The Great Inflection on Climate Equity Funds
At its surface, investing can be a seemingly fast-paced and demanding world. The perceived urgency to make quick decisions, amplified by the constant flow of daily investing news competing for your attention, could lead to overlooked opportunities, especially in your company’s 401(k) plan investments.
We believe the market is asleep on second and third-order thinking, especially in regards to sustainable investments. But first, you might be wondering what second- or third-order thinking is. It’s the idea that smart money involves looking beyond immediate outcomes to consider the deeper, longer-term consequences. For example:
First-Order Thinking: “I think AI will expand and become part of our daily lives; I will explore investing in an AI tech giant.” (Like the magnificent 7-stocks.)
Second-Order Thinking: “What will AI require? Energy. What companies will fuel our new energy demands?”
Third-Order Thinking: “What energy source is the most efficient, and what fuel does it require?”
A Sustainable Investment in a Sustainable Investing Equity Fund
We believe the market has only recently awakened to the kind of thinking outlined above. In a survey representing 87% of the world’s population, over half (56%) reported thinking about climate change daily or weekly. This growing awareness creates a ripple effect that impacts investment decisions and priorities.
While many are just beginning to connect these dots, second- and third-order ideas have long been embedded in thematic funds, such as those available through Shelton Capital Management’s NEXTX, in 401(k) plans.
Focused on energy efficiency, water transformation, and environmental innovation, NEXTX provides a forward-thinking investment approach that aligns with your employees’ concerns. Here are a few examples of what NEXTX portfolio managers consider:
- Global Water Transformation: We are going from manual water meters to digitally enabled meters. This improves water safety, efficiency, and margins. It also enables us to have more water to power the increasing adoption of technology.
- The Circular Consumer: The innovation in circular materials, materials that are regenerated into new products at the end of their life, helps increase profit margins and reduce production time. These new players create a competitive edge over peers, bringing newness and mix to the market faster.
- Domestic Electric Grid Modernization: To support our growing energy needs, we will need to revamp our grid and add new forms of energy to support and protect it.
- Worker & Driver Safety: How do we protect people, physical assets, our environment, and time? This requires a ray of telematics, environmental monitors, and sensors.
- Trash: This is not a joke; we think about who benefits from cleaning up the mess we all make as human beings and what companies are working on innovative ways to destroy forever chemicals like PFAS from harming our everyday lives.
The Bottom Line: Include Life’s Essentials in Small Business Retirement Plans
All of the catalysts mentioned uphold our general ecosystem and daily life interactions. They are alive and visible to everyday people. We all need water, wear clothes (hopefully), like to have our lights on, want to be safe, and throw out trash. But for some reason, we believe the market has fallen asleep on the most basic companies that profit from our daily existence, and this order of thinking seems to be hidden in plain sight from many portfolios.
Reorder your thinking with guidance from a professional investment manager. To learn more about sustainable investing as a part of your small business retirement plans, give us a call (800) 225-8778.
Important Information
Fund information is not intended to represent future portfolio composition. Portfolio holdings are subject to change and should not be considered a recommendation to buy individual securities. The Fund is subject to several risks, any of which could cause the Fund to lose money. These risks, which are described more fully in the prospectus, include stock market risk, economic and political events risks, sector risks, large and medium sized company risks and value investing risks.
The portfolio’s environmental focus may limit investment options available to the Fund and may result in lower returns than returns of funds not subject to such investment considerations. There are no assurances that the Fund will achieve its objective and or strategy. Investing in securities of small and medium sized companies, even indirectly, may involve greater volatility than investment in larger and more established companies.
Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Fund. A prospectus should be read carefully before investing.
Shelton Funds are distributed by RFS Partners, a member of FINRA and affiliate of Shelton Capital Management.
INVESTMENTS ARE NOT FDIC INSURED OR BANK GUARANTEED AND MAY LOSE VALUE.
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