Measuring Positive Impact in Responsible Investing
Riverwater Partners’ Responsible Investing process creates value through its curation of small-cap equity portfolios of companies that have demonstrated superior returns on their responsibly deployed physical, human, and financial capital.
Our Due Diligence process seeks to understand both: how a given company’s operations impact people and the planet – widely considered a company’s footprint – and how a given company’s business by its very nature impacts people and the planet. We call this a company’s handprint.
Handprint metrics across Riverwater Partners portfolio companies in 2024
The handprint defines how a company is delivering solutions to the world’s problems. This is its value creation. And it drives not only better social and environmental outcomes, but also better financial outcomes for the company, and therefore, our customers.
Footprint vs. Handprint: Two Ways to Measure Impact
A company’s footprint refers to the impact its operations have on the environment and people. This includes the energy and water used to manufacture its products, its greenhouse gas emissions, its attention to worker safety and human rights in supply chains, its impact on the communities in which it operates, etc. We seek companies who minimize their negative footprint by responsibly deploying society’s human and physical capital.
A company’s handprint refers to how a company’s business — by its very nature — makes the world a better place. It refers to how companies’ products and services deliver solutions to meaningful societal challenges, from reducing energy consumption to improving healthcare outcomes to feeding a growing global population. This is its value creation.
Because our portfolios invest across the full economic spectrum, the handprint is not always obvious. A consulting firm, a contract manufacturer, and an intellectual property licensor might not seem like candidates for positive impact. But a closer look reveals something remarkable.
How InterDigital’s Technology Cuts Screen Energy Use by 15%
InterDigital is an intellectual property company — not the first place most investors would look for environmental impact. But InterDigital’s pixel value reduction (PVR) technology reduces video screen energy consumption by approximately 15% while maintaining full video quality.3
Consider the potential scale of that impact. PVR technology is deployed across televisions, gaming consoles, and smaller electronic devices worldwide. Despite the proliferation of more and bigger screens over the past five years, InterDigital reports that its technology has contributed to measurable reductions in greenhouse gas emissions from the consumer electronics ecosystem.3
Modine Manufacturing: Saving 389M Gallons of Water Through Data Center Cooling
Modine Manufacturing, whose stated corporate purpose is “engineering a cleaner, healthier world,” has developed a liquid cooling system called Airedale that addresses one of the most pressing infrastructure challenges of the AI era: data center energy consumption.
Data centers are among the fastest-growing consumers of electricity and water worldwide. According to company disclosures, Modine’s Airedale system targets a 44% reduction in data center energy use by 2030 — a forward-looking goal, not an achieved result.5 The system also requires significantly lower water intensity for cooling than traditional approaches. As of the company’s most recent sustainability report (2021 data), Airedale technology had contributed to saving approximately 389 million gallons of water.5
Digi International: How IoT Agriculture Helps Feed a Growing World
Digi International
manufactures sensors and communications software that enable intelligent devices in real-world applications. In agriculture, this means smart tractors, precision irrigation systems, and AI-enabled crop management tools.6
The practical benefits for farmers include improved weed detection accuracy, better plant disease identification, enhanced fruit ripeness detection, automated size and quality sorting, and reductions in water usage. In a world that needs to feed a growing population on finite arable land, this is exactly the kind of technology-enabled solution that we believe represents both investment potential and genuine positive impact.
Why Handprints – Positive Impact Companies – Matter for Returns
At its core, the purpose of business is to create value by solving real world problems – the Handprint. Innovation drives demand which leads to superior financial returns for companies and their shareholders. Bringing value to society and to shareholders are not mutually-exclusive; they are mutually-reinforcing.
The examples above demonstrate how the handprints of these companies, and others in the Riverwater strategy portfolios, help to make the world a better place, and to generate superior returns. This is our mission.
Citations
This material is provided for informational purposes only and is not intended as investment advice or a recommendation to buy or sell any security. Discussion of specific securities is for illustrative purposes only and should not be construed as a recommendation. The inclusion of a company in this discussion does not guarantee it will remain in the portfolio.
Past performance is not indicative of future results. All investments involve risk, including the potential loss of principal. A company’s positive social or environmental impact does not guarantee favorable investment returns.
Company-specific data points referenced in this commentary are sourced from company filings, sustainability reports, and product documentation as noted in the citations above. Riverwater Partners has not independently verified all company-reported impact data.
Net-of-fee composite performance for all Riverwater strategies is available upon request. Riverwater Partners claims compliance with the Global Investment Performance Standards (GIPS®). To receive a GIPS-compliant presentation and/or the firm’s list of composite descriptions, please contact us at info@riverwaterpartners.com.
