the hip investor: making a better profit by building a better world
Post on 13-Jan-2017
189 Views
Preview:
TRANSCRIPT
March 18, 2010
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 1
Special Sneak
Preview:
Coming
April 2010 (John Wiley & Sons)
HIP = Human Impact + Profit
HIP
Investing
Solve Human Needs (Do Good)
Maximize Profits (Make Money)
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 2
3
3 in 4 Employees Want to “Do Good” and Looking to Employers for Purpose
“Commitment to social issues” is a major factor for Americans deciding…
52%
40%
48%
+20%
+26%
+29%
0% 25% 50% 75% 100%
Wish myemployer would
do more forsocial causes
How I invest
Where I work
2001/04 survey 2007 survey
77%
66%
72%
Source: ConeCause survey of 1096 consumers in 2001, 2004 and 2007
4
Customers and Investors Want to Buy and Invest HIP
INVESTORS
66% see “doing good” as positive indicator
19% REFUSE to invest if firms not “doing good”
CUSTOMERS
65% want to “do good” by BUYING
49% DON’T buy if
not good
38% tell a friend
Source: Cone survey of 4000+ consumers, 2007-2008
5
But CFOs, Investors & Corporate Managers Unclear on $ Value
McKinsey surveyed 238 CFOs+investors & 127 CSR leaders:
• 85% see long-term financial value from eco-initiatives…
• BUT, 45% of CFOs and 51% of investors see them as less important to financial value during this crisis!
6
But CFOs, Investors & Corporate Managers Unclear on $ Value
McKinsey surveyed 238 CFOs+investors & 127 CSR leaders:
• And, 53% of CSR professionals “don’t know” the shareholder value of eco-initiatives.
• Finally, 14% of CSR managers prioritize charitable giving as more important than revenue growth, at
12% (!!) Brand enhancement, talent management and society’s expectations
are quoted as the top 3 ways that ESG programs deliver value
HIP’s 5 Dimensions of Measurable Impact Lead to Sustainable, Profitable Growth
• Physical Health
• Mental Agility Health
• Income Growth
• Asset Accumulation Wealth
• Carbon Neutrality
• Reusable Products Earth
• Gender Balance
• Ethnic Diversity Equality
• Transparent & Open
• Credible & Ethical Trust
HIP companies innovate to answer five human needs:
Innovative Products + Services
Inspired People + Teamwork
Increased Profits + Returns
Improved Planet + Society
Resulting in sustainable, profitable growth for all stakeholders:
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 7
Human Impact + Profit (HIP): The New Fundamentals of Investing
• Profiteer: The Traditional Way – Solely focuses on the capitalist approach – chasing short-term financial gains risking environmental and economic stability
• Do Gooder: The Exclusionary Way – Follows a socially responsible philosophy – excluding “bad” companies from portfolio – leading to lower long-term returns
• HIP Investor: The Breakthrough Way –Integrates “sustainability” into the fundamentals, transforming a portfolio; demonstrates that leading companies that integrate sustainability produce higher profits and greater appreciation
• This HIP approach seeks two goals for your portfolio
• Higher financial returns on a risk adjusted basis
• Increased positive human, social and environmental impact
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 8
The HIP Approach Outperforms Both the Profiteers and Socially Responsible Investors
$60,000
$70,000
$80,000
$90,000
$100,000
$110,000
$120,000
$130,000
$140,000
$150,000
$160,000In
itia
l
Au
g-0
4
Oct
-04
De
c-0
4
Feb
-05
Ap
r-0
5
Jun
-05
Au
g-0
5
Oct
-05
De
c-0
5
Feb
-06
Ap
r-0
6
Jun
-06
Au
g-0
6
Oct
-06
De
c-0
6
Feb
-07
Ap
r-0
7
Jun
-07
Au
g-0
7
Oct
-07
De
c-0
7
Feb
-08
Ap
r-0
8
Jun
-08
Au
g-0
8
Oct
-08
De
c-0
8
Feb
-09
Ap
r-0
9
Jun
-09
5 Year Net of HIP Fee Returns
Net of Fees HIP 100
Net of Fees S&P 100
Net of Fees 3 Month
Net of Fees DOMINI 400
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 9
10
Always Ask: “HOW HIP IS IT?”
• What human problem does this solve?
• How do you design for both
Human Impact + Profit?
• What management practices are in place to be HIP?
The HIP Methodology Process
Quant.
Impact HIP
Dimensions
1
Research
2
Quanti-fication
3
Inter-view
4
Scor-ing
5
Weighting
• Analytics based on 30 quantifiable metrics
• New fundamentals drive weighting of portfolio
• Same universe as S&P benchmarks
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 11
First, We Evaluate How Value is Created
Company Categories HIP Revenue share
GE EcoMagination 80 products, $17 Billion Equals about 10% global revenue in 2008
Pepsi Co Good for You Better for You Fun for You
30% Good and Better for You e.g. Tropicana Orange Juice, Quaker Oats
Campbell’s Soup
Lower sodium (less than 460mg) Lessened sodium High sodium per serving (780mg)
Goal for FY 2010 is: 20% …30% …50%
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 12
13
1) Health: Clean Doesn’t Smell Clorox GreenWorks + Sierra Club
Solves Human Problem: * Non-allergenic (health) * Affordable, small premium (wealth) * Eco-stable cleaner (earth) Delivers Environmental Benefit: * Meets EPA “design for environment” (DfE) standards * Biodegradable = 100% renewable Profitable for Investors: + 42% category market share + $200 million annual sales + Doubled the category size since Dec. 2007 launch
14
1) Health: Maximizing Life GE’s Logiqbook XP Ultrasound
Customer Affordability $16,000 retail price Lease for $339 per month Employee Satisfaction Solving a Human Problem… Investor Delight …for Profit + New market, high-growth, + lower manufacturing cost, + increased margins
15
2) Wealth: Increasing access to capital Wal-Mart Debit Card
• Unbanked = 10% of US families; 10 MM households – Frequently pay high fees relative
to frequent transactions
• New services increase wealth for
customers: – Lower check cashing
fees – Easier shopping at WMT,
car rentals, hotels – Trusted remittances to
family abroad – Access to ShareBuilder
investments
Next, We Run the Numbers on Human Impact
HIP Dimension
Sample HIP metrics How It Drives Profit
Health Customer and Employee Satisfaction Access to health care and wellness
Higher revenue, more referrals Increased retention, and focus
Wealth Total compensation matching CEO pay to worker pay
Boosted loyalty, longer-term staff More to invest in the business
Earth Greenhouse Gas Emissions (GHG) Waste reduction and re-use
Reduced fuel intensity, value of credits Lower costs, lessened risk
Equality Board diversity Supplier diversity
More risk-conscious decisions Stable supply base ensures deliveries
Trust Legal exposure Certifications
Reduced liabilities today & future Systematic process keeps costs lower
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 16
17
3) Earth: Saving Money + Carbon in Green Data Centers (SUN)
• Sun optimized its data centers in Silicon Valley – Enabled “virtualization” – Arranged for energy efficiency – Implemented energy sensors – Reduced 2,177 servers to 1,240
• Saving both operating + capital $$$ – Avoided $9.3MM in new construction – Retrofit payback in 3 years or less – $1mm utility incentive payment
• Positive impact on environment satisfying growing customer need – Eliminate 4100 carbon tons yearly
http://blogs.business2.com/greenwombat/2007/08/sun-greens-the-.html
18
1&3) Human Impact Profit
Lower Carbon = $$$
Human Impact = $$$
19
4) Equality: More Women on Board = Outperformance (ROE, ROS, ROIC)
20
5) Trust: Transparency of Supplier Sourcing and the Entire Carbon Chain
Solves Human Problem: • 100% traceable gold and silver • Personalized map of your purchase
at: www.LoveEarthInfo.com
Delivers Environmental Benefit: • Supplier scorecard also tracks CO2e
(carbon) associated with mining, refining, transport, crafting, delivery
• Target: Zero waste; minimize water Profitable for Investors: + Positive growth of product line in
declining category + Targets 10% of jewelry line by 2010
Strong Decision Systems Embed Sustainability
Mgmt Systems Leading HIP examples Leading Firms
Vision 50% by 2015 Zero by 2020
AMD Interface
Measures 10-point balanced scorecard PG&E, H-P, McDonald’s
Financials 10% or more of revenue $400mm cost savings +2% more; 40% less energy Solar tax credits
GE, Pepsi, Campbell’s Interface Liberty Property Trust Walgreens
Accountability Board committees; Performance targets for VPs, managers, staff
GE, Chevron, Intel Corp., Herman Miller
Decision Making
Approval / integration of new product design
United Technologies Sun Microsystems
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 21
All Three Categories Are Integrated Together
HIP Category Portfolio Weights (total 100%)
Hypothetical HIP Results
Overall HIP Score
Product 15% x (multiplied by) 10% = 1.5%
Human Impact 60% x 50% = 30%
Management Practices
25% x (20 of 25, or) 80% = 20%
Overall HIP score = 51.5%
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 22
HIP Weights Are Based on Impact, Not Just Market Value
S&P Rank
S&P 100 Market Value
S&P Weight
1 Exxon Mobil $323B 5.14%
2 Microsoft $235B 3.74%
3 Apple $189B 3.01%
5 Procter & Gamble $177B 2.81%
9 GE $161B 2.56%
19 Intel $116B 1.80%
23 Philip Morris $95B 1.40%
100 Lockheed Martin $24B 0.38%
HIP Rank
S&P 100 HIP Score HIP Weight
1 Procter & Gamble 71.0 1.47%
2 GE 70.8 1.46%
3 Intel 70.0 1.45%
24 Microsoft 57.2 1.18%
41 Lockheed Martin 53.2 1.10%
56 Exxon Mobil 48.4 1.00%
68 Apple 42.8 0.88%
100 Philip Morris 15.0 0.31%
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 23
HIP 100
Performance: A HIP100 Approach Exceeds the S&P 100 by 4% (400bps) Annually
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 24
Performance: A HIP100 Approach Exceeds the S&P 100 in Multiple Periods
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 25
In the Last Half of 2009, HIP 100 Outperformed
Since HIP 100’s “live” inception date of 7/30/09
*Actual net-of-fees results of the HIP 100 Portfolio and the S&P 100 index. Percentages include
reinvested dividends and stock splits, and deduct fees and trading costs based on a $100,000 beginning balance. Past results are not indicative of future performance.
Index Net Results As Of
HIP 100 +14.23% 12/31/09
S&P 100 +12.23% 12/31/09
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 26
HIP’s “Bottom Up” Sector Weights Differ From S&P’s Market Weights
16.1% 22.4%
15.0%
14.3%
14.2% 8.8%
12.6% 12.2%
12.4% 13.7%
9.3% 6.7%
8.9% 13.8%
4.8% 1.8%
3.6% 1.6% 3.1% 4.7%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
HIP100 S&P100
Telecom Utilities
Materials
Energy
Consumer Discr'y
Health Care
Financials
Industrials
Consumer Staples
Info Tech
HIP100 v S&P100 Sector Weights
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 27
HIP 100 Explained: The Top 10 of the 100
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 28
HIP’s Indexes Seek Diversification, Alpha and Positive Risk-Adjusted Returns
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 29
All Types of Investors Can Benefit from a HIP Portfolio
HIP Portfolio
Individual Investors
Family Offices
Endowments
Retirement Plans
Pensions
Corporate Treasuries
Foundations
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 30
New Investments Across Asset Classes
MFE’s More HIP Portfolio
Cash
All Cash is Invested for
Human Impact +
Profit
Fixed income
Corporate bond index
(become the new JENI)
Income Generating
Appreciation
Real Estate Investment Trust (a HIP
REIT)
Equities
HIP Indexes that cover all sectors and
sizes
International and
Emerging
Emerging markets
index (the new BRIC)
Venture Capital and
Private Equity
VC and PE funds that
deliver impact
Alternatives
Commodity contracts
that are fair trade,
organic, and sustainable
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 31
A
HIP Can Apply Across Asset Classes
HIP Portfolio
Cash
Community Bank of Bay
Wainwright
New Resources
Bank
Fixed income
Muni Bonds
Domini Corp. Bond
Index
Microfinance
RSF Mezz.
Income Generating
Appreciation
Preferred equities
(dividends)
REITs
Equities
HIP in US
HIP in EUR
Impact strategies (Earth 2x)
International and
Emerging
Portfolio 21
Cleantech indexes
(e.g. PZD)
Venture Capital and
Private Equity
Renewal2
Sartori
Patient Capital
Alternatives
Fair Trade Coffee
Organic orange juice
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 32
A More HIP Portfolio to Yields More Human Impact + Profit
• The new fundamentals of investing shift how businesses create value – by solving human needs for profit
• A HIP Portfolio can generate higher risk-adjusted returns, generating positive alpha – and impact
• Positive financial risk-adjusted returns attracts more traditional and SRI investors to this path
• Consequently, a HIP Portfolio builds a better world for investors, entrepreneurs and citizens
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 33
A Fundamentally New World for Investors, Business and Citizens
• Investing: Transform how capital markets –
from mutual funds and ETFs to venture
capital – serve society
• Business: Solving human needs for profit is
the path to industry leadership
• Citizens: Open sourcing of investing
enables “wisdom of the crowd”
and global impact
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 34
About HIP Investor
• HIP is a registered investment advisor, based in California
• Our multi-disciplinary team combines expertise in finance and sustainability, including microfinance and impact investing
• The HIP 100 Index has outperformed the S&P 100 by 4% on average annually over the past 5 years*
• Author of new investment primer, “THE HIP INVESTOR: Make Bigger Profits by Building a Better World” to be published by John Wiley and Sons, April 2010
* Since July 30th, 2009, the HIP 100 Portfolio has outperformed the standard S&P benchmark by 2% for less than a half-year . The HIP 100 has also outperformed the S&P benchmark in a five-year backtested model (please see Disclosure and Assumptions at the back of the document).
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 35
Disclosure and Assumptions
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 36
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 37
Special Sneak
Preview:
Coming
April 2010 (John Wiley & Sons)
Contact Us to Become More HIP
R. Paul Herman CEO + Founder +1 415 902 7741 Paul@HIPinvestor.com
Joan Varrone COO + Exec Vice President +1 415 305 6329 Joan@HIPinvestor.com
Eric Steinhofer Senior Vice President +1 415 518 2746 Eric@HIPinvestor.com
www.HIPinvestor.com
CONFIDENTIAL © 2006-2010 HIP Investor Inc. 38
top related