Net impact

This page describes Upright's net impact metrics.

This page describes what net impact data Upright provides. Upright's methodology on producing net impact data is detailed here. The rationale for why Upright has chosen to measure net impact is detailed here.

Introduction

Net impact

The net impact of a company is the net sum of costs and benefits that the company creates. Costs (i.e. negative impacts) and benefits (i.e. positive impacts) include all types of costs and benefits - including externalities. Since net impact is a measure of costs and benefits, it can also be referred to as the net value creation of a company.

Upright measures net impact in four dimensions: environment, health, society, and knowledge. Examples of costs include e.g. GHG emissions by a car factory, usage of highly-skilled labor by an IT company, and damage to human health caused by sugar-sweetened beverages. Examples of benefits include e.g. improvements in health caused by a cancer medicine, knowledge created by research equipment, and pollution removed by a catalytic converter.

Upright's net impact framework

To capture net impact, Upright measures both positive and negative impact in 4 dimensions (society, knowledge, health, and environment), and a total of 19 subcategories. Read more about each category in The Upright Framework.

Upright uses net impact profiles to visualize net impact. The image below shows the net impact of Apple Inc. The net impact profile measures both positive and negative impact, ie. net. Positive impacts are shown as green bars on the right, while negative impacts are visualized as bars to the left.

Figure 1: Net impact profile of Apple Inc.

Units

Net impact ratio (NIR)

Upright's primary metric for net impact is Net Impact Ratio (NIR), defined as:

$$\textsf{net impact ratio} = \frac{\textsf{total positive impacts}-\textsf{total negative impacts}}{\textsf{total positive impacts}}$$

The theoretical maximum value for net impact ratio is 100 %, representing a company with no negative impacts. There is no bound for the lowest possible net impact ratio. For most companies, net impact ranges between -200% and +70%.

Net impact ratio is inspired by the net profit ratio, which is defined as:

$$\textsf{net profit ratio} = \frac{\textsf{revenue}-\textsf{costs}}{\textsf{revenue}}$$

In the previously shown profile (Figure 1), Apple's net impact ratio is +29%, implying its negative impacts are 29% smaller than its positive ones. Apple is a net positive company whose positive impact exceeds the resources it uses and negative impact it creates.

Net impact sum (NIS)

Upright's secondary metric for net impact of companies is Net Impact Sum (NIS), defined as:

$$\textsf{net impact sum} = \textsf{total positive impacts}-\textsf{total negative impacts}$$

Net impact sum is calculated by subtracting the total sum of negative impact, or costs, the company creates, from the sum of positive impacts. Net impact sum can be calculated both for unit impact cents per dollar of revenue and impact dollars per year.

Impact cents

Impacts values for each impact category are expressed as impact cents per dollar of revenue. Impact cents represent the impact a company or portfolio has in a particular category relative to the size of the company. Therefore, impact cents can be understood to be similar to carbon intensities (rather than carbon footprints).

Impact cents are designed to be comparable between impact categories as well as between companies or portfolios, regardless of their size. Comparing impact cents helps answer questions like

• "What impact is the biggest contributor to the net impact of a company?"

• "Are the societal benefits created by a construction company larger than its environmental footprint?"

• "Which of these two pharmaceutical companies contributes more to physical health, relative to their respective sizes?"

Mathematical definition

In exact terms, impact cents per dollar $S_{r,c,i}$ of company $c$​ and impact $i$​ are defined as $S_{r,c,i}=\lambda_i\frac{q_{c,i}}{r_c / R},$ where

• $\lambda_{i}$​ is the economic cost of impact $i$​: this is used to make impact categories comparable between each other. Economic costs are explained in detail in Monetization of impact.

• $q_{c,i}$​ is the share of impact $i$​ that company $c$​ creates, relative to the total impact created by all companies.

• $r_c$​ is the annual revenue that company $c$​ generates.

• $R$​ is the total annual revenue generated by the private sector.

It's worth noting that the ratio $\frac{q_{c,i}}{r_c / R}$​ corresponds to the relative intensity at which company $c$​ creates impact $i$​. An impact intensity of 1.0 corresponds to the average intensity of all companies in the global economy, where anything below 1.0 is below this global average, and correspondingly values above 1.0 are above it.

Ecnomic costs $\lambda_i$​ can be understood as the weights assigned to impact intensities of each impact category $i$​.

Impact dollars per year

In addition to impact cents per dollar of revenue, category-level impacts of companies are also provided in annual dollar values. The annual values are defined as the product of the impact cent value and the annual revenue of the company.

Provided metrics

Company-level metrics

Upright provides the following net impact -related metrics for each company within Upright's coverage:

• Net impact ratio of the company

• Impact cents for each dimension and impact category, separately for positive and negative impacts (where applicable)

• List of products and their relative contribution to the company's impact within each impact category, separately for positive and negative impacts (where applicable)

Portfolio-level metrics

Upright provides the following net impact -related metrics for portfolios (e.g. funds, indices, private wealth management portfolios, sales portfolios):

• Aggregated net impact ratio of the portfolio

• Aggregate impact cents for each dimension and impact category, separately for positive and negative impacts (where applicable)

• List of constituents and their relative contribution to the portfolio's aggregate impact within each impact category, separately for positive and negative impacts (where applicable)

The same metrics are provided for both user-created portfolios and portfolios that Upright provides for benchmarking purposes.

Aggregation of portfolio-level net impact of unrecognized assets

The weight of unrecognized assets is not included in the denominator in portfolio-level net impact aggregation. In other words, unrecognized assets will be assumed to have the weighted average impact of recognized assets in the portfolio. Unrecognized assets may include assets like currencies, government bonds or unrecognized company bonds.

Net impact in the Upright API

In addition to the Upright Platform UI, all metrics listed above are available from the basic and extended net impact endpoints in the Upright API.