The HIP Model
Fixed Income Issuers
Example: Farmland LP Sustainability Bond Rating
In January of 2021, Farmland LP issued a bond to support their ongoing investments in the conversion of agricultural land from conventional to regenerative farming practices which received the highest HIP Rating to date.
Farmland's rating was buoyed by its exceptionally strong performance in four of the seven pillars: Earth, Health, Trust Products & Services, all of which were 90.0 or above. Its Management Practices rating was in alignment with the overall, and it lagged on Equality.
Farmland's performance is benchmarked to sector peers and across the broader universe of HIP ratings to create relative ratings. In this case, the Management Practices, Health, and even the Equality metrics greatly exceed the sector averages.
HIP Impact Ratings score and rank investments using material metrics from operational outcomes, products and services, and management practices.
HIP Impact Ratings score and rank investments using material metrics from operational outcomes, products and services, and management practices.
Specifically, HIP organizes data and constructs and analyzes 260+ metrics to assess the impact and risk for any investment. All ratings are on a 0-100 scale where 0 is net-negative impact (more extractive) and 100 is net-positive (more generative).
An analysis of the data which HIP gathers and licenses in combination against the HIP Pillars and their components allows HIP Investor to provide analytic products on several levels of granularity: metrics, pillars, and an overall ESG score.
Higher HIP ratings not only provide information on who is providing more positive impact, but they also tend to correlate with higher returns and lower risk. Lower ratings tend to generate lower returns, more volatility, and less impact.
HIP Investor Clients
- FUND MANAGERS seek an edge with HIP Ratings, which can reveal knowable-yet-ignored risks and potential sources of untapped returns.
- ADVISERS want to serve those investors who request ESG solutions specifically, those who use their portfolio to fund Impact Investing and want to serve all their customers by pursuing optimal risk-adjusted returns.
- INVESTORS pursue optimal risk-adjusted returns by incorporating HIP Ratings to select and weight investments in stocks, bonds and funds/ETFs
- ISSUERS want the benefit of a HIP review to understand how they may improve their future risk-adjusted returns, or want to pre-rate their issuance.
- MUNICIPALITIES want to compare their issuances with HIP metrics and HIP’s map to SDGs or other frameworks.
- ACADEMICS want to advance the understanding of the relationship of ESG data to financial returns.
- BENEFITS ADMINISTRATORS revise 401(k) Plans seeking higher employee recruiting and engagement of their company’s employees who can use HIP Ratings of fund choices to invest for retirement in alignment with their values.
Since the HIP Ratings cover all asset classes, including Corporate Bonds and Equities as well as Municipal and Sovereign Bonds, the ratings can be applied to mutual funds, ETFs, and entire portfolios.
