business book bestseller list 22 university curricula: mba ... · published 2010 (john wiley &...
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Published 2010(John Wiley & Sons)
*Amazon.com
*BetterWorldBooks
* Wiley.com
Business Book
Bestseller List
22 University Curricula:
MBA, MPA, Finance
Global Libraries
on 5 Continents
© 2006-2012 HIP Investor Inc. 1
How HIP Helps Investors
CONFIDENTIAL © 2006-2015 HIP Investor Inc. 2
1. HIP RATINGS:Research, analyze & score
4500 corporate equities & bonds,
and 9000+ munis/treasuries/agencies
…on Future Risk & Upside Potential,
and Net Impact on Society
2. HIP STRATEGIES:Manage HIP-weighted investment indexes + portfolios
3. HIP PORTFOLIOS + 401(k)s:License HIP Ratings to fund managers,
wealth advisors, and 401k’s
HIP textbook in
22 university &
MBA curricula
The Value of Human Capital
+
How Investors Can Finance Sustainable Prosperity
October 3, 2015
THIS IS COPYRIGHTED MATERIAL. © 2006-2015 HIP Investor Inc.
Disclosure and Disclaimers
© 2006-2015 HIP Investor Inc. 4
HIP Investor Ratings LLC is a California limited liability
company, providing 13,500+ ratings of global
investments and funds for investors, family offices,
advisers, fund managers and retirement plans.
R. Paul Herman is a registered representative of
HIP Investor Inc., an investment adviser registered in
the States of California, Washington, and Illinois, with
clients across the USA.
This is not an offer of securities. All investing has risks.
Full disclosures at www.HIPinvestor.com
Past results are not indicative of future performance.
Disclosure on HIP’s“Best Companies To Work For” Portfolio
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 5
Pop Quiz:
What is
your company’s
most important ASSET?
© 2006-2012 HIP Investor Inc. 6
Most important asset?
•A. Brand
•B. Ideas, patents, I.P.
•C. People
•D. All of the above
© 2006-2012 HIP Investor Inc. 7
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 8
2003 Survey
If People Are Important:
Where are People on the financial statements?
© 2006-2012 HIP Investor Inc. 9
…where on financial statements?
•A. Expense (on inc.stmt)
•B. Liability (on bal.sheet)
•C. Asset (as “goodwill”)
•D. All of the above
© 2006-2012 HIP Investor Inc. 10
84% of Market Value = Intangible
© 2006-2015 HIP Investor Inc. 11
17%
32%
68%80% 84%
© 2006-2015 HIP Investor Inc. 12
Ocean Tomo Patent ETF (OTP)
Intangibles Index Beats S&P500 (12/29/06 to 3/05/12,
this ETF was retired despite positive performance)
+7.7%
-3.9%
“Total wealth includesall sources of ‘income’ or
consumable services. One
such source is the
productive capacity
of human beings.”
– ‘The Quantity Theory
of Money’ (1956)
Nobel Laureate in EconomicsDr. Milton Friedman
© 2006-2012 HIP Investor Inc. 13
http://money.cnn.com/magazines/fortune/bestcompanies/2011/full_list/
© 2006-2012 HIP Investor Inc. 14
Wharton Professor Alex Edmans’Peer-Reviewed Academic Analysis
“Does the
Stock Market
Fully Value
Intangibles?
* * *
Employee
Satisfaction
and Equity
Prices”http://www.AlexEdmans.com
© 2006-2012 HIP Investor Inc. 15
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 16
“Best Companies To Work For” Equities Have Outperformed
Source: Russell Investment Group, via
© Great Places To Work® Institute
1997-2014, ANNUALIZED RETURNS
Best Companies Have Outperformed
Cumulatively since 1997
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 17
Investing in “100 Best” to Work For Can Beat the Market (1997-2014)
Source: Russell Investment Group, via
© Great Places To Work® Institute
1997-2014, ANNUALIZED RETURNS
Best Companies Have Outperformed Cumulatively
since 1997
© 2006-2012 HIP Investor Inc. 18
Parnassus Workplace Fund (PARWX)
One Mutual Fund Invests in “Best Companies to Work For”
(4/21/06-10/6/15)
+84.2%
+53.7%
HIP’s “Best Companies to Work For” Index(6/27/2013-6/30/2015)
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 19
This is not an offer of securities. All investing has risks.
Full disclosures at www.HIPinvestor.com
Past results are not indicative of future performance.
“There is one and only one
social responsibility of
business – to use its resources
and engage in activities designed
to increase its profits so
long as it stays within the rules of
the game, which is to say, engages
in open and free competition
without deception or fraud.“
– New York Times (1970)
Nobel Laureate in EconomicsDr. Milton Friedman (14 years later)
© 2006-2012 HIP Investor Inc. 20
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 21
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 22
“Employee Satisfaction, Labor Market Flexibility, and
Stock Returns Around the World”(Alpha, Beta, R-squared: Sept 1997 to Dec. 2013)
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 23http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2461003
Denmark
Greece
Germany
© 2006-2012 HIP Investor Inc. 24Source: Harvard Business Review
© 2006-2012 HIP Investor Inc. 25
In January 1967 !!
Source: Harvard Business Review
R.G. Barry Corporation (ticker: DFZ)’sHuman Capital Grew Profit +12.4% in 1969
© 2006-2012 HIP Investor Inc. 26
Higher Profit = +12.4%Source: Harvard Business Review
R.G. Barry Corporation’s Assets Grew +7% With Human Capital on Balance Sheet
© 2006-2012 HIP Investor Inc. 27
Higher Asset Value = +7%
Source: Harvard Business Review
I. Historical Cost
II. Replacement Cost
III. Opportunity Cost
IV. Present Value (PV) of Compensation
Valuing People As an Asset:4 Main Methodologies
© 2006-2012 HIP Investor Inc. 28
Quantifying Human Resource Value:4 Examples – Leadership In India
I. Historical CostIV. Present Value (PV) of
Compensation
5,000
employees
1,159
32,826
133,560
employees
Southern
Petroleum
Industries
© 2006-2012 HIP Investor Inc. 29Source: HIP Investor research
India Cement Company: Workforce
© 2006-2012 HIP Investor Inc. 30Source: HIP Investor analysis
India Cement Company: People Value
© 2006-2012 HIP Investor Inc. 31
USD $48.7 million $45.1 MM $38.5 MM
Source: CCI/ICC; HIP Investor analysis
Infosys’s Annual Report Calculates Human Capital
© 2006-2012 HIP Investor Inc. 32
USD $25.7 Bil $21B
ROI-HR: 5.1% 5.5%
Source: Infosys; HIP Investor analysis
From 1998-2011, InfosysGrew the Value of its Human Capital
© 2006-2012 HIP Investor Inc. 33Source: Infosys; HIP Investor analysis
Average Employee’s Human Capital Value at Infosys Grew Over 14 Years
© 2006-2012 HIP Investor Inc. 34Source: Infosys; HIP Investor analysis
Infosys Has Grown Its Market Value By Investing in Its Human Capital
© 2006-2012 HIP Investor Inc. 35
How Human Capital Can Appreciate – or Depreciate
Beginning
Stock of
Human
Potential
Annual
Depreciation
Annual
Investment
Annual
Appreciation
Ending
Stock of
Human
Potential
Annual Flows
Training
Education
_+ + =
# Employees
Wages
Education
Tenure
Health
Benefits
Absence
Injuries
Turnover
Step
Promotion
Engagement
Wellness
Programs
Knowledge
Decay
Developed by:
Source: Interface
$-
$100
$200
$300
$400
$500B
egin
nin
gS
tock
Dep
recia
tio
n
Inve
stm
en
t
Ap
pre
cia
tio
n
En
din
gS
tock
Interface HC Pilot: Impact of Human Capital Flows($ in millions)
(Net Depreciation: (6%)
Net Appreciation/(Depreciation) of Human Capital
Note: data reflects only those employees that were included in the Human Capital Stocks & Flows pilot
Source: Interface
Calculating Stock of Human Potential
Employee Wage Education Tenure
Employee Country Position
Annual
Wage
Years
of
Education
Appreciation
per Year of
Education
Adjusted
Annual
Wage
ABC Netherlands Production 52,147$ 10.0 8% 93,864$
Tenure Time Value
Tenure
at
Interface
(years)
Average
Tenure
for
Position
(years)
Years
Remaining
at Interface
Adjusted
Annual
Wage
Discount
Rate
Corporate
Human
Capital
Stock
7.0 10.0 3.0 281,591$ 3.4% 272,069$
Source: Interface
Starbucks Capitalizes PP&E’s“Leasehold Improvements”: Why Not People?
© 2006-2012 HIP Investor Inc. 39Source: Starbucks
Recent Innovations in Valuing Intangibles and Human Capital
V. Calculated Intangible Value (CIV)*
VI. Human Capital Financial Statements** (HCF$)
*http://www.investopedia.com/terms/c/civ.asp#axzz1oIbCjM15
**http://www.hcminst.com/products-services/human-capital-financial-statement/
© 2006-2012 HIP Investor Inc. 40
Investing in Human Capital Can Be an Inflation Hedge and Has Been Uncorrelated to Stock Market Equities
• Funds investing in human capital can fit across asset classes: such as Venture Capital, Private Equity and Alternatives
Source: Lumni, Inc. (fund of human capital for student loans)
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 41
WHERE THE JOBS ARE!Hint: Solving Society’s Needs
Analyzing Job Growth by Sector from 2002-2011
1ST IN A SERIES
HIP Investor Inc. www.HIPinvestor.com
By R. Paul Herman and Tom Bowmer
Vintage: June 2012
© 2006-2012 HIP Investor Inc. 42
This Analysis Is Based on Data Open-Sourced by the US Government, Accessible to All USA Taxpayers
• Sources: – Bureau of Labor Statistics, Employment, Hours, and Earnings – National (Current Employment Statistics -
CES), http://www.bls.gov/data/#employment– Bureau of Economic Analysis, National Income and Product Accounts, table 1.3.5 (2002-2011),
http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1– HIP Investor Analysis
• Definitions for Job Calculations (Unadjusted numbers used):– 1. BUSINESS SECTOR: Total private industry employees from the Current Employee Statistics survey.– 2. IMPACT SECTOR: Private industry employees from Health care, Education, & Social Assistance
subsectors in the Current Employee Statistics survey. – 3. GOVERNMENT SECTOR: Total government employees from the Current Employee Statistics survey.– 4. BUSINESS (w/out IMPACT) SECTOR: Total private industry employees from the Current Employee
Statistics survey minus Health care, Education, and Social Assistance subsectors.
• Definitions for GDP Calculations:– 1. BUSINESS: Equals gross domestic product excluding households, nonprofit institutions serving
households, and government. – 2. NONPROFIT INSTITUTIONS: Equals compensation of employees of nonprofit institutions, the rental
value of non-residential fixed assets owned and used by nonprofit institutions serving households and rental income of persons for tenant-occupied housing owned by nonprofit institutions.
– 3. GOVERNMENT: Equals compensation of government employees plus government consumption of fixed capital.
© 2006-2012 HIP Investor Inc. 43
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 44
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 45
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 46
© 2006-2012 HIP Investor Inc. 47Source: http://fraser.stlouisfed.org/docs/meltzer/maremp93.pdf
Great Depression: Deep Unemploymentand More than a Decade of Misery
© 2006-2012 HIP Investor Inc. 48Source: http://fraser.stlouisfed.org/docs/meltzer/maremp93.pdf
Current “Great Recession” Is Not as Deep,But How to Keep GDP and Jobs Growing?
2008-2015 to date
GDP Growth from Impact-Focused Org’s (NGOs & Government) Exceeds the Business Average
© 2006-2012 HIP Investor Inc. 49
Source: Bureau of Economic Analysis, National
Income and Product Accounts, table 1.3.5 (2002-
2011); HIP Investor analysis
Business Growth: + 3.4%
Gov Growth: +4.3%
NGO Growth: +4.2%
3 out of 10 Jobs In USAFocus On Building a Better World
© 2006-2012 HIP Investor Inc. 50Source: Bureau of Labor Statistics; HIP Investor
analysis
~ 16%
~ 14%
~ 70%
GOVT + IMPACT = 30% of total JOBS
The Real “Job Creators”: Solvers of Society’s Problems
© 2006-2012 HIP Investor Inc. 51
Business Sector (w/out Impact)
Government SectorImpact Sector
Cum. Growth -3.52% Cum. Growth +22.75% Cum. Growth +2.75%
Source: Bureau of Labor Statistics ; HIP
Investor analysis
The Impact Sector Is Adding JOBS Every Year
© 2006-2012 HIP Investor Inc. 52Source: Bureau of Labor
Statistics; HIP Investor analysis
JOB GROWTHJOB LOSS
Growth: 2.8%
Annual Growth: 0.3%
Growth: 22.8%
Annual Growth: 2.0%
Growth: -3.5%
Annual Growth: -0.4%
9.3 Million Jobs In BUSINESS Sector
Focus on IMPACT:
Education, Health Care
& Social Assistance
© 2006-2012 HIP Investor Inc. 53
2.0 mm jobs
1.4 mm jobs
5.9 mm jobs
Source: “Holding the Fort” report by
John Hopkins Center for Civil Society’s
JH Nonprofit Economic Data Project;
Lester Salmon, S. Wojciech
Sokolowski, Stephanie Geller ; funded
by Charles Mott Foundation (with
estimated job calc’s by HIP Investor)
How Many IMPACT Jobs in BUSINESS today? At least 10%
These 9.3 million jobs represent ~10% of the
Business workforce in 2010
To Grow the Economy and Reduce Unemployment Requires the BUSINESS Sector to Focus on IMPACT
• Society’s needs are tremendous– Health care access is limited
– Access to capital for new ideas is constrained
– Natural resources are becoming polluted and scarce
• Business mobilizes talent and capital at tremendous speed– Biggest employer of talent, and typically highest paid
– Widest access to capital markets: equities, bonds, working capital
– Allocate human & financial capital to untapped opportunities
• Impact and Government Sector know the solutions– Compelling solutions to society’s needs are already discovered
– Partnerships for IMPACT across sectors are waiting for Business
© 2006-2012 HIP Investor Inc. 54
Biggest Job Growth Driven by Positive ImpactOver the Last Decade (2002-2011)
© 2006-2012 HIP Investor Inc. 55Source: Bureau of Labor Statistics ; HIP Investor
analysis
Business Sector
Total
Business Sector
excluding Impact
Impact Sector (Health care,
Education, & Social Assitance) Government
Cumulative Growth 2002-2011 + 0.4% -3.5% + 22.7% + 2.7%
Annualized Growth Rate 2002-
2011+ 0.0% -0.4% + 2.1% + 0.3%
Annualized Growth Rate 2002-
2007 ("Boom Years")+ 0.7% + 0.4% + 2.2% + 0.6%
If BUSINESS Solved Society’s Needs, Creating Jobs at the Rate of the IMPACT Sector….
© 2006-2012 HIP Investor Inc. 56Source: Bureau of Labor Statistics ; HIP Investor
analysis
Actual Biz Jobs Projected Biz Jobs
Number of Business jobs at Impact Sector’s 10 year
annualized growth rate (2%)
Number of Business jobs at 1.5% job growth
rate
© 2006-2012 HIP Investor Inc. 57Source: Bureau of Labor Statistics;
http://www.cepr.net; HIP Investor analysis
If BUSINESS Solved Society’s Needs like the IMPACT Economy, then Full Employment is Possible by 2015
© 2006-2012 HIP Investor Inc. 58Source: Bureau of Labor Statistics ; HIP
Investor analysis
Actual Biz Jobs Projected Biz Jobs
By 2015, full employment* possible
By 2020, full employment*
possible
*Full employment is defined as ~ 5%
HIP = Human Impact + Profit
HIPSolve Human Needs (Do Good)
Seek HigherProfits (Make Money)
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 59Source: HIP Investor
HIP’s 5 Dimensions of Measurable ImpactCan Lead to Sustainable, Profitable Growth
• Physical Health
• Mental AgilityHealth
• Income Growth
• Asset AccumulationWealth
• Carbon Neutrality
• Reusable ProductsEarth
• Gender Balance
• Ethnic DiversityEquality
• Transparent & Open
• Credible & EthicalTrust
HIP companies innovate to answer five human needs:
Innovative Products + Services
Inspired People + Teamwork
Increased Profits + Returns
Improved Planet + Society
Which can result in sustainable, profitable growth for all stakeholders:
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 60Source: HIP Investor
Health
Wealth
Earth
Equality
Trust
HIP Ratings: MethodologyEvaluation Tool for All Investments
Products
& Services
Operating
Metrics
Mgmt
Practices
“How HIP Is This Investment?”
HIP = Human Impact + Profit
Source: HIP Investor
Health
Wealth
Earth
Equality
Trust
HIP Ratings: MethodologyEvaluation Tool for All Investments
Products
& Services
Operating
Metrics
Mgmt
Practices
I
M
P
A
C
T
“How HIP Is This Investment?”
HIP = Human Impact + Profit
Strategic Innovation &
Risk Mitigation
Higher Revenue potential
LowerCost
potential
Source: HIP Investor
Impact Can Drive Higher Profit andShareholder Value, as MIT and BCG Show
A study by Boston Consulting Group and MIT Sloan Management Review discusses how sustainability is changing the competitive landscape and reshaping the opportunities and threats that companies face.
63
“Smarter Beta” Is Focused on Value Creation & Risk Reduction
Smarter Beta: Value-CreationFundamentals
Smart Beta: Financial
Fundamentals
Market-Cap-Weighted
Shareholder Value
Cash Flow: Revenue GwthDividend Gwth Profit Margins
People As An Asset
Natural Resource Efficiency
Valuation:P-E Ratios
Governance & Stakeholder Mgmt.
Transparency of Risks & Opportunities
CONFIDENTIAL © 2006-2015 HIP Investor Inc. 64Source: HIP Investor
Globally, Firms with More Diverse BoardsHave Yielded Higher Return on Equity (ROE)
CONFIDENTIAL © 2006-2015 HIP Investor Inc. 65Source: Credit Suisse
Women On Board
+4% ROE
( +33% Premium)
Credit Suisse calculates Outperformance of Global Firms with 1 or More Women on Board
CONFIDENTIAL © 2006-2015 HIP Investor Inc. 66
No Women On Board
+5%
1+ Woman on Board
+40%
Source: Credit Suisse
5 Quantifiable FACTORS thatLink Directly to Shareholder Value
1. Customer Satisfaction
2. Employee Retention
3. Carbon Efficiency
4. Board Diversity
5. Legal Exposure
CONFIDENTIAL © 2006-2015 HIP Investor Inc. 67Source: HIP Investor
HIP Measures Knowable-Yet-Ignored FactorsNot Captured on Financial Statements
Smarter Beta: Value-CreationFundamentals
People As An Asset
Natural Resource Efficiency
Governance & Stakeholder Mgmt.
Transparency of Risks & Opportunities
CONFIDENTIAL © 2006-2015 HIP Investor Inc. 68
Key Drivers of
Value + Risk
+ Customer Satisfaction
+ Employee Retention
+ Oil & water use
+ Energy mix
+ Board & team diversity
+ Supply chain mgmt.
- Legal exposure
- Lobbying ratio
Knowable Yet Ignored
Not on Financial
Statements
Source: HIP Investor
Harvard Professors:Sustainability Can BenefitPortfolio Value
CONFIDENTIAL © 2006-2015 HIP Investor Inc. 69
+25% premium
+40% premium
Harvard Professors: Material Sustainability Can Greatly Benefit Portfolio Value
CONFIDENTIAL © 2006-2015 HIP Investor Inc. 70https://blogs.cfainstitute.org/investor/2015/07/07/esg-a-material-
information-advantage/
Increasing Choices for Impact Across Asset Classes
Higher Impact Choices for Your Portfolio
Cash
Economic empower-
ment credit unions
Eco-focused banks
Fixed income
Muni Bonds
Microfinance
Mezzanine Debt Funds
Income Generating
Appreciation
REITs
Preferred equities
(dividends)
HIP Preferreds Portfolio
Equities
HIP 100 Portfolio
Impact-weighted strategies (Earth 2x)
International and
Emerging
Cleantech ETFs
HIP Global Sustain’y 100
Global portfolios
Venture Capital and
Private Equity
Sustainability funds
Education and Human
Capital funds
Alternatives
Sustainable Forestry
Organic Agriculture
Renewable Fuels
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 71Source: HIP Investor
Equities
Hedges
VC+PE
Real Estate +
MLPs
Fixed Income
Cash Which Asset Classes
Generate the
Highest IMPACT?Real
Assets
Source: HIP Investor
Which Asset Classes
Generate the
Highest IMPACT?
Equities
Hedges
VC+PE
Real Estate +
MLPs
Fixed Income
Cash
RealAssets
Source: HIP Investor
IMPACT and PERFORMANCE REPORT SNAPSHOT (Sample)
Source: HIP Investor
75
With HIP Scores, Your Portfolio Can Move to More Impact
1. Score Your
Current
Portfolio
2. Select
“more HIP”
Investments
3. Reallocate
to increase
portfolio’s
HIP Score
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 75Source: HIP Investor
In this Portfolio, HIP Scores Can Vary by Asset Class,With a Wide Range of Human Impact + Profit
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 76
All Types of Investors Can Benefitfrom a HIP-Weighted Portfolio
HIP Portfolio
Individual Investors
Family Offices
Endowments
Retirement Plans
Pensions
Corporate Treasuries
Foundations
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 77
HIP serves
families,
family offices,
foundations
& teams with
advisors
Source: HIP Investor
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 78
Source:
Becker College
(DRAFT)
Endowment Seeking Impact,Income and Risk-Adjusted Return
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 79Source: Becker College (DRAFT)
Portfolios Can Align With Mission + Deliver Impact
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 80Source: Becker College (DRAFT)
ENDOWMENTS: Long Term (200 year)and Can Be Local (Students, Alums, Geography)
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 81Source: Becker College (DRAFT)
Increasing Choices for Impact Across Asset Classes(Sample choices; NOT recommendations)
A More HIP Portfolio
Cash
Eco-focused banks
Economic empower-
ment credit unions
Fixed income
Muni Bonds
Microfinance
Mezzanine Debt Funds
Income Generating
Appreciation
REITs
Preferred equities
(dividends)
HIP Preferreds Portfolio
Equities
HIP 100 Portfolio
Impact-weighted strategies (Earth 2x)
International and
Emerging
Cleantech ETFs
HIP Global Sustain’y 100
HIP Global portfolios
Venture Capital and
Private Equity
Sustainability funds
Health and Wellness
funds
Alternatives
Sustainable Forestry
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 82Source: Becker College (DRAFT)
These Knowable Metrics of Future Risk are Frequently Ignored by Investment Managers
CONFIDENTIAL © 2006-2013 HIP Investor Inc. 83Source: Mercer ratings
Fixed Income Managers Have Been Slow to Adopt
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 84
INVEST LOCAL: SF Bay Area Impact Investing Initiative
www.baiii.org
• Equity funds
• Bond funds
• Real Estate funds
• Private Equity, VC funds
• Infrastructure funds
• Employment, eco/social/gov factors, transparency
• Affordable housing, transit, community + micro loans
• Sustainable building, redevelopment, remediation
• Job creation, urban development, innovation
• Transit, water, schools, hospitals, communications
Source: Bay Area Impact Investing Initiative
(baiii.org)
SUSTAINABLE BANKS: More Loans, More Deposits
CONFIDENTIAL © 2006-2012 HIP Investor Inc. 85
Source: Global Alliance for Banking on
Values (gabv.org)
HIP Impact Ratings for50 States + DC & PR
CONFIDENTIAL © 2006-2015 HIP Investor Inc. Source: HIP Investor ratings of States
HIP Ratings Cover 2000+ Government Muni Bonds
50 States+ DC & PR
1081
CUSIPs
94 Countiescovering
307
CUSIPs
143 Citiescovering
719
CUSIPs
11 Joint Authorities with 45 CUSIPs
CONFIDENTIAL © 2006-2015 HIP Investor Inc. Source: HIP Investor analysis & ratings
HIP Impact Rating EXPLAINEDCity of Seattle = 70%
15 of 25 WEALTH points
•Median Income•Affordability of
Housing•Vacant Houses•Unemployment
•Poverty
21 of 25 HEALTH points:
• Obesity/Diabetes• Crime Rate
• Graduation Rate• Health Insurance
Coverage
75%15 of 25
EQUALITY points:
• Gender Diversity & Ethnicity Reflected
in Business Ownership
WEALTH25%
EQUALITY25%EARTH
25%
HEALTH25%
70%
19 of 25 EARTH points:
• Commuting Method &
Time Duration
CONFIDENTIAL © 2006-2015 HIP Investor Inc. Source: HIP Investor ratings
A Tale of Six Cities: Comparing the Impact (HIP Ratings) of Some of America’s Most Notable Cities
City of
Seattle
WA
City of
New York
NY
City of
Chicago
IL
City of
Los
Angeles
CA
City of
Detroit
MI
City of
Dallas
TX
Population 608,660 8,244,910 2,707,123 3,819,702 706,640 1,223,229
HIP
Rating70% 49% 44% 40% 38% 36%
HEALTH
of 25%21% 12% 8% 9% 1% 5%
WEALTH
of 25%15% 11% 7% 8% 6% 10%
EARTH
of 25%19% 13% 13% 12% 13% 12%
EQUALITY
of 25%15% 13% 16% 11% 18% 9%
BOND
RATING of
recent issue
S&P: AAA
Fitch: AA+
S&P: AA
Fitch: AA
S&P: AA-
Fitch: AA-
S&P: AA-
Fitch: AA-
S&P: C
Fitch: n/a
Moody’s: B1
S&P: AA+
Fitch: n/a
Moody’s: Aa1
Source: HIP Investor ratings and analysis; UTGO CONFIDENTIAL © 2006-2015 HIP Investor Inc.
How HIP:City of Baltimore, and Maryland Counties
CONFIDENTIAL © 2006-2015 HIP Investor Inc. 90
HIP HEALTH PILLAR HIP WEALTH HIP EQUALITY
St County MetroArea
Overall
HIP Rating
Diabetes
Rate
Adult
Obesity
Rate
Violent
Crime
Rate
Murder
Rate
Grad
Rate High
School
Grad
Rate
College
% Living
in Poverty
Occupied
(not vacant)
Housing
Women
Ow ned
Businesses
African
American
Population
African
American
Ow ned
Businesses
MD County of Anne Arundel Baltimore 58.3% 8% 28% 561 3.5 91% 37% 6% 93% 31% 15% 9%
MD County of Baltimore Baltimore 54.1% 9% 27% 538 2.5 90% 35% 10% 92% 31% 26% 17%
MD County of Carroll Baltimore 57.4% 8% 28% 207 2.4 91% 32% 6% 96% 27% 3% 2%
MD County of How ard Baltimore 61.7% 8% 25% 577 - 95% 60% 4% 96% 30% 17% 15%
MD County of Montgomery Baltimore 57.9% 8% 25% 193 2.1 92% 57% 7% 95% 26% 17% 3%
MD County of Prince George Baltimore 53.5% 11% 34% 708 10.5 85% 30% 9% 92% 38% 63% 55%
MD County of Frederick Baltimore 62.2% 8% 27% 312 1.3 92% 38% 6% 95% 31% 8% 6%
MD County of Harford Baltimore 58.6% 9% 30% 347 2.5 92% 33% 7% 94% 34% 13% 9%
MD City of Baltimore Baltimore 44.7% 12% 32% 1,405 34.9 80% 27% 24% 82% 37% 63% 35%
US USA Average National * 8% 27% 405 4.8 86% 29% 16% 87% 29% 13% 7%
* The median of HIP Ratings calculated for Cities is 52.8%, for Counties is 53.5%, and for States is 49.5%; HIP Ratings cover more than 350 cities, counties and states.
HIP Ratings are comprised of the Pillars of Health, Wealth, Earth, Equality and Trust. Selected pillars and metrics are show n above.
Each column is color-coded: GREEN for leaders in ratios, YELLOW for average ratios, RED for laggards in ratios
Source: HIP Investor ratings and analysis
Leading & Laggard Munis: STATE HOUSING AGENCIES
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91
22%
46th of 50 states
poor disclosure on key metrics
29%
65%
18th of 50 states
use 3rd party green building certification
68%
METRIC
% loan recipients that are low income
Earth:
Green Building, Energy Efficiency &
Resource Conservation
Highlight
Yield to Maturity (12-31-14)
Credit Rating (S&P)
Maturity Year
HIP Rating
3.28%
AAA
2025
3.29%
AA
2026
Source: HIP Investor ratings, analysis and research
Leading & Laggard Munis: K-12 SCHOOL DISTRICTS
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68%
67%16% & 20%
53%
52% 91%
87%58% & 66%
62%
76%
METRIC
Graduation RateNational Average: 85.9%
Averaged Math & Reading Score
Free & Free/Reduced Lunches
% of Budget Spent
on Instructional Expenses
Yield to Maturity (12-31-14)
Credit Rating (Moody’s)
Maturity Year
HIP Rating
1.82%
AA12021
1.89%
AA1
2022
Oregon South Carolina
*10% Low Income*26% Low Income
Source: HIP Investor ratings, analysis and research
Leading & Laggard Munis: K-12 SCHOOL DISTRICTS
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77%
79%16% & 20%
62%
36% students Asian & Hispanic w/ no representation on Board
60% 91%
87%31% & 36%
62%
well above SC averages for college readiness & math
76%
METRIC
Graduation RateNational Average: 85.9%
Averaged Math & Reading Score
Free & Free/Reduced Lunches
% of Budget Spent
on Instructional Expenses
Highlight
Yield to Maturity (12-31-14)
Credit Rating (Moody’s)
Maturity Year
HIP Rating
1.80%
AA12021
1.89%
AA1
2022
Oregon South Carolina
*10% Low Income*13% Low Income
Source: HIP Investor ratings, analysis and research
Leading & Laggard Munis: STATE GOVERNMENTS
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85%27%
18%
12%
few ethnic & female business owners
high rate obesity, diabetes
39% 89%39%
12%9%
#1 health insurance cov.
high usage of publictransport for commute
57%
METRIC
Education:
% Students Graduate High School
% Students Graduate College
Wealth:
% in Poverty
Unemployment Rate
Highlights
Yield to Maturity (12-31-14)
Credit Rating (S&P)
Maturity Year
HIP Rating
1.06%
AA
2018
2.10%
AA+
2022
North Carolina Massachusetts
Source: HIP Investor ratings,
analysis and research
Leading & Laggard Munis: CITY GOVERNMENTS
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80%34%
21%11%
3rd highest cancer risk from airborne chemicals in all US
counties (2002)
47% 86%52%
12%8%
#1 city in US for sustainable waste disposal
58%
METRIC
Education:
% Students Graduate High School
% Students Graduate College
Wealth:
% in Poverty
Unemployment Rate
Highlights
Yield to Maturity (year end)
Credit Rating (S&P)
Maturity Year
HIP Rating
4.7%
AA
2012
8.5%
AA+
2013
NEW YORK SAN FRANCISCO
Source: HIP Investor ratings,
analysis and research
•sample investments (not recommendations)•In portfolio or diligence
•Accessible
offerings
angel investments
•Accredited
cash fixed income equity
public private public private
SRI/ESG/activism
Source: Pacific Alliance Group
HIP Portfolios Seek Impact + ProfitAcross Multiple Asset Classes
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Asset Class HIP Portfolio Goal
U.S.-based equity HIP 100 Portfolio Since 2009, seeks equity exposure + higher impact than S&P 100 benchmark
Income-Generatingappreciation:
Preferred Stocks
HIP Preferred Stock Portfolio Since Q4-2011, seeks dividend yield + higher impact than preferred-stock benchmark
Income-Generating appreciation:
Real Estate
HIP Sustainable Real Estate Since Q1-2012, seeks income yield + higher impact than real-estate REIT benchmark
International Equity HIP Global: Dividends Since 2013, seeks income yield + higher impact than global equities benchmark
Fixed Income HIP+SNW Bond Portfolio Since 2013, seeks potential tax-deferred yield + quantified impact of muni bonds & corporate bonds
Source: HIP Investor ratings,
analysis and research
HIP Is Frequently Profiled in the Mediaand Authors Insightful Features
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Top media recognize HIP for its innovative leadership…
and HIP authors features for leading journals and media
HIP Scorecard, 2007“Oil”, 2008HIP Faceoffs, 2010
Twice-monthly features, 2011
“Socially Responsible Investing 2.0 “(2011)
“Green Investing Strategies Growing” (2010)
“How ‘Nice’ Beats ‘Vice’ Investing” (2011)
Newsweek’s Green Rankings include HIP Ratings of Green Revenue
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The 2015 Newsweek Green Rankings
The HIP Portfolio Manager: Multi-Disciplinary Experience
• R. Paul Herman, Chief Investment Officer, CEO + Founder of HIP Investor, Portfolio Manager of HIP Portfolios (Series 65 investment adviser)
– Wharton School, Univ. of Pennsylvania, specializing in finance.
– McKinsey & Co. advisor to Fortune 500 firms.
– Investment strategist for eBay founder Pierre Omidyar’s impact investing firm.
– Chief Development Officer for Ashoka.org.
– Investment Committee and Limited Partner, Patient Capital fund.
– Founder of e-finance firm pioneering 1st online debit card for families; grew to 30,000 customers and 55 partners in three years.
– Co-built $30 million energy practice, and $1 million analyst-program profit center at CSC Index.
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How HIP Helps Investors
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1. HIP RATINGS:Research, analyze & score
4500 corporate equities & bonds,
and 9000+ munis/treasuries/agencies
…on Future Risk & Upside Potential,
and Net Impact on Society
2. HIP STRATEGIES:Manage HIP-weighted investment indexes + portfolios
3. HIP PORTFOLIOS + 401(k)s:License HIP Ratings to fund managers,
wealth advisors, and 401k’s
HIP textbook in
22 university &
MBA curricula
Contact HIP
R. Paul Herman CEO + Founder [email protected]+1.415.902.7741Twitter: @HIPinvestor
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