Aspiration Redwood Fund (REDWX)

overall rating:

2.5

planets

Hannah Harrison
7/14/2021
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Preamble: this review was written in July 2021, in the middle of the coronavirus pandemic. All stock values were correct at the time of publishing.

The Aspiration Redwood Fund (ticker symbol: REDWX) is “a fossil fuel-free fund investing in sustainable businesses that are leaders in their industry when it comes to caring about their people, the planet and their company’s purpose and mission.”

The name Aspiration alludes to hopes and dreams for the future which, in many ways, are what the fund put at the forefront of its everyday actions. When other financial institutions, such as banks and hedge funds, are walking us to a cliff edge with their continual investments in fossil fuels, Aspiration provides a critical and necessary alternative to the unfortunate status quo.

The Redwood Fund acknowledges the belief that, while consumers can increasingly choose to shop sustainably in their day-to-day purchases, there is still a perceived notion within investments of the need for a trade-off between successful and ethical investments. Aspiration believes that this is not the case.

What it's made of:

2.25

One thing that the Fund is keen to present to potential investors is their minimum investment of only $10. This opens the doors of sustainable investment far more widely than hedge funds and mutual funds, which can require an initial investment of $100,000 and $3000 respectively, immediately cutting off a large percentage of the population from involvement in stocks and shares. However, in order to complement this accessible investment, I would have preferred more information from Aspiration about what sustainable investment is, written in such a way that it presumes absolutely no previous knowledge of investing or the stock market. I think this can be said for many – if not all – sustainable funds, and it is frustrating for it to also be absent here. While the fund themselves may not feel responsible for educating potential investors on investment, (they are, after all, funds) the lack of accessible education* about stock markets, investment strategies and portfolios turns a large number of people away from investment full stop, let alone sustainable investment. Doing so, in spite of Aspiration not being an “education service” per se, would only cement them as a truly sustainable financial platform.

To add to this, many people are turned off from investing in stocks because their capital is at risk. Rightly so, especially in the financially uncertain time we are in today, large numbers of us are not in the position where we are able or feel comfortable to put our money in stocks, even if the risk is managed well. I believe there should be more emphasis on financial education, particularly given by sustainable firms. Widespread education, as mentioned in my previous review on the GCSE Geography Course Guide, is – and will continue to be – the driver of the sustainable turn we are now slowly beginning to see. This doesn’t just mean education on the climate crisis specifically (climate systems, biological sciences and so forth) but education on every other intersecting part of the emergency: finance, politics, history, technology and their interactions with the climate. Each sector must play its part in teaching the next generation about how to best view it from the lens of the climate emergency. I feel this is something Aspiration could lead on if it were included on the fund’s website. Admittedly, such information is included here, but is neither accessible nor easy to find.

*in my definition this is free, open-source, non-jargon-laden education

How it's made:

2

In order to ensure that its investments are ethical a Sub-Advisor implements a positive and negative screening process to select securities for the fund (securities allow the fund to raise capital). The positive screening process vets for characteristics that go beyond finance (i.e. positive Environmental, Social and Governance – or ESG - factors) as well as more traditional criteria, including the likelihood that the securities will provide sustainable long-term value and keep the fund an attractive investment with an ethical portfolio.

The negative screening process excludes securities with more than 5% of sales in industries such as alcohol, tobacco, defence, nuclear, GMO (Genetically Modified Organisms), water bottles, gambling and pornography, and will entirely exclude all firearms issuers and companies within the energy sector. I found this to be particularly impressive, particularly the exclusion of tobacco, GMOs and water bottles.

In the case of tobacco, it seems Aspiration are aware that the mechanisms that tried to hide the destructive nature of tobacco are being driven by the same climate denial mechanisms we face today, which is pleasing and shows historicised knowledge of the climate emergency. I would also feel confident saying that Aspiration is therefore aware of the true extent of the crisis from this.

On the final front, water bottles, while they may seem odd in comparison to the other criteria that securities must invest <5% in, I do think they are a necessary inclusion and help show the fund’s attention to detail. Around 583.3bn water bottles have been sold since their inception. Plastic bottles are also made out of polyethene terephthalate (PET). While this material can be recycled, the sheer number of bottles being used makes even the fastest recycling efforts fall far short. However, more important than this is the fact that PET is made out of crude oil, which is brought above the surface by fracking, mining and drilling. This causes immense pollution, biodiversity destruction and even localised earthquakes. Banning >5% investments in plastic bottles, therefore, takes a stand against the linear economy and is one step towards developing a more circular economy.

While this criteria may seem impressive, it does not come without criticism. Towards the end of last year, the fund was criticised for not investing more in companies that battle climate change outright, and even having companies within their filing that aren’t sustainable. These include Reynolds Consumer Products, which make aluminium foil (Reynolds Wrap), and Solo Cups* and Royal Caribbean Cruises (who received a rating of ‘F’ from Friends of the Earth for air pollution). This begs the question of whether the “attention to detail” with banning plastic bottle investment is really that, or simply just for show.

*reviews of the general sustainability of solo cups can be found here and here

Who makes it:

2.5

On its website, Aspiration declares itself as a Certified B Corporation and a member of 1% For The Planet. To evaluate the standard of the people behind Aspiration, we first must break down what both of these accolades mean.

Certified B Corporation
Certified B Corporations are legally required to consider the impact of their decisions on all related stakeholders: their workers, customers, suppliers, community, and the environment. To become certified, corporations must take a rigorous assessment, receive feedback and improve themselves accordingly. A full report takes 2-3 hours to fill out and asks for a range of questions. These may regard the % of the workforce who are consulted in ESG matters, what % of energy used is from renewable sources, what % of the management is from underrepresented populations and so on.

1% for the planet member
As a member of 1% For the Planet, the fund has been vetted to ensure at least 1% of its profits into approved non-profits. These non-profits have themselves been vetted to ensure that they do no harm to the environment and are therefore valid recipients of funds. They include such platforms as the Carbon Literacy Trust, Keep Britain Tidy and ClimateScience.

In all, I would say that, in a sea of financial institutions investing in ecologically destructive activities, the Aspiration Redwood Fund is doing a comparatively good job at preventing further ecological degradation. As such, it is definitely a better option than fossil-fuel laden funds. Having said this, I would say that the fund is not without ways in which it can improve its sustainability, perhaps by tightening its criteria and making the activity of investment more accessible on its website.