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💸 Investment Portfolios for Solving Climate Change

My Climate Journey

Photo by Markus Winkler / Unsplash

Table of Contents

Host: Jason Jacobs
Guest: Zach Stein | Co-Founder & CEO | Carbon Collective
Category: 💸 Investing

Podcast’s Essential Bites:

[3:21] “Carbon Collective is an online investment platform that allows people like you and me to invest in a way that is driving true climate impact. So we know […] one of the biggest things that is blocking solutions to climate change is investment. We have to invest our way out of climate change. Right now we're having about $500 billion a year that is going into climate solutions, which is awesome. But if we're to be on a path to avoid two degrees C of warming, we've got to be closer to $5,000 billion of investment going.”

[3:54] “Right now, […] part of the problem is if you're quite wealthy, you could invest directly in climate startups. […] And what Wall Street is selling as climate investment isn't. It doesn't actually have […] real impact. And so that's what we're building right now. We enable you to take things like your IRA, or your 401(K) and align them in public markets in a way that is a smart, low fee, […] fits with your standard investment principles, you don't feel like you need to sacrifice anything in terms of fees or diversification, but is truly aligned on driving as much climate impact as we can from that. And that's just the start of what we want to build.”

[16:04] “We’re at this really interesting time in financial markets at the moment. […] From August, 3 of 2011, to August, 3 of 2021 […] the S&P 500 more than tripled in value. But the energy index, so the fossil fuel companies on the S&P 500 and beyond, they lost money. Like if you put 100 bucks in at the beginning of that time, you'd have about $92 at the end of that date. […] At the same time we saw, especially over the last five years, and especially with the Coronavirus crash of March 2020, that's when we really saw in particular climate solutions significantly outperform the market over that period of time. […] I do believe that over the long term, like over the next 10 to 20 years, having fewer fossil fuel companies in your portfolio, is likely going to do better over that period of time.”

[20:09] “One example we think is really interesting is what happened to the coal companies on the stock market in the 2010s. So from 2011 to 2020, and this is a period [when] we still use[d] lots of coal, […] the US coal index fell 99% in value on markets during that time. […] And that is because […] the narrative shifted about this entire industry, the collective belief shifted that this industry no longer has a financially viable future. And that's incredibly powerful. And that's […] where we as climate focus investors can have so much of that power. […] We can make the same arguments and see the same path for the same thing happening to oil and gas. […] And why this has an impact is when your stock falls by 99% it turns out, it's a lot harder to raise money, it's a lot harder to get debt, it's a lot harder to sell more equity, to raise money to go and expand to dig up more coal. […] It becomes a self fulfilling prophecy. And that is […] what some of the power of the stock market can be. And it's why it's so frustrating that ESG and climate impact funds […] still include fossil fuel companies in them, because you're still upholding that self fulfilling prophecy that these companies in their current states still have a place in our future.”

[27:40] “Today, where we are starting, is where most people invest, which is investing in public markets. […] We really like index based investing. […] It just still makes the most financial sense today for the vast majority of people and institutions. […] What we couldn't find and still does not exist is a comprehensive way to enable that strategy that is focused on climate change. […] So how we build our portfolios today is we look at the entire US stock market. And about 20% of the US stock market is our companies that are dependent upon the long term use of fossil fuels for their core business. […] We remove these companies and then in their share, we put in the companies that are building climate solutions. So our biggest hero is Project Drawdown. […] So we wanted to build an index of companies that are building drawdown solutions. And so we call it the Climate Index. […] And so basically […] we looked what is every single publicly traded company that is building a drawdown solution that is not making more money from servicing the fossil fuel industry.”

[45:54] “We just recently launched […] our Green 401(K) Program. So we got a lot of founder friends in the climate space. And people are like, […] I want to offer 401(K) to my employees, like that's a really important perk. The problem is […] 401(K) are traditionally really conservative. […] If you're matching your employees’ money into fossil fuel companies, they're not in any additional into climate solutions […]. So while your company might be working really hard on solar on the one hand, your money is working on the status quo, and doubling down on that. And that just doesn't make sense. So we launched an option where if you're starting a new 401(K) plan, or if you're reevaluating, […] come check us out, you'll pay the same fees, and […] you're going to be getting options.”

Rating: ⚡⚡⚡⚡

🎙️ Full Episode: Apple | Spotify (Original Title: "Startup Series: Carbon Collective")
🕰️ 51 min | 🗓️ 10/21/2021
✅ Time saved: 49 min

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