Spilling the tea on how we calculate Goodness scores
This week, we’re going to spill the tea on how we calculate Goodness scores. Our modus operandi is to sleuth the Environmental, Social and Governance (ESG) claims made by over 7000 global companies and ETFs (Exchange Traded Funds), 2300 of which are available to trade on Goodments.
In a world awash with green packaging, Environmental, Social and Governance data is a fundamental element of how we measure an investment’s true responsible and ethical behaviour throughout their entire supply chain. At Goodments, our spin on ESG takes Planet, People and Ethics into account; what’s going on behind the scenes when companies claim they’re on top of ESG?
This week we’re breaking down what Planet, People and Ethics really mean, why it’s important to your investment decisions, and who’s doing them really well.
With no Planet B waiting for us, there’s never been a better time to support companies that prioritise the environment and manage natural resources responsibly. Whether they’re in the business of creating renewable energy solutions or converting to using 100% renewable energy,
reducing their carbon footprint and waste, or developing natural bacteria as a pesticide, there are lots of inspirational environmental projects you can get behind.
Beyond using your investments to help create a more secure climate future, investments in companies that are strong on Planet issues could help your investment in a number of ways. Generating renewable energy and recycling can reduce a company’s costs, and therefore increase their profits. Companies which have strong environmental stewardship are exposed to less risk that damage their brand and share price – a solar company is less likely to create a habitat-killing oil spill, or take part in an emission scandal after all. They are often the future, simply look at the rise in electric vehicles, which are due to overtake the number of new non-electric cars in the next 10 years. If you’re investing for the long term, picking the future trends can be key.
If social justice is what speaks loudest to you, there are many companies focusing on human rights, diversity and gender equality. As public companies are the largest employers on our planet, and work is where we spend most of our adult lives, the ability for a company to ensure that large portions of our society are treated fairly should not be underestimated. Employers are the pointy end of a number of these issues, such as pay parity and equal treatment. There is an increasing amount of evidence to show that companies that are more diverse create more profit and have more satisfied customers. Not a bad thing when looking for somewhere to invest your hard-earned cash.
Corporate ethics and governance is about ensuring companies (and their supply chains) are transparent and honest in their reporting and accounting but also importantly in understanding how well their business is managed and what risks they will take. Possibly the most important factor when it comes to investing is how well a company is managed. Fraud, systemic unethical behaviour, poor reporting, scandals can all seriously impact the performance of your investment. In some industries, such as telcos and financial services, a focus on corporate governance can even reward investors with outperformance and avoid serious underperformance – think Enron and our Royal Commission into the banking sector. Good governance leaders also tend to demand high standards from their business partners, including both suppliers and customers, and can, therefore, act as multipliers of best practice throughout the entire supply chain.
How we score investments on Goodments
Working from our framework of Planet (Environmental), People (Social) and Ethics (Governance) issues, we provide an overall ‘Goodness score’ out of 100 and a score for each of these three key areas. Each investment is analysed and scored based on the company’s actions, policies, awareness and management of environmental, social and ethical risks, across its entire supply chain, partnerships and product lines.
As part of this analysis, we identify companies involved in a range of products, services and business activities, such as mining, gambling or alcohol which you can screen out as you wish. We also identify companies involved in incidents that may negatively impact the environment, society, employees and stakeholders.
Responsible funds (ETFs) are measured based on the scores of the underlying companies that the funds invest in. To be available on Goodments, responsible funds must have a specific sustainable mission, or a sustainable methodology as to how they construct their portfolios (eg. screening), or by thematic investment approach working towards providing environmental, social or ethical benefits.
To develop our scores, we source our data from a range of independent rating agencies, brands and parent company annual reports and websites, credible third-party reports (eg. Clean 200) and industry standards bodies (e.g. PRI – Principles of Responsible Investing, CDP – Carbon Disclosure Project).
Head to the app to find out more about our top performers:
Planet Herman Miller, (Planet score of 90) 100% green power and reducing their carbon intensity.
People ST Microelectronics (People score of 86) Drives towards UN Sustainable Development Goals on diversity and equal opportunities.
Ethics ASML Holdings NV (Ethics score of 85) Links executive pay to sustainability performance.
See scores and more details on how we score on each investment in the app.
This week’s TOP 5 trending stocks on Goodments:
STMicroelectronics NV, Goodness Score: 86 Week Return: +10.00%
Tesla Goodness Score: 58 Week Return: +1.00%
First Solar, Inc., Goodness Score: 74 Week Return: -1.00%
ASML, Goodness Score: 85 Week Return: +12.00%
Intel, Goodness Score: 86 Week Return: +4.00%
Trending best buy:
Visteon develops cockpit electronics products for vehicle manufacturers such as Ford and BMW and has a Goodness score of 70.
Coming updates. Watch this space.
We’ve made some improvements and we have some new updates to the app coming out very soon. The updates focus on making it easier for you to navigate the app and see all the vital information in your portfolio, including your impact as well as your financial performance.
In the news
You may have seen Goodments in the press recently. Here are some of the articles we’ve been featured in.
The Australian: Young investors follow ‘moral compass’ link
Yahoo Finance: Free brokerage? Stake App or Goodments App could make you $100k richer link
Barefoot Investor, Ethical Investor Guide: link (for those registered with BluePrint)