Evaluating Corporations

All businesses carry a mix of costs and benefits for society and the planet. We are not looking for “perfect” companies. Instead, we seek to identify companies that responsibly address the key sustainability challenges and opportunities presented by their business models. 

We evaluate companies in two dimensions: Business Alignment and Stakeholder Relations.

Business Alignment: the degree to which a company's business is aligned with our goals of universal human dignity and ecological sustainability

We seek to invest in business models that create solutions for social and environmental challenges and provide access to the underserved. Certain business models are directly, or fundamentally, aligned, with our goals. For example, companies that derive large percentages of revenue from the sale of organic food, lead in lending to small and medium enterprises (SME), generate renewable energy, or manufacture preventative healthcare products such as vaccines.

On the other hand, we view business models that externalize costs to society and the environment, or produce harmful or addictive products, as inherently negative. Certain businesses are fundamentally misaligned with our goals of universal human dignity and ecological sustainability. These exclusionary screens are applied across all our funds.

Learn more about our exclusionary screens

Stakeholder Relations: the strength of a company's relations with key stakeholders

We believe companies will succeed and prosper in the long run based on the strength of their relations with their key stakeholders: Investors; Employees; Suppliers; Customers; Ecosystems; and Local, National, and Global Communities. Our assessments of these relationships are a vital part of our investment process.

But how do we decide where to draw the line? 

We have developed a matrix to help us determine each industry’s degree of alignment with our sustainability objectives.  You can see the spectrum of industry alignment in the diagram below.

For example, a solar cell manufacturer would be considered fundamentally aligned with our standards (furthest right column in the diagram above) due to the ecological benefits provided by its core business model. Without severe stakeholder relations challenges, it would probably be considered eligible for investment in our portfolios.

For a company in a more problematic industry, we set the bar higher. Partially misaligned industries include those that are major contributors to global warming, such as automobile and truck manufacturers, or electric utilities. Companies in these industries must demonstrate a relatively stronger stakeholder relations record in certain key areas relevant to their industry that we have identified. In the table above, this record must be at least “mixed or neutral” to qualify for inclusion in our funds. 

Most companies fall somewhere in the middle. For example, a bank that provides important benefits to society may also have a poor track record of lending practices in underserved communities. Our Impact Review committee, which is responsible for determining which companies are eligible for our funds, will evaluate whether this is a pattern of behavior or a single occurrence. How severe is the impact? How does the bank’s performance on lending compare to its peers? Does this problem warrant exclusion from our Funds, or should we keep an eye on the issue and contact the company?

To guide our decision-making, we developed “Key Performance Indicators” (KPIs) for each of our subindustry categories. The KPIs help us focus our analysis on the most important sustainability challenges and opportunities each company faces, within the context of its business model and its industry. We will examine other issues as they arise, but our KPIs will generally take precedence in our decision-making.

Effective KPIs, whether quantitative or qualitative, should be ascertainable, measurable, and meaningful, such as the age of an airline fleet, automobile safety records, working conditions in corporate supply chains, or the energy breakdown of installed capacity for electricity generators.

We review companies on a regular basis to allow us to evaluate long-term patterns of behavior, new business lines and emerging issues.

An investment in the Domini Funds is not a bank deposit and is not insured. You may lose money. An investment in the Funds is subject to market, sector concentration, style, and foreign investing risks. Investing internationally involves special risks, such as currency fluctuations, social and economic instability, differing security regulations and accounting standards, limited public information, possible changes in taxation, and periods of illiquidity. Investment return, principal value and yield will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. You may lose money.

This information is provided for informational purposes only, and should not be considered investment advice. The composition of the Funds’ portfolios is subject to change. View the most current list of the Domini Impact Equity Fund, Domini Impact International Equity Fund and Domini Impact Bond Fund's holdings.

The Domini Impact Bond Fund is not insured and is subject to market risks, including interest rate and credit risks. You may lose money. During periods of rising interest rates, bond funds can lose value. The Domini Impact Bond Fund currently holds a large percentage of its portfolio in mortgage-backed securities. During periods of falling interest rates, mortgage-backed securities may prepay the principal due, which may lower the Fund’s return by causing it to reinvest at lower interest rates. Some of the Domini Impact Bond Fund's community development investments may be unrated and carry greater credit risks than its other investments.

The social, environmental and governance standards applied to the Domini Funds are subject to change without notice, as is Domini’s analysis of any of the industries named above.

Check the background of DSIL Investment Services LLC and its investment professionals on FINRA's BrokerCheck. Before investing, consider the Domini Funds’ investment objectives, risks, charges, and expenses. View or order a prospectus. Read it carefully.

DSIL Investment Services LLC (DSILD) distributor, Member FINRA.

Domini Impact Investments LLC (Domini) is the Funds’ investment manager. The Funds are subadvised by unaffiliated entities.

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