Shelton Green Alpha Fund

overall rating:

1.25

planets

Usman Iqbal
2/25/2022
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Shelton Capital Management is a multi-strategy asset manager that delivers investment solutions. These solutions include mutual funds and separately managed accounts to the clients of retirement plans, individual investors, and wealth managers. Shelton Capital manages over $4 billion in client assets as of December 31 2021. One of Shelton’s funds is their Green Alpha Fund (NEXTX). The objective of this fund, created on March 12, 2013, is to achieve long-term capital appreciation by investing in stocks in the green economy. The fund is sub-advised by Green Alpha Advisors, an asset management firm founded in 2007 which makes its investments based around the principle that “we must make an inevitable economic and technological transition to sustainability.” Even though Shelton Capital is the ultimate owner of this fund, Green Alpha is the one making all the investment decisions, so this review will have a stronger focus on Green Alpha than Shelton.

What it's made of:

0.75

As of December 31, 2021, NEXTX’S fund net assets equal to around $331.1 million, with a share price of $42.32. The fund has an annual total return of 2.65%, and a return-since-inception rate of 19.15%. Some of the top 10 equity holdings (as of 12/31/21) include Tesla (4.88% of their portfolio), Moderna Inc (4.46%), JinkoSolar (4.23%), Taiwan Semiconductor Manufacturing (4.11%), and Brookfield Renewable Corp (3.91%). It appears that many of their top holdings are companies related to renewable energy sources. JinkoSolar and Brookfield are companies with a focus on finding alternative energy sources to fossil fuels, so it is a positive to see these companies make the top 10 holdings. Tesla is a controversial company to be on a ESG fund in my opinion, because even though they are an electric car-making company, they have claims of greenwashing. Tesla is known for hiding its true carbon emissions, and they have been accused of not meeting environmental standards such as going over legal air pollution emissions. Furthermore, Tesla is known for mining materials like graphite from mines in China where workers face harsh conditions. I was surprised to see Moderna Inc on the list, but the biotech company does claim it plans to achieve net-zero carbon emissions globally by 2030, so perhaps the investment in them makes sense. Even more surprising to me is Taiwan Semiconductor, better known as TSMC, on the list of holdings. TSMC has a huge carbon footprint with its production of semiconductors using massive amounts of energy and water. I am aware that TSMC is trying to reach net zero emissions by 2050, but as they currently are a huge contributor to carbon emissions, I was a bit skeptical about seeing them here. On the bright side, NEXTX doesn’t have a single investment in any sort of fossil fuel, so their claim of being fossil fuel free holds up.

In terms of sector divisions, the Green Alpha Fund is made up mostly of the technology sector, with it being 26% of their portfolio. Other sectors include consumer non-cyclical (21%), energy (19%), and financial (15%) among a few others. The fund has a strong emphasis on turning the tech industry towards sustainability so it makes a lot of sense that the tech sector is over a quarter of their portfolio, especially with a company like Tesla as their highest holding. As technology only gets better and more attention is paid towards ESG and sustainability in general, I believe that sustainability-focused tech companies are going to grow rapidly, and that funds such as this one are only going to become more common.

How it's made:

1.75

According to Shelton’s website, the Alpha Green Fund has a strategy to their investment methods. The first of three basic guidelines is to identify green economy companies that have above-average growth potential. Next is to invest in companies that work to improve human well-being and increase economic efficiencies while also reducing environmental risks significantly. The last guideline is to seek companies which provide products and services that help economies adapt or solve key environmental and economic system risks. I think these are a solid set of rules that the fund (and other similarly focused funds) should follow to ensure that the companies that are being invested in are actually working to create a sustainable economy. Just having a list of guidelines is one thing, but I think Alpha Green is for the most part following through with the guidelines they set in place.

The fund is part of Alpha Green’s “Next Economy” initiative. According to their website, Next Economy portfolios include public equities that must be fossil fuel free. I like the emphasis Alpha Green puts on being fossil fuel free, and a quick search of their investments shows that they hold themselves to this standard. Another big aspect of Next Economy is that every company is selected for their ability to deliver new solutions addressing issues like climate change, resource degradation, and widening inequality.

 

Who makes it:

1.5

The fund is run by three portfolio managers. The first is Garvin Jabusch. Prior to co-founding Green Alpha, Jabusch worked at Forward Management LLC and managed the Sierra Club Stock Fund. He also served as the VP of Strategic Services at Morgan Stanley where he contributed to projects such as the integration of European acquisitions. In terms of his education, Jabusch holds an MBA in international management and finance. Jabusch may not have a sustainability or environment-related education, but he is the founder of a fossil fuel free asset management firm that believes in an economic and technological transition to sustainability.

The next portfolio manager of NEXTX is Jeremy Deems. He is the other co-founder of Green Alpha and was the CFO of Forward Management LLC before Green Alpha. Deems has an MBA in finance. Like Jabusch, he doesn’t have an environment-related education but he did co-found a sustainability fund that seems to care about a sustainable future. 

The last portfolio manager of the fund is Betsy Moszeter. Like the previous managers, she has a business education background. She also serves as the COO of Green Alpha.

I don’t believe one needs an educational background in sustainability to be able to invest in the right companies in order to support economic sustainability practices. The 3 co-portfolio managers have been managing sustainable fossil fuel free portfolios since 2002, so they appear to have enough experience to know how to invest in companies promoting ESG.