Have you ever wondered what impact your investment in a school has on the success of its students? Or whether the construction of the new sports facility in your city required wetlands to be drained? Or what long term impact an issuer’s hiring practices might have on their communities?
Now you can learn all of these things on Neighborly.
Ratings only go so far
You may already be familiar with conventional credit ratings, which are typically based on a two-year assessment of the issuer’s ability to pay back their debts.
However evaluating the non-financial impact of a project is usually viewed as difficult and opaque. It’s also often not possible to fully separate ethical and environmental issues from their financial effects.
An organization that pollutes the environment, for instance, may in the future find its ability to borrow cheaply cut off at the same time as it faces a massive bill for damages and remediation. An organization with a poor governance structure may find that it is unable to respond effectively to new threats or opportunities, lose market share and be unable to serve its stakeholders.
We know that investors want this information, and data is becoming more available.
The widespread demand for more ESG (environmental, social and governance) information, has led to some organizations voluntarily providing more details on their operations to gain investor trust. The Commonwealth of Massachusetts, for example, was an early leader in bringing “green bonds” to the municipal market with their $100 million General Obligation issuance in June 2013 to finance environmental projects. They have agreed to provide investors with interim updates on the use of proceeds, as well as a final list of all projects funded by this issuance.
The increased interest investors have in seeing their dollars make a positive impact has led to the emergence of impact rating companies to help answer some of these questions.
We’re working with HIP (Human Impact + Profit) Investor, to show their ratings on some Neighborly offerings.
HIP combines a traditional analysis with a quantitative evaluation of the impact of an investment decision. Their methodology rates and ranks investments based on future risk, return potential and net impact on on society.
How do HIP ratings work?
HIP gives each issuer a top line score out of 100. The issuer is also ranked in their sector. You’ll see that at the top of any HIP-rated issuance on Neighborly:
In addition to an overall rating and contextual information on where comparable issuances rank, HIP also provides key metrics which highlight some of the many factors that go into the rating calculation.
For schools, the top five are: the percentage of students who are on free or reduced school lunch, test scores, graduation rate, student to faculty ratio, and spending per student.
Our pilot begins today with California school districts; we will display their ratings on our issuer pages, and will expand our coverage to additional states and sectors over the coming months.
Each of these key metrics are aligned with a particular focus area, the “HIP Pillar”: Health, Wealth, Earth, Equality and Trust. These pillars are the same across their coverage universe and could allow you to align your portfolio around a broad value–for instance you may be interested in investments which score well on Health across city, county and school district issuers.
Here are some examples of issuances that have been rated by HIP:
- San Leandro Unified School District’s General Refunding Bonds Series 2015b sold in 2015
- West Contra Costa Unified School District’s 2012 Election Series B bonds sold in 2015
- Los Gatos Union School District’s Election of 2010 General Bonds Series 2011a sold in 2011
We’ll be releasing search and browse functionality for HIP-rated issuances in coming weeks.
Who is a HIP Investor?
HIP stands for “Human Impact + Profit”, which is part of why we think they are such an excellent partner for Neighborly and our users.
You can learn more about HIP, their team and methodology, and the work they are doing by clicking here.
We’re excited to help bring this information to a wider audience, and hope you find it useful in evaluating your potential investments on a more holistic basis.