Our impact investment process evolution

What’s stayed the same?

Avoiding harmful exposures

At Tribe, we’ve always aimed to invest in assets that create impact, i.e. generate positive environmental and social outcomes. Part of this process is to avoid assets that participate in activities which undermine or conflict with the impact we’re seeking to create. Over the years, our position on detecting and avoiding this harmful exposure hasn’t changed.

The way we detect and determine our portfolios’ harmful exposureExposureThe amount an investment is linked to a particular ethical concern. There are two types of exposure: direct and indirect. read more levels has been strengthened and improved recently thanks to better quality sustainability data. More companies are providing data with much more granularity. This helps us identify unwanted exposures quickly and systematically. And in turn, it allows us to avoid unwanted, harmful exposures, understand the minimal exposure we do have, and communicate that with greater clarity to our clients.

Assessing exposure beyond face value

Data is important in supporting and guiding our decisions, but we believe that context and judgement is an essential additional layer to effective impact investing. This is particularly true in the context of harmful exposure.

• For example: A dataset may flag a controversy from many years ago that has since been resolved, leading a company to be classified as exposed to negative activities even when this no longer reflects the reality.

Similarly, data might suggest that a company contributes to the UN Sustainable Development Goals (SDGs)UN Sustainable Development Goals (UN SDGs)The Sustainable Development Goals (SDGs), also known as the Global Goals, were adopted by the United Nations in 2015 as a universal call to action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity. There are 17 goals. read more when the extent of that contribution is more nuanced.

• For example: a dataset might classify an airline as 100% SDG-alignedSDG-alignedAn investment, activity or revenue stream that contributes to the delivery of one or more of the desired outcomes of the UN Sustainable Development Goals (SDGs). read more because it invests in sustainable aviation innovation. Rather than accepting this classification at face value, we would assess what proportion of the airline’s overall business is dedicated to that activity and use this to inform a more balanced and accurate assessment of its SDG alignment.

Qualitatively reviewing the signals we find within data is essential. Employing a “common-sense check” ensures we aren’t adding to controversial sectors unknowingly, or penalising assets unnecessarily.

Moreover, contextualising data helps to understand and manage trade-offs. There is no such thing as a perfect company, and we cannot insulate our portfolios from every negative outcome. However, we believe that being rigorous in our research and transparent about the trade-offs leads to more useful conversations about what investing for impact can and can’t achieve.

• For example: Recycling companies can often score poorly from an environmental perspective due to higher emissions even though they are critical to delivering better environmental outcomes. Similarly, adhering only to the companies that have the highest percentage of recycled assets doesn’t guarantee a portfolio that supports circularityCircularityA concept that relates to the use of regenerative materials in product development, and a shift in consumer behaviour that encourages those products to be kept in use for as long as possible. read more, as mining and energy companies can often demonstrate high performance in these areas.

Read more about how we define, approach, and measure indirect and direct exposure: Ethical screens: what are they and how do we use them?

Stewardship as part of the process

Our work doesn’t stop when an investment enters a portfolio. We’ve always looked to further support the impact our investments make with stewardshipStewardshipHow investors use their rights and influence to protect and enhance the long-term value and impact of their investments. Stewardship can include engagement, voting, monitoring, escalation and collaboration. read more. We define stewardship as how we use our voting rights and investor influence to protect and enhance the value of our assets, support our sustainability objectives, and achieve our mission as a business.

Stewardship gives us another way to understand risks and opportunities, support positive outcomes, and monitor whether an investment remains aligned with our objectives. While data may identify a problem, talking to a company or fund manager can help us understand what sits behind it, what’s being done in response, and whether there’s a credible path towards improvement.

Over the past few years, we’ve formalised our stewardship approach by developing tailored engagementEngagementHow we influence as an investor. We have three levels of engagement – reactive engagement, proactive engagement and system-level engagement. Engagement activities can include meetings, email correspondence, calls and/or video conferences with an assets management team and/or investor relations. read more objectives that are specific to our investments, informed by our team’s analysis of the asset’s sustainability opportunities and risks. This process helps us focus our engagement and votingVoting rightsThe rights attached to an investment that allow an investor to vote on certain company decisions. These may include the election of directors, executive pay, auditors, changes to a company’s constitution and shareholder proposals. read more activities on areas where we can best support and deliver better real-world outcomes.

This combination of data, qualitative analysis, and stewardship is important because impact isn’t static. Companies change, industries develop, and our understanding of environmental and social challenges continues to improve.

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What’s changed?

From ‘right of veto’ to an integrated approach

Over the past two years, we’ve evolved our approach away from having both an impact and an investment team, towards having a single, integrated team that embodies our twin-lensTwin-lensTribe’s two separate assessments of an investment’s financial and impact credentials — the potential monetary returns it may deliver as well as its social and environmental outcomes. read more approach.

We work as one team, with every team member responsible for considering impact and investment together.

This integrated approach brings a wider range of perspectives into the discussion, encourages constructive challenge, and ultimately makes the decision-making process more aligned. It also creates shared ownership of each decision: responsibility for impact no longer sits with one part of the team, but shapes how everyone researches, debates, and monitors an investment.

The result is a more consistent, accountable and resilient process, with decisions strengthened by collective judgement rather than divided responsibilities.

From ‘themes’ to ‘objectives’

Along with the wider industry, we’ve become more explicit in terms of our portfolio objectivesPortfolio objectivesThe financial and sustainability outcomes that a portfolio seeks to achieve. These objectives guide portfolio construction, security selection and ongoing monitoring, and are determined by the portfolio’s investment characteristics, risk profile and sustainability theme. read more. Objectives define the investment outcomesInvestment outcomesThe financial results a portfolio seeks to achieve for clients, including its return and risk characteristics, in line with the portfolio’s investment objectives. read more and impact outcomesImpact outcomesThe measurable real-world social and environmental changes that our investments contribute towards, linked to the portfolio’s sustainability objectives. read more we’re trying to support through our portfolios.

Investment objectives might include generating a particular level of long-term return, while managing risk and diversificationDiversificationDifferent types of investments, across a range of markets, that don’t rely on the same things to do well at any one time. read more, while impact objectives could include supporting decarbonisationDecarbonisationThe removal or reduction of carbon dioxide (CO2) output into the atmosphere. read more, creating a fairer and more inclusive economy, or encouraging greater circularityCircularityA concept that relates to the use of regenerative materials in product development, and a shift in consumer behaviour that encourages those products to be kept in use for as long as possible. read more – keeping products and materials in use for longer and reducing waste.

This is a simple change to our language, but it subtly evolves the approach. Rather than only asking whether an investment operates in a broadly positive or sustainable area – i.e., whether it aligns with a theme – we can ask ourselves whether it contributes to the specific outcomes we’re seeking – i.e., whether it makes an impact.

These objectives therefore give us a practical anchor for decision-making that keeps outcomes as our north star. They focus our research, help us compare opportunities, and allow us to draw a clearer line when an investment doesn’t fit what a portfolio is designed to achieve.

Using better data, smarter

As the impact industry has grown, so has the quality and availability of data. We’ve invested in finding the best available data to strengthen our research process, undertaking a request for proposal (RFP) process to evaluate available providers. This allowed us to assess the quality, coverage and relevance of different data sources, and select the providers that best supported our decision-making.

When selecting our data providers, we prioritised traceable data that had undergone minimal transformation. This lets us check its accuracy and understand the source of each figure.

Where providers gave us metrics that represent raw data ‘transformed’ to provide more usable insights – for example, SDG-aligned revenue – we reviewed how they made those decisions to ensure their approach was robust and logical. Understanding their methodology enables us to choose the provider that best aligns with our impact standards and, if we identify inconsistencies or errors, allows us to engage with them effectively.

We use this data to narrow a large universe of potential investments, assessing companies based on what they do, how they operate and whether they avoid harm. This includes examining how their products and services align with the UN SDGs, their operational sustainability metrics, and any controversies or involvement in potentially harmful activities.

Complementing data with the “how”

Data alone doesn’t tell the whole story. We complement our quantitative analysis with structured qualitative assessments, using formal frameworks to examine the ambitions, strategies, and direction of travel of companies and investment funds. This helps us understand not just the scale of their impact, but its depth and how it is achieved.

While a quantitative assessment can tell us a great deal about what a company does – the products it sells, the commitments it made, and its performance against particular sustainability measures – it can’t always tell us how that impact is being created.

• For example: Consider two healthcare companies. One might reach significantly more patients than another and therefore appear to have greater impact when judged on scale alone. But the second could be providing life-saving treatments for difficult-to-treat diseases. Its reach may be smaller, but the effect for each patient could be much deeper.

Neither type of impact is inherently more important. And both could contribute towards our portfolio objectives. The point is that a single headline number cannot capture the distinction, and while we are always seeking to use the best data available, there will always be a need to complement it with qualitative contextual research.

An evolving process for an evolving market

Impact investing has moved from a relatively young part of the investment landscape towards a much larger and more formalised market. We’ve learnt and adapted alongside it.

The aim of evolving our impact investment process has not been to completely overhaul how we do things, but rather to enhance and strengthen our approach so it reflects what we have learnt over the last 10 years. Our aim has been to create greater discipline and consistency within our decision-making, while preserving room for judgement.

Clearer portfolio objectives help us define what we’re trying to achieve. Better data helps us identify opportunities and risks and monitor progress. Structured qualitative assessments help us understand the context behind those numbers.

These tools allow us to explain more clearly why an investment is held, the role we expect it to play, and how we’ll assess whether it continues to belong in a portfolio.

The process will keep evolving. The UN Sustainable Development Goals themselves run to 2030. New frameworks, evidence and datasets will emerge, while our understanding of sustainability challenges and solutions will continue to develop. The tools we use today will not necessarily be the tools we use in another decade.

For us, this will always be a process of learning and improving. It’s not something we can ever complete. Constant evolution is part of what investing for impact requires.

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