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Report

Teaser, summary, work performed and final results

Periodic Reporting for period 1 - CLARITY (Bringing social impact to markets - Social Impact rating agency and AI powered SaaS tool for investors to optimize the social impact of their investment portfolios.)

Teaser

Summary

Clarity AI is a societal impact rating agency and tech company offering a software solution for investors to optimize the societal and environmental impact of their investment portfolios
Our solution offers our clients an easy to access one-stopshop to rebalance their investment portfolios integrating social impact without compromising risk or return.
Our technology is based on disruptive use of big data and machine learning algorithms and a proprietary and innovative social impact methodology, developed by excellent researchers. Clarity aggregates multiple data sources and selects the most reliable ones. Clarity offers the largest coverage of social and environmental impact data about publicly traded securities in the market, with the highest level of reliability and accuracy.

Clarity solution is born to provide numerous and accurate data to a growing market (Sustainable investment) that, according to the Global Sustainable Investment Alliance, in 2018 represented more than $30Tn in assets under management (that is, almost 39% of the total AuM).

Thus, the objectives for this project:

- Developing and improving social impact metrics
- Piloting of new scores that help have a comprehensive view of the social impact
- Scale-up & Commercialization the solution.
- Development and testing of new functionalities in the Clarity tool.
- Expanding â€œSociety Scoreâ€ globally, a brand new approach to complement the traditional metrics of Social Impact that helps understand the impact of the products and services of the companies.

Work performed

During this period of time, clarity was focused on the following works:

WP1: Development and improvement of metrics and methodology

- Improvement of the coverage of metrics dedicated to ESG. This work has started with a detailed research of all the metrics used in the market by any provider or company reporting system. From that research 472 metrics have been identified, considering quantitative and qualitative different dimensions for which there is any kind of information. Among all of them, the final set included in the platform goes to 261 after excluding those ones that overlap, are not relevant enough or have almost no data available.
- In that process, the team needed to deep dive into every single definition for each metric, in order to identify potential overlaps among metrics, or even gaps in the information coverage. This process is an ongoing process that needs to be executed every time that a new metric arises.
- For the ones that have been considered to build a comprehensive view of the ESG image of the companies, the team has done an analysis of all the potential sources with available data. That analysis has been useful to identify the quality of the data, the type of data (if reported by the companies, estimated by the company or either estimated by a third party due to the lack of reporting from the company), and the coverage in terms of numbers of companies with information available for each metric.
- Those analyses have helped to prioritize the metrics that were more relevant to create new estimation models. For those ones, Clarity has worked in proprietary methodologies that mean very relevant improvements in coverage of companies.
- Regarding the Society Score, a new dimension to include the impact of products and services, this period has been useful to progress in the conceptualization of the score using the data coming from Mexico, as well as including other sources of data for other complementary geographies like Spain.

WP2 Piloting of proprietary methodology and new scores

The current workstream on the new score has focused on the creation of the necessary algorithms to estimate the Society Score for a specific industry, and developing a tool that calculates and visualizes the needs of the population around the world, as well as the society score for several countries.

WP3 Scale-up & Commercialization

- Since the start of the project, Clarity has been progressing on the product development and release of iterative versions, working with an agile methodology. More than 9 product versions have been released since September 2018, aiming at improving the product-market fit and increasing the value to customers.
- Rebeca Minguela, CEO and founder of Clarity, has been leading personally the commercialization process being in contact with the main customers. Within this period, Clarity has been in contact with most of the top 50 asset managers in the world, leading to several trial agreements to evaluate the tool. However, due to the ongoing releases of new features of the tool, Clarity has decided to focus on the development of the tool for the first months of the project, and start formally the commercialization in Q3 2019, with a stable and fully operational version of the platform.
- Clarity team has been involved in different events as an organizer and as a participant with the main purpose of disseminate the idea and the product. Additionally, Clarity team has published articles about the business, and the sector.

Final results

Clarity has been progressing in the direction of solving the limitations of the current state of the art:

- Data: increasing the coverage of data to provide a comprehensive view of the company (aggregates more than 30 different data sources (structured and unstructured) with algorithms to identify the most reliable source, and creates proprietary data that to estimation models that increases the number of companies with available information). Clarity now provides data for more than 25,000 companies and 198 countries.
- Methodology: working in 4 main lines to build a comprehensive methodology of social impact:
* ESG Risk: financial risk of a company linked to ESG sustainability metrics.
* ESG Impact: sustainability of companies based on their behavior along ESG factors.
* Society Score: impact of the products and the services of the companies.
* Thematic approaches: specific topic for certain areas of impact, like climate change or the Sustainable Development Goals.
- Tools: Clarity platform is an end to end solution that lets users:
* Portfolio analysis: offering users a comprehensive view of their portfolios, including analysis of single equities, funds and sovereign bonds.
* Portfolio rebalancing: identifying comparable companies with similar financial returns but improvements in social impact dimensions.
* Exposure analysis: understand the exposure of the portfolio to certain activities or business lines that could be controversial to the company.
* Reporting: creating custom reports to inform clients, providers or other stakeholders about the impact of the portfolios.
* Screening: identifying new companies to invest, considering one or many ESG factors.