Overview of impact formulas on Ethos

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

Here's how impact formulas work:

1. We rate companies and securities on 45 different impact "formulas" every 3 months

We start by defining a problem statement and impact goal for 45 impact areas, 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).

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

Each impact formula includes a set of metrics (usually 25-40) that define how we rate companies and funds for that formula (e.g., percent of women on the board of directors, quality of 401k and benefits offered). We then use these metrics to rate companies once every 3 months. You can read more about our ratings methodology in detail here.

2. When you sign up for an account on Ethos, we help you create a custom impact formula

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 things you care about. We'll first help you select from the 45 impact areas, 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). 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 ratings for ~3,300 companies and securities on Ethos (ones that we've determined have enough data available to credibly rate) for every quarter over the last 2 years. This means that when you sign up we create ~26,000 custom ratings of companies and securities, which you can use to find companies and investments that align with what you care about.

3. We use your impact formula to rate your linked bank accounts 

When you link bank accounts, we use your custom impact formula to create impact ratings for your portfolio. 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)

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