The document summarizes a presentation given by Hernando Cortina from JUST Capital on the out-of-sample alpha of stocks that score highly on JUST Capital's rankings of just business behavior. It discusses how JUST Capital identifies the issues that matter most to the American public, collects data on company performance, scores and ranks companies, and selects the top-ranked companies to form indices. It finds that over the first year of the JUST US Large Cap Diversified Index, the top-ranked stocks by JUST Capital's methodology exhibited significantly higher returns and lower risk than lower-ranked stocks, demonstrating the potential financial benefits of investing based on environmental, social, and governance performance.

1. The Out-of-Sample Alpha of Just Stocks
Creating Shareholder Value from Just Business
Behavior
Hernando Cortina, CFA
hcortina@justcapital.com
@cortinah
2018 R/Finance Conference
June 2018

2. 2 | © JUST CAPITAL 2018
WHO IS JUST CAPITAL?
JUST Capital uses the power of markets to drive positive change on the issues Americans care the most about
“We believe that business, and capitalism, can and must be a positive force
for change. We believe that if they have the right information, people will
buy from, invest in, work for, and otherwise support companies that align
with their values. And we believe that business leaders are searching to
win back the trust of the public in ways that go beyond money. By shifting
the immense resources and ingenuity of the $15 trillion private sector onto
a more balanced – and more just – course, we can help build a better future
for everyone.”
Source: JUST Capital
Corporation: 501(c)3
Date: 2013
FoundersInclude: Paul Tudor Jones II
Deepak Chopra
Rinaldo Brutoco
Arianna Huffington
Paul Scialla
Poll the American public to
identifywhich business
behaviorsare most important,
e.g. worker pay and wellbeing,
job creation, customer
treatment, healthy communities,
a clean environment, and more
Createproductsand tools to
guide corporatebehavior
change.JUST Capital packages
and delivers data, insights, and
rankings to different audiences
(corporations, investors,
policymakers, general public) in
accessible ways
Trackand analyzedataon the
largestpublicly-tradedU.S.
companies on those issues and
publish the annual rankings of
America’s Most JUST Companies
in collaboration with Forbes
Magazine
JUST CAPITAL CORE ACTIVITIES

3. 3 | © JUST CAPITAL 2018
WHO AM I?
• Started using S-Plus in 2001
• Previously, equity strategist and index swap/ETF trader at Morgan Stanley
• Macro hedge fund experience
• Rediscovered R in 2014
• Joined JUST Capital in 2016, Director of Indexes and Analytics
• Most ranking and financial analytics at JUST Capital are performed in R
• Looking to contribute to the R Community
• Special thanks to the developers of the following R packages:
• quantmod, PerformanceAnalytics, xts, Rblpapi, texreg, xtable, knitr,
and many more
I work at the intersection of environmental, social, and governance (ESG) research, data science, and capital
markets

4. 4 | © JUST CAPITAL 2018
SUSTAINABLE AND ESG INVESTING IS GROWING RAPIDLY
Investor Require a Better Understanding of the Return and Risks of Such Strategies in Public Equities
• As of 2016 there were $23 trillion globally managed under responsible investment guidelines, a 25% rise since 2014
• In the U.S. the share of sustainable investments relative to total managed assets has grown to 22% from 18%
• While investor appetite is growing, there are skeptics of the link between social responsibility and returns
• Recent research supporting ESG (environmental, social, and governance) factor investing:
• AQR: Dunn, Fitzgibbons, & Pomorski. 2017. “Assessing Risk Through Environmental, Social and Governance Exposures.”
• De & Clayman. 2015. “The Benefits of Socially Responsible Investing: An Active Manager’s Perspective.” Journal of Investing.
• Merrill Lynch: Subramanian, Dec 2016. “ESG: good companies can make good stocks. Equity Strategy Focus Point.”
• This deck is based on “The Out-of-Sample Alpha of Just Stocks”
available at https://justcapital.com/investor-resources/just-alpha-research/

5. 5 | © JUST CAPITAL 2018
Survey representative
sample of Americans to
identify which issues are
most important regarding
just business behavior
Collect and analyze
data across a diverse
range of sources on how
each company actually
performs on the key
issues
Score companies based
on data weighted by the
relative importance of key
issues to the American
public, and rank
companies on how they
perform
Select the top 50% of
names by score rank in
each Russell 1000
industry and weight them
by market cap
JUST CAPITAL’S RANKING METHODOLOGY OVERVIEW
Define Drivers, identify Metrics, evaluate companies, produce rankings
STARTING UNIVERSE: Russell 1000 Index
METRICS85
Management & Shareholders
Jobs | Communities |
Environment | Products |
Customers | Workers
7DRIVERS
Customer reviews
Regulatory fines
GHG emissions
Company’s JUST Score
Top 50% of
JUST companies
by industry
JUST U.S. LARGE CAP
DIVERSIFIED INDEX
STEP 1 STEP 2 STEP 3 STEP 4
❯ ❯ ❯

6. 6 | © JUST CAPITAL 2018
STEP 1: IDENTIFY THE ISSUES THAT MATTER MOST TO THE
AMERICAN PUBLIC
JUST conducts annual surveys to define and prioritize just business behaviors. The results determine
Drivers, Components, and their respective weights in scoring
Workers 23%
Customers 19%
Products 17%
Environment 13%
Communities 11%
Jobs 10%
Management &
Shareholders 6%
Customer treatment and privacy are essential
to just business behavior
Americans agree corporations play a role in
protecting our planet
Ethical leadership and investor return are
priorities for Americans
Americans see workers at the heart of just
business practices
Products and services should benefit the
environment, health, and society
At home and abroad, Americans care how
companies support communities
Just companies should both create and
maintain U.S. jobs
7 DRIVERS

7. 7 | © JUST CAPITAL 2018
STEP 2: COLLECT COMPANY DATA
Collect measurable data on how each company performs within each Driver and Component
The data points
compute 85 unique
metrics which are
categorized within
the 7 drivers and 39
components
determined by
survey results
120,000
Data Points
WORKERS CUSTOMERS PRODUCTS ENVIRONMENT COMMUNITIES JOBS
MANAGEMENT &
SHAREHOLDERS
85
Metrics
(examples)
39
components
7 Drivers
Over 120,000 data
points are gathered
from third party
vendors, company
filings, media
sources, etc.
Charitable Giving Ratio
Commitment to Conflict-Free
Sourcing
Community Engagement and Giving
Waste Management
GHG Emissions
Fuel Use
Paid days off
Benefits Quality
Worker Safety Fines
Customer Satisfaction
Misleading Communication
Advertising Fines and
Violations
Product Fines
Anti-competitive
Practices
Product Recalls
% Change in U.S
Workforce
Total U.S. Headcount
Related Party
Transactions
Board Governance
Debt Score

8. 8 | © JUST CAPITAL 2018
Companies are scored within each
component using the collected data
metrics
STEPS 3 AND 4: SCORE, RANK AND WEIGHT
COMPANIES
JUST compares companies within the Russell 1000 by the values that matter most by the American public
Companies are ranked by their overall
scores within each sector
The top 50% of names ranked by score
within each industry of the Russell 1000
Index are selected and weighted by
market cap
JUST U.S. LARGE CAP DIVERSIFIED INDEX
SCORE RANK WEIGHT
Company A
Company B
.
.
.
.
.
.
.
.
Industrials InfoTech
Company AA
Company BB
.
.
.
.
.
.
.
.
Company A Score Card
Workers Score
Pays a living wage.................. 85
Pays a fair wage .................... 66
… …
Workers Score........................ 75
Customers
Does not discriminate.............. 91
Protects customer privacy....... 94
… …
Customers Score…................... 93
Products
Makes quality products............ 76
Provides fair pricing.................. 65
… …
Products Score........................ 67
… …
… …
Overall Score 81

9. 9 | © JUST CAPITAL 2018
DISTRIBUTION OF 2017 SCORES BY DRIVER
Individual Driver Scores Are Not Normally Distributed

10. 10 | © JUST CAPITAL 2018
THE OUT-OF-SAMPLE ALPHA OF JUST STOCKS
Key points of May 2018 JUST Capital paper
1. In first year of live trading following the release of JUST Capital’s inaugural rankings of just business behavior, highly-ranked
corporations showed significantly higher return and lower risk than low-ranked ones.
2. Top JUST score-quintile stocks exhibited 14% higher annualized return over the period, 7% lower volatility, and 11% lower betas
than bottom-quintile stocks.
3. Controlling for Fama-French factor exposures, top JUST score-quintile stocks generated 3.5% annual out-of-sample alpha, while
bottom-quintile stocks experienced 7.1% underperformance.
4. Strong worker pay & benefits and worker treatment scores significantly reduce stock volatility and drawdowns. Leadership and
ethics and lower environmental impact are associated with higher ROE and stock market return.
5. The market performance of companies with top JUST scores is consistent with meaningful shareholder value creation from just
business behavior. JUST Capital’s JULCD index captures these alpha attributes with low tracking error versus the Russell 1000
index (258 bp annualized outperformance with 3.1 information ratio).

11. 11 | © JUST CAPITAL 2018
JUST SCORES AND WITHIN-QUINTILE MEANS OF
FINANCIAL METRICS
Quintile 5 companies exhibit the lowest risk and highest return in live trading, while quintile 1 companies exhibit the
converse

12. 12 | © JUST CAPITAL 2018
RISK AND RETURN BY QUINTILE OF JUST SCORE
All six financial metrics show significant differences between Q5 stocks and Q1 stocks at the 1% level, based on t-
tests.

13. 13 | © JUST CAPITAL 2018
FAMA-FRENCH REGRESSION ALPHAS: +3.5% FOR Q5 AND -7.1%
FOR Q1 PER YEAR
All 3 F-F factors are significant across the 5 quintiles, with positive loadings for the Small minus Big (SML) and High
minus Low (HML) value factors. Q5 shows a significant positive intercept (alpha) term while the Q1 shows a significant
negative alpha term

14. 14 | © JUST CAPITAL 2018
OUT-OF-SAMPLE IMPACT OF DRIVER PERFORMANCE ON
MARKET METRICS
Strong worker pay & benefits and worker treatment scores significantly reduce stock volatility and drawdowns.
Leadership and ethics and lower environmental impact are associated with higher ROE and stock market return.

15. 15 | © JUST CAPITAL 2018
MEASURING THE PERFORMANCE OF INVESTING IN
JUST COMPANIES
JULCD index has produced measurable impact without sacrificing investment return; Bloomberg: JULCD
<INDEX>
Source: JUST Capital as of 3/29/18. Past performance does not guarantee future results, which may vary. JULCD Index Inception: 11/30/16. GROWTH OF $1,000: A graphical
measurement of a portfolio's gross return that simulates the performance of an initial investment of $1,000 over the given time period. Indices are unmanaged. The figures for the index reflect
the reinvestment of all income or dividends, as applicable, but do not reflect the deduction of any fees or expenses which would reduce returns. Investors cannot invest directly in indices.
• Include twice as many
companies that pay nearly
every worker a living wage
• Create U.S. jobs at a
20% greater rate
• Employ twice as many workers
in the U.S.
• Produce 45% lower
greenhouse gas emissions per
dollar of revenue
• Paid 71% less in fines
for consumer sales-terms
violations
• Give 2.3x more to charity
• Paid 94% less in Equal
Employment Opportunity
Commission Fines
• Have a 7% higher
Return on Equity (ROE)
$1,000
$1,050
$1,100
$1,150
$1,200
$1,250
$1,300
$1,350
$1,400
Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18
JUST U.S. Large Cap Diversified Index Russell 1000 Index
Growth of $1,000
...WITHOUT SACRIFICING PERFORMANCEMEASURABLE IMPACT...
Compared with Russell 1000 companies excluded from the Index,
2017-18 JUST Index constituents on average:
Annualized
outperformance
Since Inception:
2.4%

16. 16 | © JUST CAPITAL 2018
MEASURING THE PERFORMANCE OF INVESTING IN
JUST COMPANIES
JULCD live Performance, Tracking Error, and Risk-Adjusted Ratios (%) Bloomberg: JULCD
<INDEX>
Period: Nov 30, 2016 – Dec 12. 2017 (First year of live JULCD performance).

17. 17 | © JUST CAPITAL 2018
DISCLOSURES
This material is provided at your request for informational purposes only. It is not an offer or solicitation to buy or sell, or a promotion or recommendation of, any financial product, security or trading strategy.
Although certain information has been obtained from sources believed to be reliable, neither JUST Capital nor any of its affiliates (collectively, the “JUST Parties”) guarantee its accuracy, completeness or
fairness. The JUST Parties have relied upon and assumed without independent verification, the accuracy and completeness of all information available from public sources.
This material, and the JULCD, is provided "as is" and the user of this material or the JULCD assumes the entire risk of any use it may make or permit to be made of this material and the JULCD. This material
may not be used to verify or correct other data, to create indexes, risk models, or analytics, or in connection with issuing, offering, sponsoring, managing or marketing any securities, portfolios, financial
products or other investment vehicles. Historical data and analysis should not be taken as an indication or guarantee of any future performance, analysis, forecast or prediction.
Views and opinions expressed are for informational purposes only and do not constitute a recommendation by the JUST Parties to buy, sell, or hold any security. Views and opinions are current as of the date
of this presentation and may be subject to change, they should not be construed as investment advice.
The JUST Parties do not in any way sell, sponsor, support, promote, or endorse any securities based on the JULCD, or have any involvement in their operations or distribution. The JUST Parties and any
other person or entity involved in or related to compiling, computing, or creating the JULCD expressly disclaim all implied representations, warranties, and liabilities relating to or in connection with any
investment vehicle that seeks to provide an investment return based on the performance of any index (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-
infringement, merchantability, and fitness for a particular purpose).
No JUST Party makes any claim, prediction, warranty, or representation whatsoever, expressly or impliedly, either as to (i) the results to be obtained from the use of the JULCD or any of the data included in
the JULCD, (ii) the level at which the JULCD is said to stand at any particular time on any particular day or otherwise, (iii) the suitability of the JULCD for the purpose to which it is being put in connection with
any investment vehicle seeking to provide an investment return based on the JULCD, or (iv) the advisability of investing in securities generally or in any index or other investment product.
No JUST Party has provided, nor will any provide, any financial or investment advice or recommendation in relation to the JULCD. None of this material, nor the JULCD is intended to constitute any financial
or investment advice and may not be relied on as such. No JUST Party shall be (i) liable (whether in negligence or otherwise) to any person for any error in the JULCD or (ii) under any obligation to advise
any person of any error therein. Without limiting any of the foregoing, in no event shall any JUST Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including without
limitation lost profits), or any other damages in connection with the JULCD.
Index Benchmarks
The JULCD Index is calculated and maintained by FTSE Russell using the Russell 1000 Index and the rankings of companies provided by JUST Capital. FTSE Russell does not sponsor, endorse, sell, or
promote any investment vehicle that is offered by any third party that seeks to provide an investment return based on the performance of any index. It is not possible to invest directly in an index.
Confidentiality
This document and the information included herein are proprietary to JUST Capital and are protected by copyright and other intellectual property laws. JUST Capital has registered the “JUST Index” and
“JUST Capital Index” trademark. No part of this material may, without JUST Capital’s prior written consent, be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person
that is not an employee, officer, director, or authorized agent of the recipient.
© The Just Capital Foundation, Inc. All rights reserved.

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