Evaluating Corporations

Each industry carries its own costs and benefits to society. We are not looking for “perfect” companies. Instead, we seek to identify companies that responsibly address the key sustainability challenges and rewards presented by their business model.

Our research is guided by three key questions:

  • What is the core business the company is involved in, and how closely is that business aligned with our goals of universal human dignity and environmental sustainability?
  • How does the company treat its partners in business, including employees, customers, communities, and the environment?
  • What issues matter most to this company?

All of our social, environmental and governance research is conducted in-house.

How do we decide?

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.

Our analysis focuses on the most important sustainability challenges each company faces, within the context of its business model.

For example, a solar cell manufacturer would be considered fundamentally aligned with our standards (last 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, 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 have a poor track record of lending to the poor. 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 instance. 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?

Companies are reviewed on a regular basis to allow us to evaluate long-term patterns of behavior, new business lines and emerging issues. Current holdings are reviewed on a continuous basis.

Industry Exclusions

Some industries present such severe risks to society that we consider them to be fundamentally misaligned with our goals, and ineligible for investment (first column in the diagram above). We do not believe the risks they present to society can be managed.

These industries include:

  • Tobacco and Alcohol manufacturers
  • Gambling products and services
  • Nuclear Power
  • Coal mining
  • Fossil Fuel Owners and Producers
  • Military Weapons and Firearms manufacturers

Our thresholds for exclusion are generally determined by such factors as percentage of revenues, magnitude of involvement (market leadership), or ownership.

Companies with less significant involvement in these areas may also be considered ineligible for investment, but are evaluated case by case. In these cases, we may consider such factors as the absolute size of the involvement, the trend of the company’s involvement, and the prominence of the company’s role in the subindustry, along with the company’s overall social and environmental record in making our decision.

Wellington Management Company LLP

Once we have determined which companies are eligible and which are ineligible, we provide these lists to Wellington Management, the submanager of our funds. Wellington Management then utilizes their financial expertise to build a portfolio of companies selected from the eligible list. Wellington Management is not permitted to invest in any company that has not been approved by Domini.

 

Learn About We Evaluate Fixed-Income Investments

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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. The Domini Impact Bond Fund is subject to credit, interest rate, liquidity, and market risks.

This information is provided for educational 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 FundDomini Impact International Equity Fund and Domini Impact Bond Fund's holdings.

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.

The Domini Funds are distributed by DSIL Investment Services LLC (DSILD), Member FINRA. Domini Impact Investments LLC (Domini) is the Funds’ investment manager. The Funds are subadvised by Wellington Management Company LLP. DSILD and Domini are not affiliated with Wellington Management Company LLP.

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