Socially Responsible Investing - HIP Investors Aim to Make Bigger Profits by Building a Better World
by Danielle Ravich, Guest Blogger
In his New York City debut this past summer, Mr. R. Paul Herman, founder and CEO of an investment advisory firm, Human Impact + Profit (HIP) demonstrated how doing good for society can actually translate to doing well. By investing more in companies that address human and environmental needs, we can reinforce and reward practices that are in-line with positive societal values while also generating earnings.
"How many times have we heard companies say that people are their most important assets?" asked Mr. Herman. "But on our budget sheets, people are considered to be a liability" he noted. Today, most companies do not account for their impact on people through their current organizational assesments, but they do add value that is not necessarily accounted for by investors.
Mr. R. Paul Herman is bringing awareness of companies' impact on human lives to financial decisionmakers. Using a unique metric system, Herman evaluates how well profitable companies are actually able to address society's needs.
Mr. Herman outlines his methodology for calculating how "HIP" companies are in recent book, "The HIP Investor: Make Bigger Profits by Building a Better World". Large S&P100 companies are evaluated based on their ability to address a heirarchy of human and environmentally-related needs. The HIP Index ranking is assessed according to companys' ability to address "Health, Wealth, Earth, Equality and Trust." Once a company meets each of these needs, citizens would be happier and able to lead more fulfilling lives. Consistent with the desire to humanize hard numbers,this type of strategy is inspired by Maslow's Heirarchy of needs and is similar to the approach of the UN's Human Development Index which evaluates countries.
So, how does HIP compare to other stock portfolios? Overall, HIP investors are more likely to outperform their peers. The HIP 100 portfolio has consistently outperformed the S&P 100 Index by at least 400 basis points (4%) annually over the past five years when backtested in a model.
HIP uses public information to assess these companies, but has also conducted additional research through conducting interviews with CEOs of these companies. Through the process, HIP highlights important societal issues that companies can influence into the limelight. In their April issue, FastCompany teamed up with SVT Group and HIP Investor group to guide readers in their socially responsible investment practices.
Often times, our investments are stuck in endowments, pensions, and 401-K retirement funds, but HIP aims for "Social K's". To address this need for improved socially responsible investing, the book serves as a "how to guide for everyday investors who want to vote with their dollar" said Herman.
This type of integrated disclosure provides companies who are doing well with another way to compete. It allows companies to shift their decisionmaking to a more holistic and inclusive understanding of their practices and allows the general public to make smarter choices in their investments that are not only good for society's well-being, but also for their own pockets.
More information on the HIP Investor here.
All those qualities are something that doesn't come easy but I agree are important.
Posted by: mechanical engineering internships | October 31, 2011 at 10:13 AM
That's really interesting. It shows that the right good deeds can really pay off.
Posted by: LASIK The Woodlands | August 05, 2011 at 09:50 AM