How sustainable is your portfolio? How about your 401(k) choices? Is your investing aligned with building a better world? For most investors, the answer is not really. Overall, 80% of the S&P 500 stock market valuation is driven by factors that are not accurately captured and valued on financial statements – like people (human capital), natural resources (ecological capital) and trust (social capital).
This webinar will show how leading investment analysts and fund managers invest in sustainably-focused companies, which can lower risk and enhance potential financial returns for investment portfolios -- and create net benefit for society.
This is a preview of Paul Herman's session at New Metrics '14, three days of in-depth discussion with visionary leaders who are examining leading-edge work that expands the way business creates, quantifies and manages the value it delivers through the metrics it adopts, coming up this September.
What You Will Learn:
-Discover how Nobel-Prize winning financial theory may be outdated
-Learn how leading investment managers and analysts build sustainable portfolios
-Explore how your company can attract investors seeking impact
-See how your portfolio, and your 401k, can become more sustainable
41. Health
Wealth
Earth
Equality
Trust
HIP’s Factors Connect Directly to
Cash Flow, Profit and Shareholder Value
Products
& Services
Operating
Metrics
Mgmt
Practices
I
M
P
A
C
T
“How HIP Is This Investment?”
HIP = Human Impact + Profit
Strategic
Innovation &
Risk
Mitigation
Higher
Revenue
potential
Lower
Cost
potential
73. How High Impact Portfolios Can Outperform:
Beating Traditional Investing, Wall Street and
Modern Portfolio Theory.
-- Garvin Jabusch 6.25.2014
Investing
for the
Next Economy
74. Restricted & Confidential
Investing for the Next
EconomyImportant Information
This presentation is for informational purposes only and should not be construed as legal, tax, investment or other advice. This presentation does
not constitute an offer to sell or the solicitation of any offer to buy any security. An offer may only be made by means of a private placement
memorandum, prospectus and/or other governing documents, which should be read in their entirety. This information is not intended to be
complete or final. The information in this document is confidential, proprietary and a trade secret of Green Alpha Advisors, and is intended only for
the use of the person to whom it is given and may not be reproduced or redistributed. The presentation document does not purport to contain all of
the information that may be required to evaluate a transaction and any recipient hereof should conduct its own independent analysis of the
company and the date contained or referred to herein. By acceptance of this presentation, you (and your employees and affiliates) agree not to
release or reveal it (or any of the information in it) to any third party and, upon request from Green Alpha Advisors, will return or destroy such
information and all copies thereof.
Some of the information presented herein constitutes “forward-looking information.” Forward-looking information is based on numerous
assumptions and is speculative in nature and may vary significantly from actual results. There can be no assurance that estimated values or
returns based on those values can be realized or that actual returns or results will not be materially lower than those stated in this
presentation. Certain assumptions have been made to simplify the presentation and, accordingly, actual results may differ, perhaps materially,
from those presented. In furnishing this presentation, Green Alpha Advisors reserves the right to amend or replace this presentation at any time,
but undertake no obligation to update, correct or supplement any information contained herein or to provide the recipient with access to any
additional information.
Performance data quoted represent past performance. Past performance does not guarantee future results and current performance may be lower
or higher than the data quoted. All returns shown are total returns, net of fees unless otherwise noted. Investment returns and principal will
fluctuate with market and economic conditions and investors may have a gain or loss when you sell shares. Please refer to
www.greenalphaadvisors.com for more information.
The information in this presentation is intended to be current only as of the date of this presentation. For financial professional use only.
Green Alpha is a registered trademark of Green Alpha Advisors, LLC. SIERRA CLUB, the Sierra Club logos and “Explore, enjoy and protect the
planet.” are registered trademarks of the Sierra Club.
2
75. Restricted & Confidential
If two systems can’t coexist indefinitely, they won’t.
3
Legacy, Fossil Fuels Based Economics (BAU)
+ Economic Growth
+ Finite Planet
= Bad Quantum State
76. Restricted & Confidential
Investing for the Next
EconomyNext Economy™ Defined
4
Mega-Trend Thesis
As we look to the future we envision the Next Economy; one that is ecologically efficient,
helps mitigate climate change, promotes both energy security and national security and, importantly,
helps produce high quality, enduring job growth. Companies in Green Alpha portfolios are selected
because they are in some way working toward these goals.
The world is becoming warmer and more populous, and demands on resources like
water, arable land and clean air are increasing dramatically.
These trends are threatening the planet’s ecosystem and world economies.
Forward thinking companies around the world are innovating to address these global changes.
Those that succeed will help solve civilization’s greatest challenges and stand to profit handsomely.
By 'Next Economy’ we mean an innovation-driven, global economy that allows humans
to thrive on earth indefinitely.
77. Restricted & Confidential
…Green Alpha’s Approach
5
Innovation Drives Financial Performance
• All-cap, multi-sector, global growth
• Environmentally conscious, financially pragmatic
• Driven by science, demography and innovation
• Fossil fuel free portfolios
• Bottom-up investment process built on fundamentals, value analysis and a mega-trend growth thesis
• Thesis Track Record Since 2008
“Sustainability is not a fad and it’s not a public relations exercise. It’s in the interest of
the business community to continue to innovate through technology and increased transparency.” 1
1 Sustainability Evolves from Fad to Force, CNBC editorial, June 30, 2009
78. Restricted & Confidential
Shock & Awe
February 2014 was the 348th
consecutive month of above-
average global temperatures.3
6
2.6 billion people or 39
percent
of the world’s population live
without access to improved
sanitation.2
Projections are that by 2025,
two thirds of the world’s
population could be living in
severe water stress
conditions.1
Over 90 percent probability
that human activities over the
past 250 years have warmed
our planet.7
The world has quietly
transitioned into a situation
where water, not land, has
emerged as the principal constraint
on expanding food supplies. 8
The cost of adapting to the
impacts of a 2°C rise in global
average temperature could
range from US$70 to $100
billion per year between 2020
and 2050, according to the
World Bank.6
“If the world waits until
2020 to take action on global
climate change, it will
undoubtedly
be too late.” -- International
Energy Agency (IEA)5
1. USAID Water and Development Strategy, p.1, 2013-2018 | 2. WHO / UNICEF Joint Monitoring Programme (JMP) for Water Supply and Sanitation, Update Report, 2013 | 3. NCDC STATE of the GLOBAL CLIMATE REPORT, National
Oceanic Atmospheric Agency | 4. WHO / UNICEF Joint Monitoring Programme (JMP) for Water Supply and Sanitation, Update Report, 2013 | 5. IEA Executive Director, Maria van der Hoeven, Press Conference, London | 6. World Water
Development Report, UNESCO, 2012 | 7. Intergovernmental Panel on Climate Change, United Nations, Fourth Assessment Report, 2007 | The Guardian, The real threat to our future is peak water, Lester Brown, 7/6/13
1 in 8 people world wide do
not have access to safe and
clean drinking water.4
79. Restricted & Confidential
Investment Process
Key solutions to warming,
resource scarcity, extreme
weather, rising sea levels
and increasing population.
• Inexpensive, indefinitely
renewed energy
• Waste-to-value
economics (near perfect
recycling)
• Careful management of
scarce resources, like
water and farmland
Companies that deliver
solutions most efficiently
and profitably.
• Observable high EPS
growth
• Proven management
skill and execution
• Areas of current or
expected high demand
7
The most feasible,
promising, fastest
growing sectors.
• Solar: cheap and
efficient; fastest growing
energy type in the world
• Water management,
treatment and creation
• Advanced materials
• Production
and information
efficiency gains
1. Innovation
3. Growth 2. Profitability
Macro
Economics
Traditional, bottom up research paired with a compelling,
macro-economic growth thesis based on
scientific, demographic and climate trends.
1. Innovation 3. Growth
Portfolio
Candidates
2. Profitability
Next
Economy
Companies
81. Restricted & Confidential
Investing for the Next
EconomyNext Economy Sector Map
9
The Next Economy must reflect the broad range of human needs and desires
• The Next Economy map
is an overlay of
sustainable principles
on traditional
investment sectors
• It reflects practical,
achievable and
innovative approaches
to population growth,
resource scarcity and
climate change
82. Restricted & Confidential
Investing for the Next
Economy
Waste to Value
Adding recycled
materials back into the
value chain for high-end
consumer goods;
minimizing the need to
source from the planet.
Natural & Organic
Foods
Addressing strong
consumer demand in
developed countries,
population growth in
developing countries
and soil/water health.
Agriculture
Organic agriculture is a
key means of stabilizing
soil, managing water,
mitigating pesticide risk
and feeding a growing
population.
Transportation
Zero emissions
transportation and
capacity to store power
from renewable sources
are both key to
decarbonizing the
economy.
Water
Fresh water scarcity is
one of the primary
systemic risks for the
economy as well as a
leading cause of
political instability.
Next Economy Means All Sectors
83. Restricted & Confidential
Next Economy Means All Sectors
11
Sector Diversification
of the Green Alpha
Next Economy
Universe (3/31/14)
We seek
opportunities in
sustainability
solutions across all
parts of the economy
Currently 29 sectors
represented
85. Restricted & Confidential
Investing for the Next
EconomyNEXTX Accolades
13
Standout performance
Morningstar Rankings:
• #1 fund in Morningstar’s Large Growth category for Q2 2013
(1,821 funds)
• #1 fund in Mid Cap Growth category for Q4 2013
• Top 1% in Mid Cap Growth category 6 months ending 9/30/13,
12/31/13 and 3/31/14.
• Top 1% in Mid Cap Growth category for first full year (710
funds)
• Top 2% in Mid Cap Growth category for Q1 2014 (758 funds)
• 1-Year MStar Upside Capture Ratio: 149.96 (4/30/2014)
• 1-Year MStar Downside Capture Ratio: 69.71 (4/30/2014)
#1
86. Case Study and Fossil Free Thesis
Garvin Jabusch 6.10.2014
Investing
for the
Next Economy
87. Restricted & Confidential
Investing for the Next
Economy
Price of Installed
Solar Capacity
1977-2013
Texas: From Legacy to Next
Economy Fuel Powerhouse
The sunshine that falls on Texas in
ONE month contains more energy
than all of the oil that has ever been
pumped in the state.2
Wattage Capacity, Cash Rich
Solar Power
Just a bit further “offshore”
1977,
$76.67/watt1
1 Bloomberg New Energy Finance, 2014
2 http://www.sela.org/research-resources/solar-industry-data
3 The projected timing of climate departure from recent variability, Camilo Mora, Nature, October 10, 2013
2013, $0.46/watt
“We’re approaching irreversible warming as temperatures reach a ‘climate departure’
point from their historical averages” 3
88. Restricted & Confidential
Investing for the Next
EconomyCase Study
Ticker: FSLR
EPS: $4.05
2
Div/Yield: -
Market Cap: $ 6.02 billion2
Next Economy Solar Energy: PV, thin film
Category:
Overview:
Vertically integrated capabilities improving every
aspect of the solar value chain. One of the largest
solar project pipelines in the world (currently
nearly 3GW contracted.)
Strongest balance sheet in the industry, >$1billion
in cash. Key partnerships with industry leaders like
General Electric and Berkshire Hathaway.
Market leader with virtual monopoly of advanced thin
film PV IP and production, having recently acquired
GE’s thin film tech division and patent portfolio.
FSLR $60.101
Trailing 12 month performance versus the S&P500
First Solar, Inc.
16
1Yahoo Finance, accessed 5/15/14
2Trailing 12 month numbers, Google Finance , accessed 5/15/14
89. Restricted & Confidential
Investing for the Next
EconomyTransition to the NEXT ^Economy
17
Solar and Wind will make up 90% of the power supply by 2050
Avoiding fossil fuels is
not about divesting
• Green Alpha’s model of
an indefinitely thriving
economy by definition
precludes the idea of
investing in fossil fuels
since they clearly
cannot be civilization's
primary energy source
for much longer.
Jacobson, Mark Z., et al., “A Roadmap for Repowering California for all Purposes with Wind, Water, and Sunlight.” Stanford University. March 11, 2014
90. Restricted & Confidential18
Our Belief
Green Alpha is Fossil Fuel Free
For us, avoiding fossil fuels was never about divesting.
Rather, our model of what an indefinitely thriving economy
could look like by definition precluded the idea of investing in
fossil fuels since they clearly cannot be civilization's primary
energy source for much longer.
“We’re approaching irreversible warming as temperatures reach a ‘climate
departure’ point from their historical averages” 1
1 The projected timing of climate departure from recent variability, Camilo Mora, Nature, October 10, 2013
92. Restricted & Confidential20
Contact Information
Facebook
facebook.com/Green
AlphaAdvisors
Twitter
Twitter.com/AlphaV
erde
LinkedIn
Linkedin.com/company/
green-alpha-advisors
4760 Walnut Street, Suite 106, Boulder, CO 80301
303 993 7856
info@greenalphaadvisors.com
Blog
sierraclub.typepad.com/ga
a
93. How High Impact Portfolios Can Outperform:
Beating Traditional Investing, Wall Street and
Modern Portfolio Theory.
Garvin Jabusch 6.10.2014.
Investing
for the
Next Economy