“Ethical Markets is grateful to Tom Konrad and AltEnergy Stocks for this very thorough examination of Aspiration and its advertised “fee-free and fossil-free” banking services. Now that “green” and “impact” branding is becoming so popular among financial firms, this kind of deep dive research is much appreciated .
Read on to understand the pros and cons before moving you money. Needless to say, as a media company, we have no positions in such companies.
Hazel Henderson, Editor“
Are Aspiration’s Deposits Really Fossil Fuel Free? : AltEnergyStocks.com
Are Aspiration’s Deposits Really Fossil Fuel Free?
Posted: 19 Mar 2019 07:50 AM PDT
Fossil Fuel Free Claims
If you are reading this, you’ve probably also seen advertisements for Aspriation’s “Fee-free and fossil fuel free” banking services. Like the advertisements the company’s product page encourages visitors to “Earn high interest on what you save with an account that is fee-free and fossil fuel free.“
As a professional green money manager, I know that “fossil fuel free” is in the eye of the beholder. For many mutual funds, “fossil fuel free” simply means avoiding the 200 largest fossil fuel companies, but investing in the 201st largest fossil fuel company, even if its primary business is mining coal is just fine. Other mutual funds won’t invest in any company that has any exposure to fossil fuel production or transportation, even if that business accounts for less than 1% of revenues. Other money managers cover the entire spectrum in between. The criterion I use for my 10 Clean Energy Stocks model portfolio and private Green Global Equity Income Portfolio, is that any company in either must be better for the environment than the businesses it competes with and/or displaces.
Fossil fuel free banking products are hard to find, and I was encouraged by the fact that Aspirtation is a B-Corporation, a designation that the business meets the “highest standard of verified social and environmental performance.” In the evolving green investment space, even “verified standards” vary, so I sent three inquiries asking for details to Aspiration’s press office over the last two months. I am still awaiting a response.
The lack of disclosure aroused my suspicions. If Aspiration had something to brag about, wouldn’t they be bragging?
Where Those Deposits Go
With my suspicions aroused, I started reading the fine print. It says
After the close of business each business day, the cash balances in the Aspiration Spend and Save Accounts are swept to an account at one or more federally insured depository institutions (each a “Bank”). …. Aspiration Spend is a non-interest bearing account with electronic transaction functionality. Aspiration Save is an interest-bearing account. Full disclosure about Aspiration Spend and Aspiration Save is available in the Spend & Save Supplement to the Customer Account Agreement.
The “Spend & Save” supplement does not contain any more information about how these banks are selected. I specifically asked how these banks were selected in the emails to Aspiration. The question remained unanswered.
With no response from Aspiration’s press office, I called the company’s customer service line, and asked what banks they use to hold the deposit. The answer was remarkably simple: The money is deposited with Coastal Community Bank, based in the Puget Sound region north of Seattle..
Coastal Community Bank and Aspiration are both part of the financial holding company, Coastal Financial Corporation (NASD: CCB), which IPO’d in July 2018 to raise capital for expansion and to improve Coastal Community Bank’s capitalization. Given the joint ownership of Aspiration and Coastal Community Bank by Coastal Financial, it seems safe to assume that Aspiration will continue to deposit funds from Spend and Save accounts with Coastal Community for the foreseeable future.
The bulk of Coastal Community’s lending is to small and medium businesses and individuals in Washington state, most of it real estate lending. According to the S-1 IPO filing, CCB’s loans are “12.8% commercial and industrial, or C&I, loans, 24.9% owner-occupied commercial real estate, or CRE, loans, 32.8% non-owner-occupied [commercial real estate] loans and 13.4% one- to four-family residential loans at March 31, 2018.” While some of the commercial or industrial loans might be to fossil fuel related businesses, it seems unlikely that any of these loans are to big oil and gas or coal companies. At worst, there may be a few loans to gas stations or propane delivery companies.
Like many banks, Coastal Community also has funds deposited with other banks. According to CCB’s third quarter report, deposits with other banks amounted to approximately $100 million, compared to $750 million worth of loans. These banks are unlikely to themselves be fossil fuel free, but, again, such deposits are only about 12% of financial assets, most of which will not be invested by these other banks in fossil fuel projects. Again, the fossil fuel exposure here is minor.
Overall, I think it is fair to say that Coastal Community Bank’s deposits and Aspriations Spend and Save account are fossil fuel free by all but the most strict definitions of the term.
Mutual Funds
In addition to its Spend and Save accounts, Aspiration offers two mutual funds: The Redwood Fund (REDWX) and the Flagship Fund (ASPFX.)
The Redwood Fund seems to be a relatively generic mutual fund that avoids investing in fossil fuel oriented companies. Its top holdings are Amazon (AMZN), AGCO Corp (AGCO), UnitedHealth (UNH), Royal Caribbean (RCL), Johnson & Johnson (JNJ), Simon Property Group (SPG), American Express (AXP), Delta Air Lines (DAL), Prudential (PRU), and US Bancorp (USB). The fund avoids investing in fossil fuels by completely avoiding companies in the Energy and Utility sectors, as opposed to finding good actors like renewable energy companies in those sectors.
While the Redwood Fund is far from my top choice of a green mutual fund, I’m confident that it would meet most people’s definitions of fossil fuel free. But investors and do much better with mutual fund which seek out companies working to help the environment as opposed to just avoiding the worst actors.
Mutual fund investors who are looking for fossil fuel free investing options should read my very quick guide to a green portfolio and clean energy mutual funds and ETFs.
The Flagship Fund is another matter. This fund invests in a number of ETFs (exchange traded funds) with the goal of managing risk. None of these ETFs have any policies about avoiding fossil fuel investments. Most follow highly quantitative hedge fund style strategies that try to manage risk. While that’s not a bad thing, investors can be assured that any such strategy will have some investments in fossil fuels. The only way to avoid fossil fuel investments is to actively work to avoid them.
Investing in an ETF that makes no attempt to avoid fossil fuel invests is simply a way to avoid direct responsibility for those investments, not a way to avoid investing in fossil fuels.
Conclusion
Aspriation’s Spend and Save accounts and their Redwood fund can be described as fossil fuel free by all but the strictest definitions.
The 2% interest paid on Spend and Save account balances, along with the tools they offer to help customers direct their spending towards more responsible businesses make Aspiration a compelling option for people looking for environmentally responsible banking services.
Aspiration’s are the best green banking services I am aware of. Their green mutual fund offerings are acceptable (Redwood Fund) to not green at all (Flagship Fund.)
Whoever is responsible to responding to email sent to their press email address is abysmal. They should be called into their boss’s office to explain why they should not be fired.
Disclosure: The author and his clients have no positions in any of the securities discussed, and has received no compensation from any of the companies discussed in this article.
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Sunpower Optimistic, But Needs Cash
Posted: 19 Mar 2019 06:46 AM PDT
This recent post explored the unusual mating call of a solar panel manufacturer, SunPower Corporation (SPWR: Nasdaq). The Company is looking for a partner to bankroll the upgrade of a manufacturing facility in Hillsboro, Oregon acquired in October 2018, in a tie up with one of its rivals, SolarWorld America. SunPower now has one less competitor and more room to flex its production muscles. However, capital is still important.
The Company suffered a net loss of $811.1 million or $5.76 per share on $1.73 billion in total sales. Profit margins were negative straight down. Investors could accept the loss without too much worry if the pace of cash flow was encouraging. Unfortunately, in 2018 operations required $543.4 million in cash resources to make it through the year.
There are limits as to how long SunPower can keep up that pace. The Company ended December 2018 with $305.4 million in cash on the balance sheet and $1.5 billion in total debt. Stated otherwise SunPower has limited flexibility!
Management tried to strike a note of optimism several weeks ago when the reporting year-end 2018 financial results and providing guidance for the year 2019. Improvements are expected in the coming quarters. Of course, management is hedging the prediction with the usual hedge that growth will be weighted to the second half of 2019. Guidance includes the expectation to ship up to 150 megawatts of the P-Series solar modules from the Hillsboro facility.
P-Series Solar Module diagram
Changes in the company’s leasing program could be pivotal in improving reported sales and expenses. The residential leasing portfolio has been sold and the business leasing structure has been adjusted. Investors will have to wait until the end of March 2019, to get enough details to make an assessment of the potential in the new plan. The company is staging a ‘capital markets day’ with investors and analysts on March 27th.
Even this superficial review of SunPower’s financial performance suggests investors should move cautiously. Management had pledged to trim operating expenses as well as reduce leverage using proceeds from the residential leasing portfolio. Both actions could improve profit results going forward. That means improved cash flows that could deliver returns for a new investor.
Unfortunately, cost of silicon is an even more pressing issue for the Company and management has little control over that. Silicon has been in short supply for at least the last two years and that has led to price increases. The U.S. anti-dumping case resulted in higher import tariffs of silicon metal, effectively doubling raw material prices. SunPower could have a to have a tough time with margins even with cost cuts at the operating level.
SunPower is looking for a new mate in its Hillsboro, Oregon facility. There is much afoot for the Company – new, more competitive products based on the P-Series solar module and changes on the business leasing business model. That has to be appealing to any number of financial or strategic investors. It will take some careful due diligence before cutting a check!
Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.
This article was first published on the Small Cap Strategist weblog on 3/1/19 as “SunPower Promises for 2019.”
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