Former Vanguard analyst James Katz has founded Humankind Investments, whose first product, the Humankind US Stock ETF (HKND) has just gone over USD100 million in assets.
The firm’s proprietary Humankind US Equity Index tracks the top 1,000 US companies that promote healthier, safer, more equitable and longer lives. The Index’s ranking is based on a quantitative analysis of each company’s positive and negative contributions to society, as measured by its impact on investors, consumers, employees and citizens – defined as its Humankind Value.
The firm writes that this pioneering concept is captured by a single dollar figure that is meant to represent a company’s true social and economic value to humanity.
Katz says that he got the idea while working for the USD6 trillion asset manager Vanguard. The size of the firm meant that it effectively controlled about 5 per cent of almost every publicly traded company’s shares but, at the time, was not incorporating any kind of ethical or moral policy when voting the shares they managed on behalf of their clients.
“They said it was the asset manager’s fiduciary responsibility to maximise investment returns for shareholders,” Katz says, “and it became clear to me that this was too narrow a definition of what it means to take care of your shareholders.”
“Let’s take an easy punching bag like a tobacco company – you might make USD1,000 in your portfolio over time but maybe someone in your family gets sick from smoking and you have to pay USD10,000 in medical payments. I believe that everyone should take all the economic impacts that companies have outside their portfolio into account.”
Katz felt that this was a niche that was available within a marketing heavy socially responsible investing space.
“I saw this opportunity to try and quantify social responsibility,” he says. “To do the math on how these companies are impacting us outside our portfolios.”
Katz says that the product is aimed at anyone who wants to invest in the US stock market broadly but maximise the benefit of the investments for humanity.
“The investment thesis is if you believe that society is moving in a more socially responsible direction then people will want to shop at companies doing the right thing, work for companies doing the right thing and that government will regulate companies that are not doing the right thing which will then potentially lead to stronger performance for the investment strategy.”
The firm has other products planned, looking internationally in the next year or so, but Katz comments that the SRI research poses increased challenges in different countries.
