Physis with Stefania Di Bartolomeo | E227
Assessing and tracking the impact of ESG over time.
On today's episode of the Fintech Impact, Jason Pereira is going to talk to Stefania DiBartolomeo, the founder, and CEO of Physis Investments. This investment is an ESG and impact investing platform for reporting sustainability amongst companies. Stefania realized that the next big question for people that wanted to invest in sustainability, they wanted to invest to respect and protect the planet. But the question was going to be, can you prove the impact of this investment? And she decided to leave the company at work for a disaster management company in Europe and she came back to Harvard to start vice investment to really answer this next big next big question, help people measure the impact of their money on the planet.
Episode Highlights:
02:04: Stefania says what do people know about the impact their money is making on the planet when they start investing? Not much. This is where we came in. We help people understand the impacts of their investment. Since the day of the first investment. How many jobs have I created? How much water or plastic they have recycled by investing in the companies that have invested in them. How many women were hired or how many women made it to management positions or to accepted positions? Or what type of products the company they have invested in have created to make this world a better place?
02:41: Many more questions like this are answered by the device's platform. So we built a platform to flip the narrative or portfolios to create a detailed analysis of what you can do once you start investing, especially if you are a sustainable minded Investor, says Stefania.
04:16: After growing my fanbase from 16 million to 100 million in a couple of years, the question that most of Stefania’s clients were asking, you say you are building a sustainable or an impact portfolio, how can you prove to be the impact that you are helping me make with this investment? This was a simple question and regardless of all the studies and the methodologies and data I had, I could not provide a simple answer, says Stefania.
05:34: Physis is an indent in the Greek world and means everything that is alive on Earth. It comes from the same root of physics. Physics is the law of nature, physics from entering Greek is everything that's alive. So a Physis investment, it's reinforcing our mission. The concept of investing, where respecting everything it's alive.
06:25: It took us a couple years to develop the final solution, but this is how we do it. We start by collecting information that companies publish on their sustainability report on their corporate website. We also collect information from different data sources. Stefania has already started analyzing companies' controversial activities. Definitely companies do not provide that information, they own disclosure.
08:50: It's really important to Stefania that everyone else in the sustainable space is providing ESG scores saying that Nike has a score of 90 out of 100 and Adidas has a score of 70 out of 100. We deep dive into the meaning of that score and data behind that score.
09:43: Stefania always says there is so much to know about what really happens to your money once you start investing, and no one has ever told you that story How you are contributing to make all the companies out there are better, sustainable companies and you don't even know just by investing it, we can tell you all of this information.
10:44: If the index of the underlying portfolio starts to take a quality dirtier turn, I would see that point in time when it actually does change, says Jason.
10:53: You are able to see how this portfolio is doing compared to a benchmark. You can see how this is also improved over time or as improved based on specific investment decisions that you have made overtime, or the financial advisor has made.
11:21: We can also go as granular as really going deep down in saying if you have invested in Apple, the new iPhone has over 40% recycled. If you are investing in Nike I mentioned before, Nike owns Converse and every single pair of Converse is made with eleven plastic bottles, recycled from the ocean, says Stefania.
13:34: In the beginning because every single company reports information in a different way and not all companies report all the information. I can say a couple things. First, the level of disclosure has improved incredibly, over the last three years, says Stefania.
14:02: The second thing is that most companies are starting to report according to specific sustainable reporting frameworks like the GRI, a Global reporting initiative that's really helpful for us, but this is not enough.
15:17: Stefania always loves to tell the experience of our clients. So, the first thing when we Preach the company, they are excited to an extent because they have seen this grow to be an obvious G scoring company the moment they have access to the platform and they see how easy it is and the granularity of the data, they get excited.
15:39: The first thing they do is they become aware of the impact of the world investment they have made. The second thing they can do is to share this information with the clients and start engaging with them in meaningful conversation. More and more investors are asking advisors to build sustainable portfolios and to prove to them that they are building sustainable portfolios. They don't have enough tools and functionalities out there to answer this new investor demand.
16:10: Thanks to Physis data. We are a platform that is the life of financial advisors in their day-to-day life. They can input any portfolio in the platform, and become aware of the impact, provide this disclosure to their clients with a customized report, but they can also have access to tools and functionality to build a better portfolio.
19:15: We divide the sustainable data under the ESG so they can see ESG scores. There are previous theories to Physis, they can deep dive into the impact of every investment, how much wind energy was generated by this investment we're able to say that or they want to probably check information regarding the amount of plastic that was recycled when it came in the portfolio. They can deep dive into what we call product analysis. If they want to check if the company they have invested in has generated specific financial services or products that help build a better world, that can do that, says Stefania.
20:31: They can also click on controversy analysis, and they can understand if the company in their portfolio has been facing specific controversial activities and if so, which type. We have the lookup function to export all of this information. They can do it with excel with a PDF or with a customized PDF where they write as a financial advisor that can export list formation with their logo. They can even customize the colour of the report and put the specific information I want to share with their clients.
21:07: They want to build an investment universe of U.S. equity companies that are very well performing. They performed very well towards gender equity. They can do so through using another functionality on the platform that is called screening. Screening tool that works for funds for corporate and works for Gobert.
25:32: Biggest challenge will be when you start from scratch. I will say that it really depends on the stage of the company. I can tell you that right now my biggest challenge is really to make sure that we own board all the clients that are organically coming to us and keep offering an amazing experience to them, says Stefania.
27:03: Social impact is a well-known problem. This is despite the fact that, women delayed venture capital-funded companies tend to do better than males. Now, I don't think that's inherently because women are spectacularly better than menaced at everything. I just think it's because women have to be that much better to get the funding. So only the best ideas get funded, which is unfortunate, says Jason.
3 Key Points
Stefania explains that they have automated this data collection for over 10,000 companies worldwide. Then we process data quality checks with emails, algorithms that are assessed by the company over a six years of historical data and by peer valuation. This means that if we take the suit, two emissions or one company we evaluate this youth group mission based on six years of historical data. We compare this by their level of production or revenue and then we evaluate how well they're doing compared to peer analysis.
Measuring how a manager or measuring how an index or whatever it is you are using to execute on this, how it's doing not just beyond the current score of like, hey, it's scores 96% in terms of how clean it is compared to everything else. But actually, the windshield down to water usage, labor issues, carbon emissions, like being able to measure the cumulative impact of that overtime and how that ticket you can measure that, you can track when it starts to deviate.
The first thing an investor wants to do is sign up, once you sign up, they can start using functionalities as we have called look up so they can just type the ticker of the of or an icing of any security. It can be a portfolio of funds; it can be a single company.
Tweetable Quotes
"I wanted to start really when I was in college, and I was studying portfolio management and I started feeling disconnected from older classical investments because they had one goal in mind to make more money and I felt the need to add extra factors to just the financial performance." - Stefania
"Let's say you have probably invested in an ETF and a friend of yours has invested in the same ETF, but you started investing five years ago, while your friend started two years ago, the impact you generated is different than what he did and even the amount of money you have invested may have been different. So we are able to calculate the Cumulative investment impact since they are the first investment for every portfolio for over 355 funds." – Stefania
"When I started doing sustainable investing, the data was not available. I could not have built Physis 10 years ago, nor five years ago, but now we have the right technology and the right data available out there to make sure that people have this immersive and tangible investment experience." – Stefania
"More of our usual advisory tools will integrate through API or widgets to some big platforms, let's say a wealth management platform that offers services to their clients. This way of collaborating with other companies. I see that we have a huge opportunity I didn't mention, but we have clients in Europe and in the United States. So this to be an early stage of our journey, it's really exciting for a startup to serve both markets. And this is happening because of the need for sustainable, good, sustainable data details, sustainable data and tools that can simplify the life of investors." - Stefania
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