Research firms in the socially responsible investing (SRI) sector provide indexes analyzing the environmental, social, and corporate governance attributes of a company, as a measure of the environmental and ethical impact of a company.  These indexes are factored into investments- with investor intentions ranging from the desire to do something good, to the desire to make a profit.

A lot of research goes into calculating the value of various indexes- including untangling company supply chains, and the complex web of company impact (with various degrees of separation).  The irony is that in order to create value and generate a profit, SRI research firms have had to blackbox their analytics.

Last week, Stoxx and Sustainalytics partnered up to provide ESG indicators and also the data and algorithms behind calculating them.  This is a milestone in the SRI sector.  Something as complex as determining a company’s social impact can vary from person to person- depending on how they define what is ‘socially good’ for a company.  Opening up the data is a huge step in SRI innovation, and cultivation of transparency which SRI research seeks.

It takes a lot of research to collect the data necessary to produce various SRI indicators.  Including the public in the analysis will allow for others to double check the algorithms, understand the assumptions made in the analysis, build their own tools, and feed back into the development of socially responsible investing.