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Overview

A PIONEERING METHODOLOGY

Lemma FX has a scientific approach to measuring FX impact in emerging and developing economies.

Impact ratings for currency transactions are intended to significantly enhance the currency markets of these economies. Highly functioning currency markets need a strong interplay between impactful institutions (multilateral development banks (MDBs), development finance institutions (DFIs) and highly rated environmental, social and governance (ESG) investment banks amongst others), improved liquidity across the maturity spectrum and transactions taking place at a fair price (i.e., a price where counterparties do not misuse their power).

At Lemma FX, we partner with organisations to understand their currency impact in emerging and frontier economies using a pioneering methodology.

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Trade impact

ATTENTION TO DETAIL

An FX investment portfolio has 4 impact components, namely:


  1. Cash

  2. Bonds

  3. Peer-to-Peer; and

  4. Engagement.

For each component that Lemma FX examines, there are 2 ratings - counterparty and price.


Firstly, we examine the parties to a transaction, and whether they meet relevant impact criteria or not.

Secondly, we examine the transaction price itself and identify whether it favours the buyer or seller too significantly, or whether it provides an overall positive impact.

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Fund Impact

EXPERT SERVICE

Having certified every transaction for each of the 4 impact components, Lemma FX is able to subsequently calculate the portfolio’s overall impact, which is updated on a monthly basis.


Lemma FX’s rating of a portfolio’s overall impact is provided on a 1 to 5-star basis, with the percentages referring to a fund's overall impact as verified in accordance with Lemma FX's pioneering methodology:

1 star = a score between 0% and 20%

2 stars = a score between 20% and 40% 

3 stars = a score between 40% and 60% 

4 stars = a score between 60% and 80%

5 stars = a score between 80% and 100%

In short time, we aspire to become the industry standard for verifying impact for currencies of emerging and frontier currency markets. In doing so, we look forward to working with all ecosystem participants to measure an increasingly diverse number of investments and funds.