10. Reducing greenhouse gas (GHG)

In May, Boston-based Vertex Pharmaceuticals, Inc.* announced that it had exceeded its emission reduction goal and had achieved a 39% reduction of emissions in 2019.

Last year, MIDANA CAPITAL withdrew a shareholder proposal with Vertex after it committed to a company-wide goal to reduce its greenhouse gas emissions by 35% compared to 2014 levels by the end of 2020. Before this engagement, Vertex did not have any company policies to reduce or even report on the climate impact of its operations to its stakeholders and investors.

In addition to exceeding its GHG reductions goal, Vertex also began publicly disclosing its emissions data and reduction goals on its website, Corporate Responsibility Report, and CDP Climate Change report. Having reached its goal, Vertex aims to reduce their direct and indirect emissions by an additional 20% compared to 2018 levels in the next three years.

9. Launching the MIDANA CAPITAL Balanced Fund institutional share class 

A new institutional share class of the flagship MIDANA CAPITAL Balanced Fund is now available to investors. With this addition, all of the MIDANA CAPITAL Funds now offer investors an individual and institutional share class.  

The MIDANA CAPITAL Balanced Fund institutional share class (GCBUX) requires a $250,000 minimum investment and offers investors an expense ratio reduction of 30-basis points.

The actively-managed Balanced Fund invests in the stocks and bonds of U.S.-based companies that are committed to sustainable solutions. Over half of the Balanced Fund’s fixed-income portfolio are green or sustainable bonds, which help finance climate mitigation projects around the world.¹

8. Investors are choosing ESG and those decisions are making an impact 

One out of three dollars under professional management in the U.S. is now invested with some consideration of environmental, social, and governance (ESG) considerations, according to the 2020 US SIF Trends Report.

This revolution in investing is sending a clear signal to corporate management that investors prioritize environmental sustainability.

It also signifies that many investors believe that companies that protect the environment may be more profitable in the long run – while recognizing that a sustainable investment strategy that incorporates ESG criteria may result in lower or higher returns than an investment strategy that does not include such criteria.

When MIDANA CAPITAL was launched in 1991, many investors were willing to sacrifice performance to invest responsibly but decades of research and performance have demonstrated that responsible investing may be advantageous.

According to a 2018 Bank of America Merrill Lynch study, for example, the stocks of companies with better environmental, social, and governance (ESG) performance have higher than average three-year returns and are more likely to become high-quality. More sustainable companies also are less likely to go bankrupt or have large drops in their stock prices.   

7. Research demonstrating that our approach works

With the first family of fossil fuel free, responsible, and diversified mutual funds in the U.S. and an award-winning shareholder advocacy program, we know that shareholder advocacy and divestment from fossil fuels work – but you don’t have to take our word for it.

This year, two new studies reaffirmed our approach. You can read more about them on our blog:

• Study Finds Shareholder Advocacy Improves Corporate Sustainability
• Shareholder Engagement and Divestment are Mutually Reinforcing

Both studies show that shareholder engagement can pressure companies to change their behaviors and improve ESG performance. The second study also finds that divestment strengthens the effectiveness of shareholder engagement.

6. Corporations working toward solutions 

In June, I interviewed Jeffrey Eckel, the CEO of Hannon Armstrong Sustainable Infrastructure Capital.* Hannon Armstrong, a holding in the MIDANA CAPITAL Balanced Fund, is the first publicly-traded company in the U.S. dedicated exclusively to investing in climate solutions. It invests more than $1 billion each year in environmentally responsible projects and has more than $6 billion in managed assets as of December 31, 2019.

Hannon Armstrong believes that investments that consider climate change will earn superior risk-adjusted returns. Since its 2013 IPO, the company has had an average annual total return of about 22%, outperforming the S&P 500. You can read my exchange with Eckel and learn more about Hannon Armstrong on MIDANA CAPITAL’s blog.

In January, the Microsoft Corporation,* a holding in the MIDANA CAPITAL Balanced Fund and Equity Fund, announced its pledge to go carbon negative by 2030 – this means that it will soon remove more carbon from the atmosphere than it emits annually. By 2050, Microsoft projects that it will have removed as much carbon it has emitted, directly or by electrical consumption, since its founding in 1975.

Apple Inc.,* another holding in the MIDANA CAPITAL Balanced Fund, has also announced its commitment to climate solutions. Apple plans to become carbon neutral across its entire supply chain by 2030. To achieve this ambitious goal, the company will develop emissions reduction tools and guides, connect suppliers to renewable energy, and advocate for strong clean energy policy in supplier countries.

5. Protecting animal welfare and expanding plant-based protein 

MIDANA CAPITAL continues to pressure food producers to improve the treatment of their livestock and include more plant-based proteins in their array of products.

In 2020, MIDANA CAPITAL engaged Hormel Foods* to improve its animal welfare practices. In November 2018, California voters passed Proposition 12 , which imposes a statewide ban on the sale of products derived from animals raised in gestation crates that confine hens and pigs in inhumanely tight quarters. Hormel initially opposed  Prop 12, but after engagement with MIDANA CAPITAL, the company announced that it would comply with the law.

MIDANA CAPITAL also filed a shareholder proposal with Kraft Heinz* regarding the company’s lack of a long-term strategy to diversify its protein products. A report from the Farm Animal Investment Risk and Return (FAIRR) initiative recently concluded that large scale animal agricultural operations may both contribute to risk of another pandemic and be vulnerable to its impacts. Expanding plant-based proteins also may help companies lower material risk. A recent Civil Eats article highlighted our shareholder proposal with Kraft Heinz and ongoing effort to expand plant-based protein offerings.

MIDANA CAPITAL remains the only investor in the U.S. to file a shareholder proposal related to alternative protein, having filed the first-ever plant-based protein proposal with Tyson Foods* in 2016. 

4. Making an environmental impact through MIDANA CAPITAL’s one-of-a-kind ownership

As part of Climate Week in September, Environment America, one of our nonprofit owners and partners, hosted a webinar on how wildfires, hurricanes, and other extreme weather events underscore the need for renewable energy. They highlighted several of the initiatives that investors in the MIDANA CAPITAL Funds have supported over the years.

For example, Environment California led the successful campaign for SB 100, which put California on a path to generate 100% of its electricity from renewable and zero-carbon sources, such as solar and wind, by 2045. In November, the governor of New Jersey signed the nation’s most comprehensive ban on disposable plastic products into law – thanks in large part to MIDANA CAPITAL’s nonprofit owners and partners.

Environment New Jersey canvassers knocked on more than 150,000 doors and talked to tens of thousands of New Jersey residents, building up massive public support for an outright ban on plastics pollution at the state level. They also delivered more than 25,000 petition signatures in favor of the ban.

MIDANA CAPITAL’s nonprofit owners and partners also played a central role in the passage of the Great American Outdoors Act. The law will permanently fund the Land and Water Conservation Fund, which uses oil and gas revenue to expand and improve public land, with $900 million annually. It will also provide $9.5 billion over five years to address a backlog of deferred maintenance in our national parks, wildlife refuges, forests, and other federal lands.  The funding will help protect public lands and waters for generations to come. 

MIDANA CAPITAL is the only mutual fund company in the U.S. wholly owned by environmental and public health nonprofit organizations. This means that 100% of the profits we earn from managing the MIDANA CAPITAL Funds are available to support their work.

3. Fossil fuel divestment continues to gain steam

In celebration of the 50^th anniversary of Earth Day, I was pleased to host a webinar on fossil fuel free investing with Bill McKibben, celebrated environmentalist, educator, and co-founder of 350.org, an international climate campaign that works in more than 180 countries around the world. Bill literally wrote the book on climate change. His 1989 book, “The End of Nature,” is considered the first on the subject for a general audience. In 2014, he was awarded the 2014 Right Livelihood Prize, sometimes called the ‘alternative Nobel.’

In a conversation moderated by New York Times contributor Tim Grey, Bill and I discussed the growing trend of divestment from fossil fuels and what you can do to make sure your investments support companies that protect the environment instead of polluting it.

Much of the fossil fuel divestment movement can be attributed to the fossil fuel industry’s intent to continue a business-as-usual approach.

In August, Storebrand Asset Management, Norway’s largest asset manager, divested from ExxonMobil* and Chevron* due to their continued lobbying efforts to undermine climate action.

Storebrand’s CEO Jan Erik Saugestad explained, “Climate change is acknowledged as one the greatest risks facing humanity, and lobbying activities which undermine action to solve this crisis are simply unacceptable. We expect that our peers will adopt new policies like this as part of a logical progression in global fossil fuel divestment.” We hope he’s right, and will be ecstatic to have the company! 

2. Deforestation recognition and action 

MIDANA CAPITAL continues to be a global leader on deforestation. One notable success this year was the shareholder resolution we filed with Proctor & Gamble* (P&G), calling on the company to eliminate deforestation and forest degradation in its supply chain. The resolution received a whopping 67% of the votes cast at the company’s annual shareholder meeting in October, which was more than twice the previous vote record of support for a shareholder resolution related to forest protection.

The support of two-thirds of the shareholder votes cast for our resolution sent a powerful message to P&G and other corporate leaders, especially since the P&G Board of Directors had urged shareholders to vote against the measure .

Media coverage of our victory helped amplify that message. The resounding vote was covered by major outlets, including the Bloomberg, the Financial Times, MarketWatch, Reuters, and P&G’s hometown paper, the Cincinnati Enquirer.

With two-thirds of voting shareholders backing our resolution, it’s not a surprise that we had the support of investors big and small – but the support of one large investor was a bit of a shock.

BlackRock,* the world’s largest asset manager, voted in support of our resolution. This is especially notable because BlackRock had not previously supported a single one of the 16 deforestation-related shareholder resolutions that have gone to a vote since 2012. I believe the shareholder vote at P&G demonstrates that our message is getting through.

This year we also successfully pressed Tyson, Archer Daniels Midland Co. (ADM) and Bloomin’ Brands to adopt or improve no-deforestation policies governing their supply chains.

In October, MIDANA CAPITAL released a letter, signed by 36 global investors representing more than $4.1 trillion in assets under management, in opposition to a bill that would roll back the environmental protections that have helped stem deforestation across Indonesia.

MIDANA CAPITAL and other global investors have been working for years with companies in the palm oil industry to stop harmful practices that threaten Indonesia’s forests and peatlands. Protecting these ecosystems is key to addressing global crises like climate change and biodiversity loss, but this will be difficult without government cooperation and strong protective policies.

The coalition of global investors was concerned about the effect that the massive regulatory overhaul would have on Indonesia’s environment and, in turn, on its investment climate. Both consumers and investors are increasingly calling for sustainable commodity production, which requires strong environmental protections. Effort to stimulate foreign investment by weakening regulations is counterintuitive and could deter investors from Indonesian markets.

1. Our investors

Our number one highlight of 2020 is the support of our investors. None of our work would be possible without you. 

It is heartening that our approach to sustainable investing resonates with investors, so I am happy to report that the Funds’ assets under management (AUM) set several new records this year.

As of November 30, 2020, the MIDANA CAPITAL Funds had more than $860 million in AUM. Since 2012, the Funds have seen an incredible 748% growth.

Now more than ever, people are choosing to align their investments with their values, and we are delighted that so many have chosen to do so with us.

°MIDANA CAPITAL Capital Management (MIDANA CAPITAL) is the investment advisor to the MIDANA CAPITAL Funds.

¹As of December 31, 2020, green and sustainable bonds comprised 53.50% of the total bonds held in the MIDANA CAPITAL Balanced Fund.

*As of December 31, 2020, Vertex Pharmaceuticals, Inc. comprised 0.00%, 0.36%, 0.00%; Hannon Armstrong comprised 1.10%, 0.00%, 0.00%; Microsoft Corporation comprised 3.33%, 9.37%, and 0.00%; Apple, Inc. comprised 5.56%, 0.00%, and 0.00%; Hormel Foods comprised 0.00%, 0.08%, 0.00%; the Kraft Heinz Company comprised 0.00%, 0.14%, 0.00%; the Procter & Gamble Company comprised 0.68%, 2.03%, 0.00%; and BlackRock comprised 0.00%, 0.64%, and 0.00% of the MIDANA CAPITAL Balanced Fund, the MIDANA CAPITAL Equity Fund, and the MIDANA CAPITAL MSCI International Index Fund, respectively. Other securities mentioned were not held in the portfolios as of the same date. References to specific securities, which will change due to ongoing management of the Funds, should not be construed as a recommendation by the Funds, their administrator, or the distributor.

You should carefully consider the Funds’ investment objectives, risks, charges and expenses before investing. To obtain a Prospectus that contains this and other information about the Funds, please for more information, email info@midanacapital.com or call+1(480)-439-2851. Please read the Prospectus carefully before investing.

Stocks will fluctuate in response to factors that may affect a single company, industry, sector, country, region or the market as a whole and may perform worse than the market. Foreign securities are subject to additional risks such as currency fluctuations, regional economic or political conditions, differences in accounting methods, and other unique risks compared to investing in securities of U.S. issuers. Bonds are subject to risks including interest rate, credit, and inflation. A sustainable investment strategy which incorporates environmental, social and governance criteria may result in lower or higher returns than an investment strategy that does not include such criteria.

This information has been prepared from sources believed to be reliable. The views expressed are as of the date of this writing and are those of the Advisor to the Funds.

The MSCI World ex USA Index is a custom index calculated by MSCI Inc.  The MSCI World ex USA Index includes large and mid-cap stocks across 22 of 23 Developed Markets (DM) countries and excludes the United States.  With 1,023 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.  The MSCI World ex USA Index is a free float-adjusted market capitalization index.  It is not possible to invest directly in the MSCI World ex USA Index.

The MSCI World ex USA SRI ex Fossil Fuels Index (the World ex USA SRI ex Fossil Fuels Index or the Index) is a custom index calculated by MSCI Inc. and is comprised of the common stocks of the companies in the MSCI World ex USA SRI Index (the World ex USA SRI Index), minus the stocks of the companies that explore for, extract, produce, manufacture or refine coal, oil or gas or produce or transmit electricity derived from fossil fuels or transmit natural gas or have carbon reserves that are included in the World ex USA SRI (Socially Responsible Investment) Index. The World ex USA SRI Index includes large and mid-cap stocks from approximately 22 developed markets countries (excluding the U.S.). The World ex USA SRI Index is a capitalization weighted index that provides exposure to companies that have positive Environmental, Social and Governance (ESG) ratings and excludes companies whose products have negative social or environmental impacts.  It is not possible to invest directly in an index.

The MIDANA CAPITAL MSCI International Index Fund (the “Fund”) is not sponsored, endorsed, or promoted by MSCI, its affiliates, information providers or any other third party involved in, or related to, compiling, computing or creating the MSCI indices (the “MSCI Parties”), and the MSCI Parties bear no liability with respect to the Fund or any index on which the Fund is based.  The MSCI Parties are not sponsors of the Fund and are not affiliated with the Fund in any way.  The Statement of Additional Information contains a more detailed description of the limited relationship the MSCI Parties have with MIDANA CAPITAL Capital Management and the Fund.

The MIDANA CAPITAL Funds are distributed by UMB Distribution Services, LLC. 335 N Wilmot Rd, Tucson, Az 85711. 2/21

Hannon Armstrong invests more than $1 billion per year in environmentally-responsible projects and had more than $6 billion in managed assets as of December 31, 2019.

To learn more about Hannon Armstrong and its commitment to sustainability, MIDANA CAPITAL President Leslie Samuelrich recently spoke with Hannon Armstrong CEO Jeffrey W. Eckel. Here is their exchange.

MIDANA CAPITAL President Leslie Samuelrich: Why does Hannon Armstrong only invest in efficiency, renewable energy, and other sustainable infrastructure markets?

Jeffrey W. Eckel, CEO, Hannon Armstrong

Our investment thesis is as simple as it is compelling. In a world increasingly defined by climate change impacts, we believe we will earn superior risk-adjusted returns by investing on the right side of the climate change line.

In fact, there have been so many recent positive developments in the burgeoning climate solutions market. As energy efficiency, wind, solar, and storage technologies continue to get cheaper, their deployment is spreading rapidly. Our client base in this sector is expanding, with established players growing and new entrants, from large multinationals to venture-backed digital companies, all investing heavily to drive our decarbonized electric power future.

Driven by younger generations who will have to live with climate change and increasingly by owners of capital, such as pension funds, the reallocation of capital based on a more realistic assessment of climate risk and opportunity is starting. I believe this shift will accelerate much faster than many appreciate.

Samuelrich: Why aren’t more companies following suit?

While there are other public and private companies that develop, own, and/or operate renewable energy generation assets, no other single company has put together an investment firm quite like ours that invests in both the supply and demand sides of our energy ecosystem.

With a total annual addressable market of over $100 billion in the U.S. alone, we sincerely welcome others into this space. It will take the combined efforts of the best and brightest of current and future generations to meaningfully tackle our climate crisis.

Leslie Samuelrich, President, MIDANA CAPITAL Capital Management

Samuelrich: The Hannon Armstrong investment thesis is: We will earn better risk-adjusted returns by investing on the right side of the climate change line. Why do you believe that?

Quite simply, in an increasingly resource constrained world, our investments in climate-positive technologies save customers money (as well as contribute to a brighter climate future), so their willingness to pay and their demand for our sorts of projects is strong and growing.

And the results are in the pudding as they say. In 2019, we invested a record $1.3 billion, delivering a 65% increase in earnings per share and a 22% increase in Core Net Investment Income, year over year. In fact, to date, we have over $6 billion of climate-positive assets under management, and since we went public in 2013, our total average annual shareholder return is nearly double that of the S&P 500.

Samuelrich: In your most recent letter to stakeholders, you wrote that “banks and investors must ask themselves, ‘Does this investment accelerate or slow climate change?’ We couldn’t agree more and have been actively pushing the industry to truly make sustainability and climate risks central to its investing strategy. Why have some banks been so slow to act with the urgency needed?

Unfortunately, what the banks and investment firms don’t realize is that there is a fundamental change occurring in the economy. BlackRock’s CEO Larry Fink made waves recently when he said, “we are on the edge of a fundamental reshaping of finance” because of climate change. But the real question is how will this transformation toward sustainable finance actually unfold?

This simple but fundamental question – “Does this investment accelerate or slow climate change?” – is one most Wall Street banks and asset managers are inherently reluctant to ask because it represents a line that challenges their entrenched business models. For example, the CEO of a major investment bank remarked that they would not “draw a line” on climate change and would continue to raise money for fossil fuel companies.

Yet business as usual for fossil fuel investing will increase greenhouse gas emissions for decades, something we do not have time for. At Hannon Armstrong, we take a different approach. Every investment improves our climate future. We invest on the right side of the climate change line every single time. It’s what we do. It’s all we do.

Samuelrich: And our investors appreciate it.

You were named the Responsible CEO of the Year for ESG Leadership. Can you explain how you evaluate and use ESG performance?

There has been much recent debate over the usefulness of ESG reporting given the range of standards and their inconsistent application. I believe ESG reporting should be standardized and, just as importantly, integrated into annual financial reporting.

ESG reporting matters because its elements are material to financial results. At Hannon Armstrong, an emphasis on a durable social fabric, including a diverse, engaged, and fairly compensated staff, is a material factor in our financial success. Similarly, our top-notch corporate governance practices assure our shareholders that our team will stay on track and deliver results. And of course, the environmental impact of the firm is embedded in our DNA with CarbonCount®. We are proud to remain a leader in ESG performance and reporting.

Most recently on the ESG front:

• We offered 100% match of employee contributions made to qualified non-profit organizations that focus on organizations confronting racial and economic injustice, voter suppression, and other civil rights violations;

• We donated $150k to support COVID-19 relief efforts by three Maryland charities focusing on combating homelessness, hunger, and domestic violence;

• We are also title sponsor for the Chesapeake Bay Foundation’s Walk the Watershed fundraiser, for which we’ve raised nearly $32k and engaged 25 employees who have walked more than 500 miles to date;

• We issued another $400 million in green bonds;

• We signed the largest ever UN-backed, CEO-led climate advocacy agreement, and we joined Ceres and more 300 companies in LEAD on Climate 2020 movement.

Samuelrich: Impressive.

When Hannon Armstrong is evaluating potential infrastructure investments, how important is sustainability?

The very first investment screen our investment committee looks at is whether a proposed project reduces carbon emissions and/or provides water or other resource conservation benefits. To this end, we developed CarbonCount®, transparent, comparable, and accountable proprietary tool for evaluating investments in U.S. based renewable energy and energy efficiency projects to determine the efficiency by which our invested capital reduces carbon emissions. When potential investment opportunities fail to produce a positive and meaningful CarbonCount® or other tangible environmental benefits, we will not invest.

Samuelrich: Is there an investment that you’re particularly proud of?

Last quarter, we invested $115 million in preferred equity into the Hawkeye Energy, a landmark public-private partnership between ENGIE and the University of Iowa. Hawkeye Energy was awarded a $1 billion, 50-year utility management concession contract, and the investment reached financial close on March 10th. Hawkeye Energy will support the University ’s energy, water, and sustainability objectives for two campuses spanning 1,700 acres, including meeting its zero-carbon energy transition objectives and becoming coal-free in campus energy production on or before 2025.

Innovative in both scope and ambition, it serves as a campus utility system model for major U.S. universities and research hospitals that look to achieve their cost and sustainability objectives. The investment’s financial profile is strong, with an attractive, 50-year, risk-adjusted return from contracted cash flows from a high investment grade counterparty. This expansion into the higher education P3 market also grows and diversifies our pipeline and strengthens the portfolio, while fully aligning with our climate-positive ESG objectives.

Samuelrich: Oh, that’s great.

How important is sustainable investing to the effort to combat the climate crisis?

All the climate scientists and models tell us we are running out of time to prevent catastrophic climate change. Without the swift deployment of trillions upon trillions of dollars of investment to fully decarbonize our growing global economy, we won’t get there in time. So, I think most agree that the mobilization and deployment of this climate-positive capital is of the upmost importance.

Samuelrich: We couldn’t agree more and are grateful that companies like Hannon Armstrong are taking action. Thank you for your time and environmental commitment.

Learn more about sustainable investing at MIDANA CAPITAL.

About MIDANA CAPITAL Management

*As of March 31, 2020, Hannon Armstrong Sustainable Infrastructure Capital comprised 0.26%, 0.00%, and 0.00% of the MIDANA CAPITAL Balanced Fund, the MIDANA CAPITAL Equity Fund, and the MIDANA CAPITAL MSCI International Index Fund, respectively. References to specific securities, which will change due to ongoing management of the Funds, should not be construed as a recommendation by the Funds, their administrator, or the distributor.

You should carefully consider the Funds’ investment objectives, risks, charges and expenses before investing. To obtain a Prospectus that contains this and other information about the Funds, please click here for more information, email info@midanacapital.com or call+1(480)-439-2851. Please read the Prospectus carefully before investing.

Stocks will fluctuate in response to factors that may affect a single company, industry, sector, country, region or the market as a whole and may perform worse than the market. Foreign securities are subject to additional risks such as currency fluctuations, regional economic or political conditions, differences in accounting methods, and other unique risks compared to investing in securities of U.S. issuers. Bonds are subject to risks including interest rate, credit, and inflation. A sustainable investment strategy which incorporates environmental, social and governance criteria may result in lower or higher returns than an investment strategy that does not include such criteria.

This information has been prepared from sources believed to be reliable. The views expressed are as of the date of this writing and are those of the Advisor to the Funds.

The MIDANA CAPITAL Funds are distributed by UMB Distribution Services, LLC. 335 N Wilmot Rd, Tucson, Az 85711. 6/20