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KLD’s Research Process
KLD researches the social, environmental, and governance performance of corporations. KLD research relies on five distinct data sources to inform our ratings and analysis. Data are collected in a disciplined process from a wide variety of company, government, non-government organization and media sources. KLD tracks each company through more than 14,000 global media sources daily.
Rating Approach
Once the information is collected, KLD rates the social, environmental and governance performance of companies using a proprietary framework of positive and negative indicators.
Companies are rated in seven major qualitative issue areas: Environment, Community, Corporate Governance, Diversity, Employee Relations, Human Rights and Product Quality and Safety. Analysts assign Strengths and Concerns associated with these issues, providing a social and environmental profile of companies. The business involvement screens are associated with activities that are controversial to certain social investors.
KLD analysts specialize by sector. This improves the quality of analysis, improving sector insight to identify the key social, environmental and governance factors affecting peer companies.
Monitoring and Updating Process
KLD uses three processes to maintain the accuracy and currency of its research:
- Continuous updates: daily updates from media sources and special updates from NGOs and government data sources
- Fiscal year updates: annual updates from company public documents
- Annual updates: a comprehensive annual review that includes analysis of all information gathered throughout the year, review of company websites and CSR reports, and direct communication with the company, NGOs, and research partners.
Quality Assurance
KLD senior analysts perform a quality review of every company profile at least once per year, edit daily updates for content and ratings quality, and mentor junior analysts. KLD’s Ratings Review Committee (RRC), composed of senior analysts and the Director of Research reviews controversial questions, maintains the currency of existing ratings, and develops new ratings as thought leaders for the business.
KLD evaluates its methodology each year, using the experience of rating companies since 1988.
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