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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.

Periodic Reporting for period 2 - 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.)

Reporting period: 2019-06-01 to 2020-02-29

In summary, for the final period we have been able to:

Build a fully functional platform that let users manage portfolios with equities, fixed income of companies and governments, and funds to understand the social impact of those portfolios.
Keep growing the coverage and number of social metrics included in the platform.
Developing new methodologies that contribute to the measurement of impacts of companies, with the Society Score approach to measure the impact of products and services,as a well as with other methodologies like the ESG Impact framework.
Crate an amazing team of researchers, data scientists, developers, data engineers and product managers working together for the common purpose of bringing the best quality information about social impact to change capital markets.
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.

Summarizing, thanks to the time and effort dedicated to this project:
WP1: Clarity AI has now a bigger coverage in terms of metrics and data points, integrating multiple sources of data and developing its own estimation models
WP2: Clarity aI has developed two frameworks to measure social impact, with a disruptive approach that considers the impact of products and services, as well as the impact of the activities and operations of the companies within the ESG framework.
WP3: Ensuring the escalation of the commercialization by the signature of the current customers in trials, and integrating Clarity scores in other platforms that contribute to expand Clarity branding among professional asset managers and retails users.
Clarity has been progressing in the direction of solving the limitations of the current state of the art:

Data: Clarity AI has reached the goal proposed in the starting of the project by. Work with more reliable data and with greater coverage
Data Aggregation. Aggregate more than 50 different data sources (structured and unstructured), plus proprietary data
Data triangulation. Triangulate data sources and proprietary estimation models, to increase reliability
Estimation models. Using machine learning to expand coverage and increase reliability
Rating: Societal impact and gold standard
New comprehensive approach, Clarity AI proprietary societal impact methodology measures how companies behave by measuring the impact of thor products and their services in the society
Objective methodology: Based on science and research, implemented by tech algorithms
Scientifically robust, Years of research and analysis by experts in the field that have studied in top universities around the world like Harvard, MIT or Technical University of Madrid.
Tool, Systematic SaaS Tool
One-stop-shop with advanced functionality
Fully fledged SaaS tool in the cloud
Access to specific modules through API
Simple reporting creation
Portfolio analysis & optimization, Integration with both financial and social data providers
Standard scores, but also customization, Specific functionality to allow users to customize according to their own values

Methodology, working in 3 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.

Market, there is a huge shift in the market towards sustainability:
+30Tn AuMs under sustainability criteria, with a 34% growth over the last 2 years
Increasing regulatory pressure globally (stress testing and scenario analysis, climate reporting, etc.)
Increased social conscience with an increasing demand for sustainability criteria in all dimensions, including investing