How We Select and Monitor the ETFs in Your Humankind Portfolio

Here at Humankind, our team of PhDs and CFAs is hard at work, gathering and synthesizing information about how we believe companies are behaving toward their people. We always try to invest in the ETFs whose underlying companies are having more of a positive impact on people, and of course, less of a negative impact. In practice, this tilts Humankind’s Portfolios away from ETFs that, based on our research, invest in companies which do a lot of harm, like those that sell toxic products, or pollute our air, and instead tilts Humankind Portfolios toward ETFs that invest in companies that do a lot of good, like those which provide access to clean water, or are researching new ways to cure disease. We do all this with an eye toward selecting diversified ETFs that not only have more of a positive human impact, but that can also help you meet your financial goals. Not to mention – we keep an eye on how these ETFs are performing over time – using our impact and financial lenses, reshuffling and rebalancing your portfolio as necessary. The idea is for you to be able to essentially set it and forget it, subject to any changes in your situation you inform us about, while we do this work on your behalf.

Our Socially Responsible Investment Philosophy

We think about each company’s contribution to humanity as its Humankind Value – the net benefit it provides to humanity, like how an economist might do a cost-benefit analysis. For each ETF that we look at, we add up the Humankind Values of its constituents, multiplied by their weight in the portfolio, to get the Humankind Value of each ETF. If you want to learn more, check out this fun illustrative example of how we think about a company’s Humankind Value.

How We Include (Or Don’t Include) Our Own ETFs in Your Portfolio

At Humankind we manage our own ETFs! When you invest in a Humankind ETF in your Humankind Portfolio, we will reimburse you for our ETF’s fee. When we manage an ETF ourselves, we get to have a direct relationship with the companies the ETF is invested in and can more effectively advocate for positive change at those companies on your behalf. We can use the power of holding a company’s shares directly to vote to improve each company’s human impact and can meet with company management to push them to improve outside the voting process. Plus, we get to have control over exactly which companies are included in the ETF, which allows us to better align the ETF’s holdings with our ethical investment philosophy.

We think these are all good reasons to include our ETFs in your Humankind Portfolio. Nevertheless, if you would rather exclude them, you have the option to do so while setting up your portfolio – and you’ll get an ETF from a different fund family instead. We won’t be reimbursing you for their fund fee of course.

See our Form ADV brochure for more information about our conflicts of interest and how we work to mitigate them.

How We Manage Your Portfolio

When you open an account with us, you’ll fill out a questionnaire to tell us about your financial goals. Based on your answers, we will craft a portfolio that is designed to help you meet those goals, while also aiming to invest in ETFs that provide you with exposure to more positive human impact as compared with a traditional investment portfolio.

Our automated investment program checks on your portfolio at least monthly to see if it needs to be rebalanced. It can also rebalance your portfolio in response to changes in your financial goals that you enter into the application, or in response to cash deposits and withdrawals. Through our application, you can set up a monthly deposit to automate your savings process. We will rebalance your portfolio in response to these monthly deposits, working to invest your cash so that it has the opportunity to earn a market return.

Our Investment Committee meets quarterly to review the ETFs and portfolios. The objective of these reviews is to seek to ensure that your portfolio continues to meet our high ethical standards, while also aiming to meet your financial goals.

The Beginning of a Beautiful Friendship

Basically, we are your advocates for investing in the world that you want to build. We work to set up and automate your socially responsible investment portfolio. At the same time, we engage with companies to get them to improve their human impact on your behalf. By voting with your wallet and partnering with us, you can add your support to our mission to build a better world, one investment decision at a time.

Disclosures

Advisory services provided to clients by Humankind Investments LLC (“Humankind”), an SEC-registered investment adviser.

Brokerage services provided to clients by Apex Clearing Corporation, an SEC-registered broker-dealer and member of FINRA/SIPC.

Humankind’s internet-based socially responsible advisory service (“Humankind Portfolios” or “the Program”) is designed to assist clients in achieving discrete financial goals. Clients are invested in portfolios of securities selected by Humankind based upon information provided by clients to Humankind. The investments that comprise the portfolios consist of various exchange-traded funds (“ETFs”), including an ETF from a fund family managed by Humankind and can include additional ETFs managed by Humankind in the future (collectively referred to as “Humankind ETFs”). Investments in Humankind ETFs in the portfolios can vary from no investments in Humankind ETFs to a majority of the portfolio consisting of Humankind ETFs. Clients can opt out of investing in Humankind ETFs in the portfolios. The ADV (Form ADV brochure and brochure supplement) and Investment Management Agreement (Advisory Agreement) for the Program describe the conflicts of interest presented by the Program and the actions Humankind takes to address them.

Humankind uses a proprietary metric, called “Humankind Value” to select and manage the ETFs that comprise the investments in client portfolios. Humankind Value is a single dollar value which is intended to capture the aggregate worth of a company based upon its economic impact on humanity, defined as investors, customers, employees, and society at large. It is important to understand that this single dollar value of Humankind Value for a company is not a precise measurement of the economic impact that companies have on humanity – rather, it represents a good faith estimate based on Humankind’s internal model of how these companies behave and what the estimated impact on humanity of their behavior is. In other words, Humankind seeks to create a simplified mathematical representation of the real world and are using that to derive this single dollar value for a company. See the Form ADV brochure and brochure supplement for additional information on this metric and how Humankind uses it in its investment advisory process.

Humankind may also present to clients estimates of the human impact of their portfolio as compared with a standard benchmark portfolio, across a sampling of themes. For example, without limitation, Humankind may present the number of cigarettes smoked their portfolio is responsible for as compared with the benchmark portfolio, or the number of people that their portfolio has provided access to clean water to as opposed to the standard benchmark portfolio, etc. It’s important to understand that these individual human impacts presented to clients are not a precise measurement– rather, they represent a good faith estimate based on our internal methodology. This human impact estimate methodology is made available to clients.

The Program is not intended to provide comprehensive financial planning with respect to every aspect of a client's financial situation and does not incorporate specific investments that clients hold elsewhere. Additionally, the Program does not customize investment portfolio construction based on clients' unique ethical preferences. Information on clients’ unique ethical preferences that is collected by the Program can be used for customized client communications.

Before investing, consider your investment objectives and the Program’s fees and expenses. For more details about the Program, see our Form CRS, Form ADV brochure, and brochure supplement.

Investing involves risk and there is the potential of losing money when you invest in securities. Past performance does not guarantee future results.