Specifically, KRMA draws on dozens of sources to identify companies that have demonstrated a long term focus on creating positive outcomes for five stakeholder groups, including employees, customers, communities, suppliers, and stock and debt holders,
The underlying portfolio undergoes a three-step screening process that analyzes companies’ adherence to academically-backed Multi-stakeholder Operating System to identify those that operate in a sustainable and responsible manner.
Firstly, the index uses forty information sources and public rankings to identify and evaluate companies based on ability to achieve positive outcomes across all five stakeholder groups, such as employee productivity, customer loyalty and corporate governance.
In the second step, the index uses composite analysis to apply deeper evaluation based on employee engagement, executive integrity, customer relationship quality, labor and human rights, and quality of financial reporting.
Lastly, a screen for consistent achievement is applied – a company must be qualified for inclusion in the Multi-stakeholder Operating System investable universe for at least three consecutive years. The index is then equally weighted.
“It utilizes traditional analysts’ framework around you know balance sheet items like earnings statements, right, but it goes beyond that to include intangible items like customer satisfaction, employee engagement, relationship with the community,” Diessner said. “These are all positive attributes that we believe is a more holistic approach to financial analysis and offers the potential for better return.”