Overview of Impact Formulas on Ethos

Impact Formulas let you pick the causes you care about and see how well your portfolio supports those causes. You can explore causes on Ethos here.

Here's how Impact Formulas work:

1. We continuously rate companies and securities on 45 different causes

We start by defining a problem statement and impact goal for 45 causes, such as Gender Equality, Climate Action, and No Poverty. Impact goals are intended to be broad enough to cover ambitious goals (such as shifting to a sustainable, clean energy economy), while allowing us to include many specific metrics of company performance (such as tons of green house gas emissions). Causes on Ethos are based loosely on the United Nations Sustainable Development Goals.

We aim to include a wide range of issues covering what many people might care about, though we are always refining causes. If there are additional causes you would like to see on Ethos, please let us know.

Each cause includes a set of metrics (usually 25-40) that define how we rate companies and funds for that cause (e.g., percent of women on the board of directors, quality of 401k and benefits offered). We then use these metrics to rate companies with the most recent available data. You can read more about our ratings methodology in detail here.

2. When you sign up for an account on Ethos, we help you pick the causes you care about

One of the first things you'll do when you sign up with Ethos is build your own Impact Formula, so you can track your impact on the causes you care about. We'll first help you select your causes, then we'll use your picks to create a custom formula that rates companies, funds, and your portfolio (including your accounts, holdings and held companies) based on those causes. We use this formula to track your impact over time, though you can change it whenever you want. 

When we create your custom Impact Formula, we create custom ratings for all companies and funds on Ethos that have sufficient data available. Public companies tend to have more publicly-available data and hence more ratings on Ethos.

3. We use your Impact Formula to rate your portfolio and accounts 

When you add an account on Ethos (by linking an online account or manually adding an account), we use your custom Impact Formula to create impact ratings for your portfolio, accounts, and holdings. We do this by:

  • Determining the value of all your holdings in specific companies (through stocks and fund compositions); e.g., you may hold $10,000 in a fund that has Company A as 5% of its portfolio, meaning you hold $500 of Company A through that fund
  • Getting the impact ratings for all of your held companies, from step 2 above
  • Creating weighted average ratings for your holdings, accounts, and overall portfolio; i.e., multiplying ratings of your held companies by their weight within a holding, account or portfolio. For example, if Company A is rated 60 and Company B is rated 80, and you have an account with $500 stock in Company A and $500 stock in Company B, the account's rating would be 70 (most accounts have hundreds or thousands of held companies through large funds, but this is the idea)

Was this article helpful?

1 of 1 found this article helpful
Have more questions? Contact us