Our rigorous approach to calculating Humankind Value can lead to surprising results. Thankfully, this approach also allows for remarkable transparency. Take a closer look at the companies representing our largest investments.
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At A Glance
When was the last time you paid for an internet search? Have you ever used otherwise idle time waiting in line to return an email? Alphabet provides free digital services to billions of people on a continuous basis. Search, email, maps, navigation, and entertainment on demand are ubiquitous, enabling discovery, exploration, and innovation. Alphabet could improve its Humankind Value by curtailing the practice of consumer data harvesting, and by focusing on services that do not foster internet addiction. Through supply chain management, Alphabet can continue to reduce its ultimate contributions to air pollution and greenhouse gas emissions. With these and other social effects considered, the free services provided by Alphabet dominate the ledger for Humankind Value.
Verizon Communications, Inc.
Modern life is highly dependent on smart phones and broadband internet access. It is difficult to think of any aspect of daily life that does not involve these modern technologies. Our research has shown that there is substantial Humankind Value in free online services such as internet search. Verizon provides the infrastructure for internet access and operates some of these free online services. Verizon is penalized for the fossil fuel-based energy consumption required for internet access, along with the practice of consumer data harvesting. We view both data harvesting and fossil fuel energy as negatives but the positive value of free online services to consumers far outweighs the negative impact, hence Verizon’s high weighting in the index.
When it comes to the life-sustaining value of food, we assign more value to companies that are closest to the farming itself. As a seed manufacturer, Corteva benefits from the most direct possible connection to crop production. The company’s pesticide business has a lesser but still meaningful positive value due to its incrementally lower impact on agricultural yields. On the negative side of the ledger, some of the food produced using Corteva’s inputs is lost upon conversion into meat and dairy products, wasted in transport or processing, and diverted into biofuel production. In addition, farming and associated downstream industries contribute substantially to air pollution and greenhouse gas emissions. The composite value for Corteva remains high within our model as the benefit of feeding millions outweighs the related costs.
Your e-mail address is something that you probably acquired and can use for free. Our research recognizes the large share of the e-mail space served by Microsoft, which is a net positive for society. Microsoft also derives value from its role in providing free internet search. Through supply chain relationships related to e-mail, productivity software, consulting, and cloud services, Microsoft shares in the credit for enabling a broad range of other socially beneficial activities, from delivering medical care to providing clean water. However, the services rendered by Microsoft require electricity as an input, making Microsoft ultimately responsible for the greenhouse gas emissions and air pollution inherent to producing electricity from fossil fuels. In the case of Microsoft, the positive elements of Humankind Value far exceed the negatives.
Modern life is highly dependent on smart phones and broadband internet access. Our research has shown that there is a large amount of Humankind Value associated with free online services such as internet search. Apple provides the smart phones, computers, and other devices that consumers use to access these services. Apple is penalized due to the use of fossil fuel energy, consumer data harvesting, and its contribution to travel injuries. We find that distracted driving due to the use of handheld devices accounts for a small portion of the injuries and deaths on the road. We view data harvesting, energy derived from fossil fuels, and travel injuries as negatives but the positive value of online services to consumers outweighs these negatives, hence Apple’s high weighting in the index.
Johnson & Johnson
Pharmaceuticals, medical devices, and hygiene are among the largest contributors to increasing human lifespan and quality of life. As such, research and development, manufacturing, and distribution of these product categories yields a large amount of Humankind Value. Johnson & Johnson combines pharmaceutical, medical device, and hygienic product businesses in a single company. On the negative side, Johnson & Johnson gets a Humankind Value deduction from the manufacturing and distribution of opioid painkillers, which contribute to the opioid crisis in the United States and around the world. Johnson & Johnson also loses value for its direct energy use and supply chain partners in chemical manufacturing that both contribute to greenhouse gas emissions and air pollution. However, these negatives are far outweighed by the positive value Johnson & Johnson provides to humanity.
Healthcare is a central component of our measure of Humankind Value, as a large contribution to modern life expectancies has come from the last 150 years of medical innovation. In the case of Pfizer, positive benefit is derived from both the manufacture and distribution of existing medications that have already contributed to the gains in life expectancy as well as continued R&D that based on extrapolations should contribute to such gains in the future. These very large benefits are only slightly reduced by the negative impacts from supply chain partners in chemical manufacturing and electricity generation, which contribute to both air pollution and greenhouse gas emissions. Pfizer also mostly avoids the negative impact associated with opioid abuse due to the limited exposure to opioids in its product portfolio. The composite value for Pfizer remains high within our model as the benefits of longer and healthier lives outweigh the small negative footprint of its supply chain.
HCA Healthcare, Inc.
Medicine is one of the main contributors for the gains in life expectancy over the past 150 years. HCA Healthcare receives a positive Humankind Value for delivering healthcare services. In addition, HCA Healthcare receives positive value from its supply chain partners for utilizing and distributing medical devices and pharmaceuticals. Its positive Humankind Value is slightly reduced as a for-profit healthcare provider. In addition, its supply chain relationships also transfer responsibility for such negative factors as opioid abuse and biofuel production. Nevertheless, HCA Healthcare is one of our top ten holdings as its positive value for offering healthcare services far outweighs these negative factors.
Although the positive value of food starts at the farm, it is the bulk purchasers and processors of crops that achieve scale as publicly traded companies. Bunge’s relationships with thousands of farmers across the world and their focus on the purchase and transport of primary grains and oilseeds places them at a high rank within our food production model. This is supplemented by Bunge’s milling and oil production businesses, which supply basic ingredients to other food manufacturers. Bunge is penalized directly for its small biofuel segment and for the various losses that occur at its supply chain partners, such as crops consumed as animal feed, spoilage in transport, and ultimately food waste in the supermarket and restaurant settings. It is also impacted by the contributions to air pollution and greenhouse gas emissions that are intrinsic to farming, transport, and food manufacturing. The composite value for Bunge remains high within our model as the benefit of delivering food to millions outweighs the related costs.
Procter & Gamble Co.
Companies that offer hygiene products receive a positive Humankind Value in our research as these products extend life expectancies by reducing the burden of infectious disease. Procter & Gamble receives a positive contribution due to its offering of many hygiene related products, such as germicidal soaps, household cleaning agents, etc. Procter & Gamble’s Humankind Value is somewhat reduced for its responsibility for greenhouse gas emissions and plastic pollution, along with its supply chain relationships with companies that are responsible for biofuel production. Procter & Gamble is one of our top ten holdings as the positive value for offering hygiene related products far outweighs these negative factors.
American Water Works Co., Inc.
Human life is unsustainable without water. It is required for drinking, cooking, and basic sanitation. It is very easy to take for granted that one can just turn on a faucet and clean, drinkable water comes out. However, gathering, sanitizing, and delivering water to people is actually an involved process. As water is so vital for human life, a large amount of Humankind Value is awarded to water and wastewater utilities. American Water Works is one such company, serving around 15 million people in the United States. American Water Works receives some debits by supplying water to other companies with negative Humankind Values. However, these negatives are far outweighed by the positive value American Water Works provides to humanity.
General Electric Co.
General Electric is a large conglomerate with revenues from several sources. Medical devices are among the largest contributors to increasing human life expectancy and quality of life. General Electric’s healthcare division produces medical devices that are sold primarily to hospitals and medical facilities, giving them a large amount of Humankind Value. Power generation from fossil fuels and aviation have negative Humankind Value due to air pollution and greenhouse gas emissions. General Electric supplies companies that produce aircraft and generate power from fossil fuels. However, a portion of General Electric’s power generation business is focused on renewables, particularly wind turbines, bypassing the negative damage from fossil fuels in that segment. Finally, General Electric’s aviation division also supplies parts for military aircraft, resulting in a small negative connection to warfare. Given the size of General Electric’s healthcare division and the beneficial impact of medical devices on human health, this positive Humankind Value outweighs the negatives associated with the business segments that supply fossil fuel power generators and the aviation industry.
Deere & Co.
Producing enough to feed billions of people is a systemic challenge addressed by modern crop types, synthetic fertilizers, tailored pesticides, and efficient irrigation but accomplishing this feat with just a small percentage of the workforce can be attributed to industrial agricultural machinery. As one of the world’s largest producers of tractors and other farm equipment, Deere benefits from its pivotal role in enabling global food production. Detracting from this value is the contribution to air pollution and greenhouse gases from operating such equipment, as well as the food value losses associated with transport and processing, converting crops into meat and diverting them toward biofuel production. The composite value for Deere remains high within our model as the benefit of facilitating high agricultural productivity far outweighs the related costs.
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The Fund is a recently organized, diversified management investment company with limited operating history.
There is no assurance that the Fund will achieve its investment objective, and you can lose money investing in this Fund. SRI investment risk, which is the chance that stocks screened by the Index Sponsor for SRI criteria generally will underperform the stock market as a whole or that the particular stocks selected for the Index will, in the aggregate, trail returns of other mutual funds or ETFs screened for SRI criteria. In tracking the Index, the Fund may, from time to time, invest more heavily in companies in a particular economic sector or sectors, which would subject the Fund to proportionately higher exposure to the risks of that sector. The profitability of companies in the healthcare sector, as traditionally defined, including healthcare equipment and services companies, may be affected by government regulations and government healthcare programs, increases or decreases in the cost of medical products and services, an increased emphasis on outpatient services, demand for medical products and services and product liability claims, among other factors.
Companies in the technology sector, including information technology companies, may have limited product lines, markets, financial resources or personnel. Investors in small- and medium-sized companies typically take on greater risk and price volatility than they would by investing in larger, more established companies. The value of your investment in the Fund is based on the values of the Fund’s investments, which may change due to economic and other events that affect markets generally, as well as those that affect particular regions, countries, industries, companies or governments. Although the Fund’s shares are approved for listing on the NYSE Arca (the “Exchange”), there can be no assurance that an active trading market will develop and be maintained for Fund shares. Although Fund shares are listed for trading on the Exchange, there can be no assurance that an active trading market for such shares will develop or be maintained. The Fund is not actively managed and therefore would not sell an equity security due to current or projected underperformance of a security, industry or sector, unless that security is removed from the Index.
Additional disclosure for NYSE's What's the Fund video: This communication is provided for informational purposes only and expresses views of Humankind Investments, LLC (Humankind), an Investment Adviser. There is no guarantee that any investment strategy will achieve its objectives, generate profits, or avoid losses. Humankind’s social responsibility based approach to investing may not produce desired results and could result in underperformance compared with other investments. Any reference to the “Humankind Value” approach is provided for illustrative purposes only and indicates a general framework of guiding principles that inform Humankind’s overall investment process. Investing involves risk including possible loss of principal. Past performance does not guarantee future results.