Descriptive Transcript

[This video uses animation to convey spoken content.
The CIBC logo appears.
The Irrational Capital logo appears.]

Hello hello, my name is Dan Ariely, and I’m a behavioural economist, an author, a co-founder of Irrational Capital, and a professor at Duke University.

[Icons representing employees. One by one each icon is highlighted as an individual asset. A spotlight sweeps across them. When an icon is hit by the light it transforms into a lightbulb to represent talent. The rest of the icons fade, leaving one employee highlighted. A line graph appears beside the icon, which represents the data about that icon.]

Leaders often say that their people are a company’s most valuable asset. The CIBC Human Capital Index allows you to invest in the companies that prioritize talent, and we do this by using proprietary data and deep analysis.

[The line graph is replaced by a vertical measuring stick.]

But measuring the performance of that asset – what we call the human factor – has historically proven elusive.

[The measuring stick rotates to become horizontal. Icons representing an employee and a company appear above it. A wavy line flows between the employee and the company.]

What if there was a way to measure the value of the relationship between companies and employees?

[The measuring stick transforms into a line graph which shows a rising value. The screen clears. The acronym ESG appears. Below that, icons and text explain the acronym: Environmental, Social, Governance.]

And what if we could translate that value into an investment product that enables investors to meet their objectives while also addressing Social and Governance objectives? Enter the CIBC Human Capital Index, a quantitative investment strategy created in collaboration with my firm, Irrational Capital.

[A bar graph appears. The bars are icons of office buildings. Some of the buildings grow as their performance improves.]

The premise is really quite simple: companies that treat their employees well on the things that matter perform better over time.

[One building is isolated for analysis. A magnifying lens hovers over it. An icon of a research report appears next to it. The screen clears. Three employee icons appear on the left, and three company icons on the right. Horizontal score meters measure the relationship between each company and their corresponding employee.]

Based on our innovative research into corporate culture and its effect on financial performance, the CIBC Human Capital Index quantifies the relationship between employers and employees at large companies as a reliable predictor of a company’s overall performance.

[New screen. On-screen text: The Human Capital Effect. Nine empty squares appear. One square briefly turns red.]

So how does the Index measure this new fundamental? We start by isolating what we call the Human Capital Factor.

[We zoom out to see dozens of empty squares resembling office windows. A magnifying lens hovers over the squares and an icon representing a report about Human Capital Factor appears. The screen clears. On-screen text: Human Capital Factor. Icons of a group of employees next to score meters for motivation, sense of purpose, relationship to management, and organizational trust.]

First, we analyze and score robust data derived from corporate culture assessments designed to systematically measure employees’ levels of motivation, sense of purpose, relationship to management, organizational trust, and more.

[Icons representing research reports appear.]

Then, we bring it all together within a multi-factor scoring model.

[A field of 500 small squares appears. A bar passes over them. Most of the squares fade, leaving about 1/3, which represent companies with the strongest Human Capital Factor performance.]

First, the Index evaluates and ranks close to 500 of the largest publicly traded U.S. companies on their corporate cultures and on their Human Capital Factor to select the companies with the strongest behavioural performance.

[The bar passes back over the field, and now only a few squares remain. These squares are rearranged into three new fields which are labeled Predefined Sectors, Company Risk, and Exposure Limits.]

Next, on an annual basis the Index selects approximately 150 different companies. The Index seeks exposure to equities within predefined sectors, company risk and exposure limits, while seeking excess returns from the Human Capital Factor.

[Squares are added to or removed from each of the fields to demonstrate how the index is rebalanced.]

The Index targets the same sector weights as the starting universe, and the stocks within each sector are rebalanced annually to float-adjusted market capitalization weights.

[The three fields transform into three office buildings.
The screen wipes clean. Three icons of human heads appear. Underneath are the words, “People are the most important asset.” A bar chart appears, demonstrating the performance of the company. A line chart that demonstrates human capital performance is superimposed on the bar graph, showing how closely their performances are linked.

I think it is safe to say that everyone who has worked in any company feels deep down that the people in that company are the most important asset for the productivity and performance of that company. Today, the CIBC Human Capital Index allows us to take our quantified lessons and invest in the top performers of this most important asset class.

[The CIBC Capital Markets logo appears.]