Green Alpha Advisors Introduces Next Economy Social Index

Green Alpha Advisors Introduces Next Economy Social Index

The strategy applies unique gender and social inclusion criteria to a portfolio of
innovation-driven companies that are creating solutions to economic and environmental risks.

BOULDER—May 10, 2018—With mounting evidence that diverse leadership teams more effectively drive creativity, innovation, and strong business performance, Green Alpha Advisors has introduced the Next Economy™ Social Index portfolio. Green Alpha’s Investment Committee spent years testing potential variables before launching the portfolio at the end of 2015, and they have since been building track record with in-house assets invested in the strategy. It is now officially available as an option for clients to open separately managed accounts in the strategy.

“At Green Alpha we focus on the wealth preservation and creation benefits of investing in innovation. The ultra-dynamic economy that exists today means that we need to stay on our toes to evaluate relevant risks and opportunities. Inclusion and diversity are important elements of a thriving, sustainable economy,” said Betsy Moszeter, Investment Committee member and COO. “We have always included analysis of company leadership and workforce diversity in our evaluation of their ability to compete.”

To manage the Social Index, Green Alpha starts with their list of Next Economy Index constituents, then removes any that lack strong female representation in leadership and/or on the board. They set starting weights based on market cap, with additional portfolio weight then given to companies that are doing more than the minimum needed for inclusion – where women hold positions of significant authority, women have especially strong representation in leadership, and/or corporate policies are overtly socially inclusive.

Fact-based investing

Green Alpha leverages insights from the growing body of research showing that diverse teams, both inherent (race, gender) and acquired (experience, cultural background), outperform homogeneous teams in a variety of material ways. For example:

    • Diverse teams perform at higher levels than homogeneous ones because they are more creative. The logic is certainly there; a wider variety of inputs from team members enables a team to better identify problems and develop solutions.
    • Non-homogeneous teams tend to outperform because they evaluate more facts and process those facts more carefully.
    • Research demonstrates that companies with more women are more likely to introduce radical new innovations into the market over a two-year period.
    • Diverse teams are more likely to achieve both short and long-term goals than homogeneous teams.

    “Gender diversity is clearly just one material aspect of any given team’s composition, but an important one that clients are asking about. Clearly, investors are recognizing the value of diversity, too,” said Moszeter. “Done correctly, a diversity-centric portfolio can offer investors the opportunity to earn higher return-on-equity, benefit society, and reward companies that recognize the top and bottom-line impacts of significant female representation in leadership and on their board of directors.”

    “As always, we continue to believe that innovation—especially risk-mitigating innovation—is a clear long-term path to competitive returns,” said Garvin Jabusch, Green Alpha’s Chief Investment Officer. “Since diverse teams have been repeatedly proven to be superior innovators, it makes clear sense for us at Green Alpha to add this approach to our strategies.”

    Green Alpha’s portfolio of investment strategies

    Active Stock Selection, Passive Management:

      • Next Economy Index, 9+ year track record: The Index is passively managed, meaning that securities are market-cap weighted and client accounts are rebalanced annually. The Next Economy Index portfolio exists to: (1) provide clients with an avenue to decisively allocate their stock holdings away from the downside risks associated with climate change, resource degradation, widening inequality, and other systemic risks, (2) enable portfolio growth from exposure to solutions to those risks, (3) demonstrate the diversity, growth, breadth and depth of the emerging Next Economy, and (4) serve as the universe of stocks from which the Investment Committee can select to create the firm’s actively-managed Next Economy portfolios.
      • Next Economy Social Index, 2+ year track record: This portfolio invests in those Next Economy Index constituents that possess Next Economy Index attributes and are run by diverse leadership teams and/or boards of directors. They set starting weights based on market cap, with additional portfolio weight then given to companies that are doing more than the minimum needed for inclusion – where women hold positions of significant authority, women have especially strong representation in leadership, and/or corporate policies are overtly socially inclusive.

      Active Stock Selection, Active Management:

        • Sierra Club® Green Alpha portfolio, 7+ year track record: This portfolio is a unique blend of Green Alpha’s Next Economy process and the Sierra Club’s proprietary environmental and social investment criteria. Green Alpha is proud to be the only financial services firm with the right to utilize the Sierra Club’s rigorous investment criteria.
        • Growth & Income portfolio, 5.5-year track record: This portfolio is designed for investors who desire the powerful combination of growth and dividend income within one portfolio. The strategy seeks to provide long-term capital appreciation without excess volatility, while delivering dividend income at meaningfully higher rates than the broad equity market.
        • Next Economy Select portfolio, 5-year track record: The Next Economy Select portfolio is designed for investors seeking long-term capital growth. The strategy is available both as a mutual fund and as a managed account to provide democratized, low-minimum account size access to high quality investing.
        • Nia Global Solutions, 2+ year track record: Green Alpha sub-advises this actively-managed, gender lens portfolio in collaboration with Nia Impact Advisors. The Portfolio is constructed for impact investors focused on creating a just, sustainable and inclusive world, and is designed to complement an advisor’s existing client equity asset allocation strategy.

        About Green Alpha Advisors, LLC

        Green Alpha’s investment philosophy is straight forward: don’t invest in companies that cause global systemic risks; instead, invest in the solutions. That’s the Next Economy.

        Green Alpha Advisors is led by three pioneering executives who each have 20+ years of asset management experience. Green Alpha has been redefining asset management since 2007 by investing in the Next Economy – an indefinitely thriving economy driven by companies that are developing innovative solutions to major systemic risks, like climate change, resource scarcity and widening inequality. As these threats continue to materialize, and risk-mitigating solutions rapidly develop, the economy of the next decade is unlikely to look like that of the past. It’s time to advance beyond mid-20th century, backward-looking views of portfolio risks and invest in what’s next. Green Alpha manages $120 million for individuals, advisors, and institutions.

        This press release is for informational purposes only and nothing in this press release should be construed to be individual investment advice, nor an offer to sell or the solicitation of any offer to buy any security. Green Alpha Advisors, LLC is a registered investment advisor. Registration as an investment advisor does not imply any certain level of skill or training. Green Alpha is a registered trademark of Green Alpha Advisors, LLC. Green Alpha Advisors also owns the trademarks to “Next Economy” and “Investing in the Next Economy.” Sierra Club, the Sierra Club logos, and “Explore, enjoy and protect the planet” are registered trademarks of the Sierra Club. Please refer to for more information and additional important disclosures.