Inside the Inspire Impact Score™ (2024)

Section One

Negative Inspire Impact Score Calculation

Each negative issue category has been selected based on evangelical, biblically conservative, theological understandings. It should be noted that the Inspire Impact Score is not suggesting that all the negative issues listed are inherently sinful or immoral, but rather seeks to identify broadly agreed upon areas of concern. For example, alcohol is not inherently sinful or immoral; however, the alcohol industry is known for predatory advertising and sales practices, and alcohol products are addictive and become sinful for those who misuse them. Therefore, investment in alcohol production and distribution is a widely agreed upon area of concern and is, therefore, a negative issue for Inspire Impact Score purposes.

Notable omissions in the negative issue category list include military weapons, civilian weapons, and barrier-type contraceptives (hormonal contraceptives are registered in the Abortifacient category), which are exclusionary issues under the United States Council of Catholic Bishops (USCCB) investment guidelines. In practice, Inspire’s asset management division avoids investments in military weapons, civilian weapons, and barrier-type contraceptives in order to serve investors who have issues of conscience surrounding those issues and Inspire makes those data points available via their inspireinsight.com screening technology. However, Inspire’s position is that those issues should not warrant a negative Inspire Impact Score on their own merits and thus are not present in the negative issues list for Inspire Impact Score calculations.

Following is a list of all negative issues considered in the Inspire Impact Score methodology. For complete definitions of each issue, please reference Appendix A.

(A) Recording Negative Issue Breadth

Second, the number of negative issue categories that a company has involvement in is recorded (breadth). It is important that the specific category and sub-categories are made note of, as some categories are given larger weights in the final Inspire Impact Score (see discussion of “Issue Severity” below).

(B) Lookback Period

Negative violation data is considered with a lookback period covering the previous full calendar year, as well as any incremental data for the current calendar year. Any single instance of negative issue involvement during the lookback period will produce a negative Inspire Impact Score. Data older than the previous full calendar year is not considered in Inspire Impact Score calculation.

The rationale for a full calendar year lookback is to allow adequate time for our team to provide up-to-date research in each of the various categories. It also enables improved engagement efforts with corporations, allowing us to reward a company which responds positively to our requests to honor biblical values with a more immediate improvement in their Inspire Impact Score, rather than being penalized by older violations before the one year lookback period.

To the untrained observer, real-world examples of faith-based investing data services producing widely contradictory outputs imply inconsistency and unreliability, and have contributed to a distrust of faith-based investing data in some instances. However, upon more thoughtful investigation, an investor can easily observe the reasonable, logical, procedural differences that create these variances in analysis. Also note that contradictory scoring outputs are also commonplace among secular ESG data providers and are not unique to the faith-based investing data world. Different data providers employ different frameworks, and different frameworks produce different results. Understanding lookback periods, as well as other nuanced processes, is critical for investors to understand potential inconsistencies between faith-based investing data sets.

(C) Violation Severity Calculation

Once the breadth of a company’s negative issue involvement within the specified lookback period is recorded, the next step is to identify the severity of each issue. To accomplish this, the Inspire Impact Score methodology applies a Severity Factor to each issue category which either increases, decreases, or keeps neutral the weight of that issue relative to all other issues in the overall calculation of the final Inspire Impact Score.

The Severity Factor is a unique aspect of the Inspire Impact Score which serves the critical function of acknowledging that some issues are more severe than others, and as such should weigh more heavily on the score of a company. For example, the manufacture and distribution of abortifacient drugs is inherently sinful and directly facilitates the murder of an unborn child, while the manufacture and distribution of alcohol (though problematic for aforementioned reasons) is not inherently sinful and does not necessarily cause harm in all instances. Therefore, a company whose only violation is Abortifacients should have a more negative score than a company whose only violation is Alcohol. Multiplying these issue categories by a Severity Factor (5 for Abortifacients and 0.5 for Alcohol) results in providing faith-based investors a clear differentiation between the relative severity of the issues inherent in a given company and allows for more precise analysis and portfolio construction as a result.

The following is the detail of Severity Factors applied to each negative issue category in the calculation of Inspire Impact Scores. It is understood that there is a degree of subjectivity in the assignment of severity factors, and it is not the intention of the Inspire Impact Score to imply, for example, that Abortifacient manufacturing (severity factor of 5) is precisely ten times more sinful than Alcohol (severity factor of 0.5). The purpose of the severity factor is simply to produce a generally appropriate range of relative scores, allowing investors to quickly ascertain how one company might relate in terms of biblical values relative to other companies in the broader market.

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(D) Calculation of Raw Inspire Impact Score

With the recording of negative issue category exposure breadth within the specified lookback period, and with Severity Factors appropriately applied to those negative issue categories, it is now possible to combine that data into a preliminary, raw Inspire Impact Score.

The two main inputs of breadth and severity can be defined as follows:

1. Breadth: The greater the number of negative issue categories a company is involved with, the deeper the negative Inspire Impact Score will be for the company.
2. Severity: Certain issues are assigned a greater magnitude of severity, and therefore a greater weighting in the Inspire Impact Score calculation, than other issues. Involvement with more severe issues will result in a deeper negative Inspire Impact Score than involvement with less severe issues. Severity magnitude is determined by the explicit sinfulness of the issue (i.e.: abortifacients are inherently sinful, versus alcohol which is not inherently sinful but is nonetheless a problematic industry).

(E) Scaling Function

Once breadth and severity factors have been applied in the calculation, the next and final step in the determination of a negative Inspire Impact Score is to apply a scaling function to achieve optimal dispersion of scores across the full range of negative one (-1) through negative one hundred (-100).

The scaling function begins with calculating the natural logarithm of each company’s raw score, which is the actual range of all raw Inspire Impact Scores. In order to arrive at an appropriate and helpful dispersion of relative Inspire Impact Scores, it is then necessary to identify the lowest and the highest raw negative scores in the current database of all negative Inspire Impact Scores.

For instance, perhaps the lowest raw Inspire Impact Score among the thousands of companies being scored is determined to be negative ninety-three (-93) and the highest negative score is determined to be negative seven (-7). The Inspire Impact Score will then utilize the worst logarithm score of -93 and highest (least bad) logarithm score of -7 to scale all remaining negative scores between -1 and -100.

Applying a scaling function to raw scores is important to create a logical, intuitive spectrum of Inspire Impact Scores that accurately communicate not just an absolute value, but the relative value of scores within the broader universe of all Inspire Impact Scores. Ultimately, it is not the precise absolute value that is important, but rather the precise relative value that is critical for helpful applications to faith-based investing decisions.

Without scaling, it is possible and likely that negative Inspire Impact Scores would be clumped in a few narrow ranges throughout the spectrum, making it problematic for investors to accurately ascertain relative alignment or misalignment with biblical values when comparing multiple securities against each other. With scaling applied, Inspire Impact Scores are more effectively dispersed across the spectrum, reducing “lumpiness” of scores and creating more even dispersion between absolute values. Scaling enables investors to intuitively discern the value of an Inspire Impact Score of a certain security in relation to the broader universe of all Inspire Impact Scores and thus make more precise, biblically responsible investing decisions.

(F) Inspire Impact Score Formula For Negative Scores

With a thorough understanding of the above data inputs and factors, the formula for calculating Inspire Impact Scores with negative issue involvement (negative scores) is defined as follows: