Charles Goldman makes a green investment that involves black and white analysis

Brooke’s Note: We didn’t see this one coming: The highly analytical Charles Goldman jumping into an investment with a couple of fellows with sentimental feelings related to Mother Earth. But it looks like a good move for both sides and a situation to watch.

Charles Goldman is standing shoulder to shoulder with the Sierra Club regarding where he puts his money — an investment in a tiny-but-promising fund management company in his home town of Boulder, Colo.

The former head of the RIA custody units of both Charles Schwab & Co. and Fidelity Investments — which have a combined $1.1 trillion of assets in custody for 10,000 advisory firms — and co-founder of Advizent, has taken a “material minority” stake and signed on as a board member for Green Alpha Advisors LLC, which was founded in 2007 by Garvin Jabusch and Jeremy Deems. Green Alpha is subadvisor of what is now the Shelton Green Alpha Fund. See: What led to Advizent’s end and why Steve Lockshin is unfazed, even energized.

The socially conscious investors gained quick recognition at the end of the second quarter. As of June 30, the Shelton Green Alpha Fund, registered on March 12, found itself in the top 1% of the 1,821 funds in the large-growth category — over its first three months of measured existence. It returned 15.47% on the strength of holdings such as First Solar, Tesla and Google — beating the benchmark of 2.03% for large growth and the 2.91% gained by the S&P 500. The fund has only about $3.7 million of assets.

Slow growth

Goldman says that what attracted him to Green Alpha Advisors and the choices of stocks that it leans toward buying was not idealism, altruism or cynicism. It’s a desire to find an effective investing theme that matches up with the turn that the world is taking.

“The notion of socially responsible investing is that you give up returns to do the right thing. This isn’t about that at all. This is about the macro trend of sustainability and buying stocks based on solid fundamentals but using this (nod to sustainability) as an initial screen. I see it as a great opportunity.”

Garvin Jabusch: If I have Carl
Pope, people say: Of course you
do …. It’s why we needed
a Nixon-in-China more than ever.

For Jabusch and Deems, getting Goldman — and his show-me-the-money thinking — woven into the fabric of the company is a coup. To say that their venture has been a labor of love is an understatement, considering that it only has about $7 million of AUM six years into its existence. It had only $3.5 million as of March, and the original fund was seeded with just $100,000 in 2007.

Before 2007, Jabusch and Deems ran a similar fund — the Sierra Club Stock Fund — under the Getty family-owned Forward Funds umbrella in San Francisco. See: Advisors find big assets in some little-thought-of locales.

'Nixon-in-China’ moment

One of the biggest endorsements that Green Alpha received in its early years was a first-ever equity investment from the Sierra Club itself.

But such an endorsement can cut both ways because some people jump to the conclusion that environmental principles trump fund performance.

“If I have Carl Pope [on the board of directors], people say: Of course you do,” Jabusch says. “It’s why we need a Nixon-in-China moment more than ever. Charles Goldman is a realist.”

David Kathman, senior financial analyst for Morningstar Inc., says that socially conscious funds historically perform right about on a par with their peers that are not values-minded.

Kathman adds that SRI is due for a recasting of the kind that Green Alpha seems to be pursuing. “SRI has the connotation of being old-fashioned — focused on negatively screening things that are bad rather than including things that have the most positive characteristics.”

Best solutions

David Kathman: SRI has the connotation
of being old-fashioned — focused on
negatively screening things that are bad
rather than including things that have
the most positive characteristics.

Jabusch says he was able to win over Goldman with about a three-hour meeting. [The crux of the Green Alpha investment thesis is that the world is on an unsustainable path of consuming natural resources and that companies that shift that path to sustainability will logically grow better than ones that depend on dwindling reserves.

“I believe entrepreneurs are the best solutions to hard problems,” Goldman says.

Dennis Clark, managing director of Shelton Capital Management LLC (formerly California Investment Trust), which manages about $930 million of assets in 18 funds, is the one who served as matchmaker between Green Alpha, Charles Goldman and his own company.

Clark was brought aboard San Francisco-based Shelton to create products that are of interest to RIAs, and he believes that this is a theme people are looking for. Needless to say, Goldman has ties to that RIA community.

But Goldman believes he also brings some nuts-and-bolts experience.

“I have deep industry knowledge and experience, and I’m good at the private equity, brand and business side.”