Comment on page
This page describes Upright's net impact metrics.
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.
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. Positive impacts are shown as green bars on the right, while negative impacts are visualized as bars to the left.
The net impact profile measures both positive and negative impact, ie. net. Positive impacts of the companies are visualized as bars to the right. Negative impacts are visualized as bars to the left.
Figure 1: Net impact profile of Apple Inc.
Upright's primary metric for net impact is Net Impact Ratio (NIR), defined as:
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:
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.
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?"
In exact terms, impact cents per dollar
are defined as
- is the share of impact that company creates, relative to the total impact created by all companies.
- is the annual revenue that company generates.
- is the total annual revenue generated by the private sector.
It's worth noting that the ratio
corresponds to the relative intensity at which company
. 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.
can be understood as the weights assigned to impact intensities of each impact category
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.
- 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)
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.