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New Alternatives Fund

Invest in socially-responsible companies that benefit the environment and contribute to a sustainable economy.

Many sustainable and ESG funds take an exclusionary approach when investing in public equities and bonds. For instance, they may mimic the S&P 500 index and remove oil companies, casinos, or tobacco companies. Only a handful proactively invest in companies that promote renewable energy, human rights, or community investment.

The New Alternatives Fund (NAEFX) is a mutual fund that belongs to the latter group, investing in socially-responsible companies that benefit the environment and contribute to a sustainable economy. Since its inception in 1982, the actively-managed fund has become a mainstay for investors seeking purpose-driven long-term capital growth and income.

Who's behind the fund?


The New Alternatives Fund has been managed by a team of three advisors dedicated to socially-responsible investing since 1982.

David J. Schoenwald, a portfolio manager and co-founder of the fund, was an attorney with Nassau Law Services, a poverty law agency, before going into private practice with his father to focus on liberal, social, and environmental matters. The two started raising capital from neighbors and friends to reach the $100,000 minimum to launch a fund in 1982.

Murray Rosenblith has been with the fund as a portfolio manager since 2008. Between 1985 and 2008, he was Executive Director of the A.J. Muste Memorial Institute, a publicly-funded charitable foundation supporting activist groups working toward nonviolent social change. He also helped manage the endowment of an affiliated group.

What's in the portfolio?


The New Alternatives Fund doesn't follow a specific formula for selecting investments. Instead, the portfolio managers select companies based on their economic, political, and social benefits at a given point in time. Many of its holdings are public companies familiar to impact investors due to their work in renewable energy and sustainability.

Some of the fund's holdings include:

  • Hannon Armstrong – A leading investor in climate change solutions with more than $8 billion in managed assets.
  • Brookfield Renewable Corporation – A renewable energy power production business with hydro, wind, and pumped energy storage solutions across North America.
  • Next Era Energy – A leading investor in renewable infrastructure with plans to deploy $50 to $55 billion in new infrastructure investment across America through 2022.

The mutual fund even holds its cash reserves in community development financial institutions (CDFIs) that invest in low-income housing and small businesses to build more vibrant local economies.

How it fits into a portfolio


The New Alternatives Fund is an equity-focused mutual fund with a $3,500 minimum investment (for the Investor shares) and a modest 1.1% expense ratio. As a result, impact investors may want to consider it for a portion of their equity portfolio. However, given its concentration in renewable energy assets, it's not as diversified as an index fund.

But that said, with a five-star rating on Morningstar and a 40-year track record, investors can rest assured that their money is in good hands. The portfolio managers also publish regular shareholder reports written in the style of Warren Buffett's annual letters, providing insights into the renewable energy industry and discussing potential opportunities.

The bottom line


The New Alternatives Fund (NAEFX) is one of the oldest renewable energy mutual funds. While it may not deliver the diversification of an index fund, its down-to-earth approach is reminiscent of Warren Buffett's Berkshire Hathway, except tilted toward impact rather than profits. As a result, it might be a suitable option for impact investors seeking equity exposure.

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Dec 08, 2022

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Asset Class

Equity

Impact Focus

Renewable Energy

Tags

green energy mutual fund

Highlights

  • Invest in an inclusionary mutual fund that holds companies contributing to a clean and sustainable environment.
  • Target areas include renewable energy, recycling, clean water, energy conservation, and organic food production.