Paul Herman, CEO & Founder, HIP Investor, Inc. Bart Houlahan, Co-Founder, B Lab Stephen J. Donofrio, VP, Partnerships & Innovation, CDP North America Bill Baue, Corporate Sustainability Architect Joy Poland, President, Building Bridges, LLC What sustainability-related trends are picking up among investors, and are there reasons to believe any of these trends might see mainstream adoption? What next-level benchmarks should brands pay attention to, and why? Are the principles of fossil divestment and localization ever going to take off, or have they already?

1. The New Metrics of Sustainable Business 2013
Trends and Tremors in the Sustainable Investing
Landscape
Paul Herman, HIP Investor, Inc.
Joy Poland, Building Bridges, LLC
Bart Houlahan, B Lab
Stephen J. Donofrio, CDP North America
Bill Baue, Corporate Sustainability Architect

2. Trends
Tremors
Tools
CONFIDENTIAL © 2006-2013 HIP Investor Inc.
2

3. 80% of Market Value = Intangible
83%
68%
32%
68%
20%
20%
80% 80%
32%
17%
www.AgeOfVolatility.com
© 2006-2013 HIP Investor Inc.
3

4. Intangibles Index Beats S&P500
(12/29/06 to 3/05/12)
Ocean Tomo Patent ETF (OTP)
+7.7%
-3.9%
© 2006-2013 HIP Investor Inc.
4

5. FUTURE
RISK,
UPSIDE
CONFIDENTIAL © 2006-2013 HIP Investor Inc.
5

6. ESG in Each Asset Class Still
Ripe for Sustainability Portfolios
Source: Mercer ratings
CONFIDENTIAL © 2006-2013 HIP Investor Inc.
6

7. How Much Carbon Do You Own?
Current Funds
VWNAX, $
158,297
2
Proposed Portfolio
VMMXX,
$187,971
VASGX, $8
6,858
Fund Tons of
CO2 = 2602
Note 2 – Values as of 6/30/2013
Fund Tons of
CO2 = 778
CONFIDENTIAL © 2006-2013 HIP Investor Inc.
7

8. IMPACT-RATED MUNI BONDS
City of Seattle = 72%
15 of possible 25
WEALTH points for
17 of possible 25
HEALTH points for
WEALTH
25%
•Median Income
•Affordability of Housing
•Vacant Houses
•Unemployment
•Poverty
EQUALITY
25%
16 of possible 25
EQUALITY points for
•
Obesity/Diabetes
• Crime Rate
• Graduation Rate
• Health Insurance
Coverage
HEALTH
25%
72%
75%
24 of possible 25
EARTH points for
•
Commuting Method
and Duration
EARTH
25%
•
Gender Diversity &
Ethnicity Reflected in
Business Ownership

9. IMPACT-RATED BONDS
Seattle Public Utilities Wastewater = 59%
5 of possible 10
TRUST points for
• 3rd Party certifications
5 of possible 10
EQUALITY points for
• Gender diversity
on the board
and executive
management
15 of possible 20
HEALTH points for
• Sewer Overflow
management
59%
34 of possible 60
EARTH points for
• Treatment
techniques
• Separated pipes
• Biosolids practices
CONFIDENTIAL © 2006-2013 HIP Investor Inc.
9

10. 20.00
IMPACT:
RETURNS:
color of circles:
Green = higher IMPACT
Yellow = medium IMPACT
Red = lower IMPACT
Annualized
5- Yr Returns*
15.00
OP 50 Funds (ETFs)
10.00
5.00
-
5.00
15.00
25.00
35.00
RISK
Standard Deviation of 5Year Returns*
(5.00)
VALUE: size of circles
US Equity in Fund
relative to $ InvestedSmall Cap
US Equity Mid Cap
US Equity Large Cap Value
US Equity Large Cap Growth
US Equity Large Cap Blend
Global Equity
Emerging Markets Equity
Industry Sector
US Fixed Income
High Yield Fixed Income
Inflation Linked
Commodities Precious Metals
Morningstar Efficient Frontier
* Past 5 years, as of 8/31/2013; HIP Scores (2011/12)
Source: XYZ 401(k); Morningstar; HIP Investor Scores
CONFIDENTIAL © 2006-2013 HIP Investor Inc.
10

11. 20.00
RETURNS:
IMPACT:
color of circles:
Green = higher IMPACT
Yellow = medium IMPACT
Red = lower IMPACT
Annualized
5- Yr Returns*
15.00
TOP ETFs
Industry-Sector
10.00
5.00
-
)
5.00
15.00
25.00
35.00
4
VALUE: size of circles
RISK
relative to $ Invested in Fund
Standard Deviation of 5Year Returns*
(5.00)
Industry Sector
* Past 5 years, as of 8/31/2013; HIP Scores (2011/12)
Source: XYZ 401(k); Morningstar; HIP Investor Scores
Commodities Precious Metals
Morningstar Efficient Frontier
CONFIDENTIAL © 2006-2013 HIP Investor Inc.
11

12. 20.00
RETURNS:
IMPACT:
color of circles:
Green = higher IMPACT
Yellow = medium IMPACT
Red = lower IMPACT
Annualized
5- Yr Returns*
15.00
TOP ETFs
Fixed Income
10.00
5.00
-
)
5.00
15.00
25.00
35.00
4
RISK
VALUE: size of circles
Standard Deviation of 5Year Returns*
relative to $ Invested in Fund
(5.00)
US Fixed Income
High Yield Fixed Income
* Past 5 years, as of 8/31/2013; HIP Scores (2011/12)
Source: XYZ 401(k); Morningstar; HIP Investor Scores
Inflation Linked
Morningstar Efficient Frontier
CONFIDENTIAL © 2006-2013 HIP Investor Inc.
12

13. )
20.00
RETURNS:
IMPACT:
color of circles:
Green = higher IMPACT
Yellow = medium IMPACT
Red = lower IMPACT
Annualized
5- Yr Returns*
15.00
TOP ETFs
Equities
10.00
5.00
5.00
15.00
25.00
35.00
4
RISK
VALUE: size of circles
Standard Deviation of 5Year Returns*
relative to $ Invested in Fund
(5.00)
US Equity Small Cap
US Equity Mid Cap
US Equity Large Cap Value
US Equity Large Cap Growth
US Equity Large Cap Blend
Global Equity
Emerging Markets Equity
Morningstar Efficient Frontier
* Past 5 years, as of 8/31/2013; HIP Scores (2011/12)
Source: XYZ 401(k); Morningstar; HIP Investor Scores
CONFIDENTIAL © 2006-2013 HIP Investor Inc.
13

14. CONFIDENTIAL © 2006-2013 HIP Investor Inc.
14

15. CONFIDENTIAL © 2006-2013 HIP Investor Inc.
15

16. Billion+ IMPACT
Million JOBS
Trillion $
MARKET
CONFIDENTIAL © 2006-2013 HIP Investor Inc.
16

17. Building
More Value + Profit:
The Rhode Island MVP ™ Program
Building Bridges
Joy Poland

18. Tremors
“Flying in the fog of „False Estimates‟ of real
corporate value is a threat of planetary proportions.
These can be fixed with fundamental shifts in
measurement, reporting and rating companies.”
Allen White, (Guardian Professional) February, 2013
Answer: Bridge the GAAP

19. Kevin

20. Trends
Thought-Leaders Using
SI/ESG Fundamentals to
Engage CPAs, Business
Owners & Educators
• Engage the CPA Community ~ Most Trusted Advisor
• Engage the Business Owner (Privately-Held)
~ Valuation & Succession Planning
• Engage Leaders/Job Creation ~ KnowledgeEconomy $$$
• Education Partners ~ Colleges & Universities

21. Tools
MVP (More Value & Profit)™ Program
• Based on People-Driven (and Planet Too) Business Model
• Sustainability Scoring & Impact Ratings; 401K, Pensions (& Endowments)
• Internships ~ MBAs, Sustain’y Accounting: Providence College
• Create New, Viable Profit Centers – Especially for CPAs
• Community Signature ~ Environmental Literacy Programs
~ No Child Left Inside (NCLI)

22. A “People-Driven” Business Model Values
Human, Environmental, Social & Financial Capital
PROFIT-DRIVEN
Financial Data:
Tangibles
• Earning Growth
• Price/Earnings
Ratio
• Return on Equity
• Operations
• Cash Flow
• Risk Management
PEOPLE-DRIVEN™
Profit +
People +
Planet =
Prosperity
Benefits the
Whole
Human Env Social
Data: Intangibles
• Health ~ Stress/Wellness
Program
• Wealth ~ Scoring/Impact
• Earth ~ Energy Efficiency &
Natural Resource Intensity
• Equality ~ Employee
Engagement &Leadership
• Trust ~ Sustainability
Reports/Community
Signature
Why? Intangibles Drive Value
Building Bridges 2012
Copyright 2012 All Rights Reserved

23. 401(k) Plan Funds Scored for IMPACT
KLR's Retirement Plan: HIP Scoring of Return, Risk and Impact
ASSET CLASS
RETURN
RISK
IMPACT
Name of Fund
Global Broad
Category
Global Category
Morningstar
Rating
Total Ret
Annlzd 5 Yr
(Daily) USD
Std Dev 5 Yr
(Qtr-End)
USD
Tentative HIP
Score
Nationwide Money Market Instl
Money Market
US Money Market
*
0.10
0.14
54.8%
Oppenheimer International Bond A
Fixed Income
Global Fixed Income
4
Neuberger Berman High Income Bond A*
Fixed Income
High Yield Fixed Income
1
Principal High Yield A
Fixed Income
High Yield Fixed Income
4
PIMCO Real Return Instl
Fixed Income
Inflation Linked
4
American Century ShDur Infl Prot Bd Intl
Fixed Income
Inflation Linked
4
Prudential Total Return Bond A
Fixed Income
US Fixed Income
4
PIMCO Total Return Instl
Fixed Income
US Fixed Income
4
TCW Total Return Bond N
Fixed Income
US Fixed Income
5
Eaton Vance Floating Rate A
Fixed Income
US Fixed Income
3
TCW Total Return Bond I
Fixed Income
US Fixed Income
5
Principal Short-Term Income A
Fixed Income
US Fixed Income
3
Nationwide Bond Index A
Fixed Income
US Fixed Income
2
Delaware Extended Duration Bond A
Fixed Income
US Fixed Income
4
4.38
4.49
9.84
4.69
4.06
7.22
6.58
8.50
5.32
8.80
3.51
3.89
11.86
10.27
12.11
11.45
8.80
6.62
5.10
4.41
3.77
10.78
3.80
2.09
3.64
12.17
54.8%
26.4%
38.0%
69.6%
69.0%
64.5%
69.7%
71.4%
33.9%
70.1%
50.7%
69.6%
69.6%
Wells Fargo Advantage Emerg Mkts Eq A
Equity
Emerging Markets Equity
4
Lazard Emerging Markets Equity Open
Equity
Emerging Markets Equity
4
Aberdeen Global Equity A
Equity
Global Equity
3
American Funds Capital World G/I R6*
Equity
Global Equity
3
American Funds EuroPacific Gr R6*
Equity
Global Equity Large Cap
3
Thornburg International Value I
Equity
Global Equity Large Cap
4
Harbor International Instl
Equity
Global Equity Large Cap
4
Oppenheimer International Growth A
Equity
Global Equity Large Cap
5
DWS RREEF Global Real Estate Secs A
Equity
Real Estate Sector Equity
2
Invesco Real Estate A
Equity
Real Estate Sector Equity
3
5.21
25.14
36.4%
3.36
27.83
36.7%
4.93
21.62
49.0%
10.02
20.26
48.4%
8.88
21.85
46.7%
3.87
20.52
47.4%
5.12
25.04
51.2%
7.77
21.80
43.6%
4.00
26.74
26.2%
CONFIDENTIAL © 2006-2013 HIP Investor Inc. 23
4.71
29.08
24.3%

24. Benefits of 401(k) Plan Scoring:
Engaging Employees; Attracting Top Talent;
Discovering How to Quantify Future Risk & Impact
25
IMPACT: color of circles:
Green = higher IMPACT
Yellow = medium IMPACT
Red = lower IMPACT
RETURNS:
Annualized
5- Yr Returns*
20
15
10
5
0
-5
0
5
10
15
20
25
VALUE: size of circles
relative to $ Invested in Fund
35
RISK: Standard Deviation
of 5-Year Returns*
Money Market
-5
30
US Equity Small Cap
US Equity Mid Cap
US Equity Large Cap
Equity Real Estate
Global Equity
US Fixed Income
High Yield Fixed Income
Inflation Linked
Global Fixed Income
Allocation
All Funds
* Past 5 years, as of 8/31/2013; HIP Scores (2011/12)
Source: KLR 401(k); Morningstar; HIP Investor Scores
Emerging Markets
CONFIDENTIAL © 2006-2013 HIP Investor Inc.
24

26. 850+ B Corporations $7.0 Billion Marketplace 60 Industries

27. Trends: An Emerging Marketplace?
All Investing
$61.9 Trillion
Negatively
Screened Funds +
Impact Investing
$3.1 Trillion
Impact Investing
in 10 years?
• Impact Investing is the
use of for-profit
investment to address
social and
environmental
challenges.
~$1 Trillion
850+ B Corporations $7.0 Billion Marketplace 60 Industries

28. Who makes Impact Investments?
DFIs
• OPIC
• IFC
• IADB
Private
Foundations
• Rockefeller
• Ford
• Skoll
Private Equity & Debt
Real Estate
Financial
Institutions
•
•
•
•
Pension
Funds
JP Morgan
Prudential
UBS
Morgan
Stanley
• TIAA Cref
• PPMG
HNWIs and
Corporations
• Starkbucks
• Danone
•“Double & Triple” Bottom Line Funds
•Cleantech funds
•Investments in land conservation, green buildings, and
affordable housing
Fixed Income
•Screened Portfolios of Gov’t Bonds
•Targeted Community Development Bond Funds
Cash & Cash
Equivalents
•Deposits at a CDFI or B Corporation
850+ B Corporations $7.0 Billion Marketplace 60 Industries

29. What do they want to Measure?
Operational Impact
Business Model Impact
Governance
Workers
Intensity
Reach/Scale
Community
Environment
Efficacy
Serving Those
In Need
Consumers
Industry
Impact/ Sector
Innovation
850+ B Corporations $7.0 Billion Marketplace 60 Industries

30. Tremors: New Corporate Forms
Benefit Corp: Twenty
Passed
(DE, PA, CA, HI, IL, LA, MA
, MD, NJ, NY, SC, VT, VA, D
C, AZ, AR, NV, OR, CO, RI)
Not Alone
L3C
Flexible Purpose Corp
Social Purpose Corp
UK / Chile
850+ B Corporations $7.0 Billion Marketplace 60 Industries

31. Tools: Resources
850+ B Corporations $7.0 Billion Marketplace 60 Industries

32. Tools: Engagement
•Subsidiaries
•Investment
•Supply Chain
•Tax
•Procurement
850+ B Corporations $7.0 Billion Marketplace 60 Industries

33. Discovering corporate sustainability trends &
tremors through CDP disclosure assessment
Sustainable Brands
#NewMetrics
Philadelphia 25th September 2013
Stephen Donofrio
Vice President, Partnerships & Innovation
Stephen.Donofrio@CDP.net / 212.378.2086
132 Crosby Street, 8th Floor, New York, NY 10012
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 33

34. Agenda
• Trends
Increasing investor interest & corporate disclosure
Quality of corporate disclosure is ever-improving
• Tremors
Scope 3: Financed emissions minimally reported by financials
Scope 3: Investments methodologies exist, but no standard
• Tools
Case Studies of Scope 3: Investments calculated by financials
CDP overview
Action and engagement on financed emissions
850+ B Corporations $7.0 Billion Marketplace 60 Industries
34

35. Agenda
• Trends
Increasing investor interest & corporate disclosure
Quality of corporate disclosure is ever-improving
• Tremors
Scope 3: Financed emissions minimally reported by financials
Scope 3: Investments methodologies exist, but no standard
• Tools
Case Studies of Scope 3: Investments calculated by financials
CDP overview
Action and engagement on financed emissions
850+ B Corporations $7.0 Billion Marketplace 60 Industries
35

36. 750
90
CDP Signatories & Signatory Assets: 2003 - 2013
75
600
60
Assets ($ trillion)
Number of Signatories
Trends:
Increasing investor interest & corporate disclosure
Climate Change
4600+
Companies
disclosed via CDP
in 2013
To transform the global economic system to prevent
Water
dangerous climate change and value our natural resources
45
340+
by putting relevant information at the heart Companies disclosed
of
in 2012
business, investment and policy decisions.
30
450
300
150
15
Forests
100
0
0
2003
2004
2005
2006
Climate change signatories
Climate change assets
2007
2008
Water signatories
Water assets
2009
2010
2011
2012
2013
Companies disclosed
in 2012
Forests signatories
Forests assets
850+ B Corporations $7.0 Billion Marketplace 60 Industries
36

37. Trends:
Quality of corporate disclosure is ever-improving
Transparency
Verification
97%
71%
min score for G500 disclosure
leaders in 2013
 8% increase from 2011
of G500 companies verified
their GHGs in 2013
 2X % from 2011
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 37

38. Agenda
• Trends
Increasing investor interest & corporate disclosure
Quality of corporate disclosure is ever-improving
• Tremors
Scope 3: Financed emissions minimally reported by financials
Scope 3: Investments methodologies exist, but no standard
• Tools
Case Studies of Scope 3: Investments calculated by financials
CDP overview
Action and engagement on financed emissions
850+ B Corporations $7.0 Billion Marketplace 60 Industries
38

39. Tremors:
Scope 3: Financed emissions minimally reported by financials
Energy:
 Energy companies’ reported scope 3 emissions are 4X higher
than the
sector’s scope 1 and 2 emissions;
 98% of these are emitted through the use of sold products.
whereas…
Financials:
 Financials makes up 24% of respondents, however,
represents only 0.6% of
total S1+2 emissions;
 Only 6% report the carbon impact of their investments…
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 39

40. 
• Under the CDP, in 2012 RBS reported greenhouse gas emissions of
735,437 tonnes of carbon dioxide equivalent (tCO2-e)... RBS did
not report any emissions resulting from the money it loans to
fossil fuel companies or projects. These ‘financed emissions’
resulting from the bank’s loans to coal, oil and gas companies
bring the bank’s 2012 carbon footprint to up to 1,200 times the
footprint reported...

- RBS’s true carbon emissions 2012, The World Development Movement (WDM)
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 40

41. •

Various approaches exist:
2o Investing Initiative id’ed a dozen
• Standardization efforts:
results in 2014-2015?
Investments are categorized as a
downstream scope 3 category
because the provision of capital or
financing is a service provided by the
reporting company.
- GHG Protocol (WRI/WBCSD)

–
•
UNEP-FI (global) & VfU (regional)
Methods mentioned in
CDP’s
2013 disclosure cycle:
UNEP-FI (10 mentions), GHG Protocol (9
mentions), VfU (7 mentions), WRI (7
mentions) & WBCSD (3 mentions)
–
850+ B Corporations $7.0 Billion Marketplace 60 Industries
41

42. 

There are many factors to be
We have tested all available
considered including
methodologies to assess GHG
availability, credibility, and
emissions from investments, but
consistency of information as well as
none of them meets our criteria in
the direction of the regulatory
terms of reliability and bias.
landscape in North America.

- Bank of Montreal
2013 CDP Climate Change Disclosure

- BNP Paribas
2013 CDP Climate Change Disclosure
850+ B Corporations $7.0 Billion Marketplace 60 Industries
42

43. Case Studies of Scope 3: Investments calculated by Financials
Commonwealth Bank of Australia
 % of financing X total lifetime
project emissions
 1 project (25 year life) in ’12
 Uses Australian govt’s def. of
‘emissions intensive’ to identify
deals closed during reporting yr
July 1, 2011 - June 30, 2012
(metric tonnes CO2)
Scope 1
Scope 2
Scope 3
11,160
145,989
39,634,361
39,791,510
S3 Investments
39,469,868
S3 Investments/Total
99%
S3 Investments/(S1+S2)
251 times
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 43

44. Case Studies of Scope 3: Investments calculated by Financials
Mizuho Financial Group
 % of equity x emissions as
reported to CDP or other
 Top 30 companies held by the
parent company
 Accounts for ~20% of the
value of consolidated noninvestment holdings
April 1, 2012 - March 31, 2013
(metric tonnes CO2)
Scope 1
Scope 2
Scope 3
16,177
202,850
8,658,200
8,877,228
S3 Investments
8,601,803
S3 Investments/Total
S3 Investments/(S1+S2)
97%
39 times
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 44

45. Case Studies of Scope 3: Investments calculated by Financials
Citigroup
 % of financing X total lifetime
project emissions
January 1, 2011 - December 31, 2011
(metric tonnes CO2)
 1 project (30 year life) in ’11
Scope 1
Scope 2
Scope 3
 Project-specific GHGs are
derived from the plant’s capacity
& heat rate, the carbon content
of the fuel, and projected
capacity utilization
36,751
1,039,178
7,528,870
8,604,799
Scope 3 Investments
7,400,000
S3 Investments / Total
S3 Investments / (S1 + S2 )
86%
7 times
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 45

46. Agenda
• Trends
Increasing investor interest & corporate disclosure
Quality of corporate disclosure is ever-improving
• Tremors
Scope 3: Financed emissions minimally reported by financials
Scope 3: Investments methodologies exist, but no standard
• Tools
Case Studies of Scope 3: Investments calculated by financials
CDP overview
Action and engagement on financed emissions
850+ B Corporations $7.0 Billion Marketplace 60 Industries
46

47. Tools:
CDP overview
 CDP is an international, not-forprofit organization providing the only
global system for companies and cities
to measure, disclose, manage and
share vital environmental information.
 Mission is to transform the global
economic system to prevent
dangerous climate change and value
our natural resources by putting
relevant information at the heart of
business, investment and policy
decisions.
CDP has 501(c)3 charitable status in the U.S. via its fiscal agent and sponsor
liaison, Rockefeller Philanthropy Advisors
850+ B Corporations $7.0 Billion Marketplace 60 Industries
47

48. Tools:
Action and engagement on financed emissions
General Motivations:
CDP Efforts:
 Pressure from NGOs.
 UNEP-FI Scope 3 - Investments
 Companies want
investor
feedback
force
task
 CDP is increasing work on sector
disclosure & materiality focus
 Mandatory reporting
requirements will increase
financed
emissions reporting tool
 CDP could be utilized as a
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 48

49. Discovering corporate sustainability trends
through CDP disclosure assessment
Sustainable Brands
#NewMetrics
Philadelphia, 25th September 2013
Stephen Donofrio
Vice President, Partnerships & Innovation
Stephen.Donofrio@CDP.net / 212.378.2086
132 Crosby Street, 8th Floor, New York, NY 10012
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 49

50. Trends & Tremors in the
Sustainable Investing Landscape:
Threshold Investing
Sustainable Brands #NewMetrics Conference
Wharton, UPenn, September 24, 2013
Bill Baue
Co-Founder
Sustainability Context Group

51. Tremor
Overshooting Sustainability Thresholds
Rockstrom's Planetary Boundaries
Pssst: “Sustainable” Investing Currently Ignores Thresholds

52. Trend
Threshold-Based Advocacy
350.org's Divestment Campaign
Pssst: Campaign Currently Ignores “Demand” Side—Carbon Emitters

53. Tool
Threshold Investing
Sustainable Investing Founders Add New Dimension
Pssst: Investors Wanted

54. Tools
Threshold-Based Carbon Counters
CSO, Autodesk, CDP/WWF Offer Free Calculators
Pssst: Run the Numbers

55. Tool
Threshold-Based Screening
Climate Counts Index
Pssst: Build Portfolios That Profit From Climate Solutions

56. Tool
Triple Bottom Line Threshold Screening
True Sustainable Investing
Pssst: Build Portfolios That Profit From Sustainability Solutions