Finance and Investment

The Upright Project and the Quest for Net Impact

In the period of environmental, social, and governance (ESG) integration and sustainable investing, how good are we at measuring affect?

Not very, says Annu Nieminen, founder and CEO of the Upright Project. Take carbon footprint metrics, for instance: Knowing that one firm has twice as giant a carbon footprint as one other is mainly meaningless with out context. And but, the place are the instruments that incorporate that context, amongst different elements, and assist us calculate an correct and holistic affect evaluation?

At the first Nordic Investment Conference in Copenhagen, Nieminen guided attendees via the present challenges of calculating web affect, highlighting 4 specifically:

Current methods focus nearly solely on limiting downsides. For instance, damaging screening, or excluding blacklisted firms and industries, with out contemplating their web affect first is a myopic strategy. “Only minimizing the negative or maximizing the positive is naïve,” Nieminen mentioned.We deal with affect as if it isn’t affected by scale. Too a lot details about secondary elements can overshadow actually significant information. For instance, a big firm with a horrible environmental report can create a complete advertising and marketing marketing campaign round their recycling efforts. This greenwashing diverts our consideration and leads us to view the agency as impact-positive as we ignore extra consequential elements. Thus we skirt round even an approximation of the corporate’s precise web affect.We focus nearly fully on inside and upstream affect. Rarely is all the worth chain thought of. Why? In half, as a result of monitoring and measuring these inputs is difficult and time consuming, and so . . .Data is often hidden in lengthy, esoteric sustainability studies. Lack of information consistency amid prolonged PDF paperwork, which look extra like in depth advertising and marketing brochures than information assets, add to the thriller round calculating an correct measure.

The fact is that there is no such thing as a such factor as optimistic affect solely, in keeping with Nieminen. Instead, by together with the damaging information within the equation, we will, in her phrases, “bring out the impact shape of an investment/fund/portfolio.”

Leena-Leena

The Upright Project has developed a quantification mannequin that calculates a web affect profile of services and products. This mannequin is at present accessible to institutional buyers and B2B providers firms. Leena-Leena, the Upright Project’s web affect synthetic intelligence (AI) is accessible to the general public as effectively. Users can seek for information on tens of hundreds of merchandise and firms. Leena-Leena additionally learns from customers, requesting suggestions based mostly on their experience, analyzing their enter, and incorporating new information into the mannequin.

AI Pioneers in Investment Management

How does this quantification mannequin work? First, a taxonomy of an organization’s choices is created, then a blueprint of the corporate’s principal impacts is developed. The two are then overlaid on a database of 130-million scientific articles, and utilizing pure language processing (NLP) and deep neural networks, the AI produces a web affect profile.

For Nieminen, a techniques engineer and self-proclaimed nerd, and her group of equally nerdy idealists, that they will create this self-improving mannequin and produce significant outcomes may have been sufficient. But the venture’s true affect — pun supposed — lies within the very 21st-century realization that income and affect needn’t be mutually unique and even unconnected penalties of distinct actions.

By utilizing the Upright Project mannequin, buyers cannot solely measure the complete affect of their property, but additionally decide what they will put money into to satisfy particular sustainability objectives and shopper wants. And they will guarantee their investments are in sync with their monetary and affect standards on the identical time.

In the Nordics, the place ESG is king, an AI- and NLP-powered quant mannequin has been born. The query is: Does the Upright Project mannequin mark the start of an period the place web optimistic affect and funding returns are in full alignment?

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All posts are the opinion of the creator. As such, they shouldn’t be construed as funding recommendation, nor do the opinions expressed essentially replicate the views of CFA Institute or the creator’s employer.

Image courtesy of CFA Society Denmark

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Anastasia Diakaki

Anastasia Diakaki is director of constant skilled improvement content material for the EMEA area at CFA Institute.


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