disclosure is, in a number of ways, imperfect – and sometimes incomplete. For example, we find that impact data on products and services is trailing behind that related to operational footprints. Plus, it’s often quite difficult to gain consistency between companies’ different methodologies and metrics.”
As such, the second dataset is a fuller and more refined version – fleshed out and honed by a group of proprietary researchers who use reported data and lifecycle assessments to measure the impact of companies’ products and services. “Our researchers are not what you’d call ‘consultants’ in the traditional sense, but they work in close collaboration with our users to ensure that they’re getting not just data, but an informed perspective,” Siu notes.
Siu points out that the platform also includes functions such as rate-of-change analysis, so users can see how portfolio companies have developed and evolved in key impact areas. “That doesn’t just cover a single year’s-worth of data, but a broader history, enabling users to pick out trends. And, importantly, it’s standard practice for fund managers to measure their portfolios against a range of benchmarks – such as the MSCI Index, or even the UN’s Sustainable Development Goals (SDGs) – so our tools provide that capability, too.”
The overall aim, says Siu, is to make it easier for users to communicate the sustainability trends that are playing out in their portfolios to their end-clients.
Apples to apples
Another crucial function that the platform provides is the facility to help impact investors discover new funding opportunities. “There are thousands of different companies in our data universe and users are not just restricted to information relevant to their own portfolios,” says Siu. “They can roam outside and explore what’s going on at other companies that may have similar sustainability profiles to the ones they’re already supporting.”
Users can pull up information on, say, carbon emissions, broken down into scopes 1, 2 and 3, and create rankings of all the companies in the Net Purpose data universe, based on their performance in each area.
“It all depends on the sustainability strategy that’s guiding your work,” she says. “Whether you are an environmental, energy, social or healthcare fund, our data points will normalise so you can compare apples to apples across a large body of specialised information. And that can help you spot other businesses that may fit with your portfolio.”
Universe of coverage
Looking ahead, Net Purpose is eager to build the user base for its just-launched SDG contribution tool: a visualisation aid that helps investors understand how sustainable their portfolios are, in relation to the SDGs. The platform is also aiming to expand its universe of coverage – from the standpoint of both the number of businesses on its radar and the types of sustainability data points it collects.
In addition, it is moving into use cases for engagement and stewardship teams.
Siu explains: “A company may report on scope 1 and 2 emissions, but not scope 3. Or perhaps it doesn’t have in place net-zero or science-based targets. Lots of investors are beginning to pick up on those topics because, ultimately, asset owners are asking them what the plan is for companies with those gaps. How are they looking to transition, and provide greater transparency? So, significant pressure is being applied on those companies from an engagement and stewardship perspective, and we think we can help them close their gaps.”
In 2021, ICAEW’s Finance for the Future Awards recognised Net Purpose with a Highly Commended nod in the Moving Financial Markets category, for its efforts to boost the profile of impact measurement. This year, the platform won outright in the SME branch of that category, demonstrating significant progress.
“We feel very honoured and it’s encouraging for us,” Siu says. “It means that impact and sustainable investing through moving capital, at scale, in public markets continues to gain traction as a strategy – and that demand for transparent, accurate data on science-based outcomes is growing. There’s a recognition in the market that if you use a rating that you yourself don’t understand, what does that even mean? How can you use that to underpin such a crucial part of your investment process? So, we’re very proud – and optimistic about where the market is moving.”