Episode 127: Andrei Cherny, Aspiration
Today's guest is Andrei Cherny, CEO & Co-Founder of Aspiration.
Before Aspiration, Cherny worked for Vice President Al Gore as a speechwriter and John Kerry for President campaign as a speech writer and special advisor on policy. Cherny served public office as the Assistant Attorney General in Arizona in the late 2000s. Since then, Cherny has worked on public policy, communication and strategy in the private sector as president of ACE strategies and as managing director at Burson-Marsteller. Additionally, he is the author of two books and spent time as a senior fellow at the Harvard Kennedy School of Government.
We cover a lot in this episode, including Aspiration and how it came to be. We dive into how Aspiration works and what Cherny hopes to achieve through it. Cherny and I discuss the effectiveness of incentives in capitalist societies. Cherny also touches on how public policy and government helped him start Aspiration.
Enjoy the show!
You can find me on Twitter @jjacobs22 (me), @mcjpod (podcast) or @mcjcollective (company). You can reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.
In today's episode, we cover:
An overview of Aspiration
Cherny's background & experiences that led him to the idea of Aspiration
Cherny's time working for Al Gore
How banks operate
Aspiration's model of success
Challenges Aspiration is faced with
Cherny's perspective on fossil fuels & how it applies to banking
Discussion on "do no harm"
Collectivism versus individualism
Divestment versus advocating within the existing systems
How to create change within banking
The power of consumers
Links to topics discussed in this episode:
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Jason Jacobs: Hello everyone. This is Jason Jacobs, and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help. Today's guest is Andrei Cherny, the co-founder and CEO of Aspiration. Aspiration is an online financial firm with a conscience created for everyone, built on trust and dedicated to combining profit with philanthropic purpose. Company closed a $135 million series C financing in May, which brings it to more than $200 million in total funding. I enjoyed this discussion.
A bank is something that, at least me, I think of it as storage, where to put my money. But I don't [00:01:00] necessarily... It's hard to distinguish one back from the next, and I don't really think about how that money is being invested once the bank is storing it. But we dug in in this episode, and Andrei talks about how the trust relationship with banks is broken and needs to return, and how fees as a penalty misaligns interests as it relates to the customer relationship, since the more fees that are assessed, the more profit the bank makes. And also, people are increasingly wanting to invest in ways that align with their values. And I told you that I don't really think of banks beyond storage. But now that my eyes are being opened, it makes me realize that, if I want to live my values in a holistic way, where I put my money really matters.
And Andrei also talks about some cool things that Aspiration is doing in terms of enabling you to offset [00:02:00] some of your activities like driving while you're out in the world, and also getting insight into the brands that you buy from so that you can make better decisions for brands that are more forward thinking in their categories as it relates to climate and getting to net zero emissions. I enjoyed this one, and I hope you do as well. Andrei Cherny, welcome to the show.
Andrei Cherny: Thanks for having me.
Jason Jacobs: Thank you for being here. Where do I find you today geographically?
Andrei Cherny: You find me at home, [laughs] as many of us are, in Phoenix, Arizona. So, a place that was warming before warming was a thing.
Jason Jacobs: Nice. And the team is based in?
Andrei Cherny: We're headquartered in Los Angeles, in Marina del Rey, and then have another big office up in Portland, Oregon as well.
Jason Jacobs: Uh-huh, so has everyone been virtual with the pandemic?
Andrei Cherny: Yes. We kind of went and mid-March, as everybody else did, on a dime flipped over to having everybody in the company work from home. It turned out, for regulatory reasons, we had drafted a pandemic response plan [00:03:00] and a business continuity plan long before anybody thought we would actually have to ever use that. And so, we dusted it off. And I think, as with many people finding that the switch to work from home has its challenges, but it's actually gone a lot smoother for us as a company than I would've ever thought.
Jason Jacobs: Yeah, well my little company of two, we've been functioning okay, certainly simpler than doing it with a big company like yours. And you guys also just closed a big round right in the midst of the pandemic, right?
Andrei Cherny: We did. It's something that we'd been working on for a while but closed also in end of March, uh, beginning of April. So, that was our, for us what we'd call our series C, was, that was the most recent funding for our company.
Jason Jacobs: Rounds of that size, I think it was what, 175 million? Is that right?
Andrei Cherny: 135.
Jason Jacobs: Oh, 135. Yeah, rounds of that size would be hard to get done without some in-person interaction.
Andrei Cherny: Yes. I think the good thing was that that, all that in-person interaction happened leading up coronavirus and the pandemic, and so then it was really [00:04:00] just doing the final pieces. But you are hearing of other companies that are raising money now and doing it over Zoom calls, and even companies going public now. And there used to be this whole process when you had an IPO around a roadshow and you'd fly from city to city to city to meet with different big investment firms. And what I'm hearing from other companies is that's happening now with everybody, in one day, sitting on a series of video calls. It'll be interesting to see, as with so many things, what things look like as you fast forward a year or two from now.
Jason Jacobs: Well, congrats on getting it done. And let's just take it from the top. What's Aspiration?
Andrei Cherny: Aspiration is a sustainability-focused, socially-conscious financial firm for everyday Americans. We offer core products that help you have your spending, saving, investing, other parts of your financial life live in parallel to your values and be financial products that not only help you save money and make money but [00:05:00] also, as you use them, do more and more to save the planet. And we really think of ourselves as creating a very different kind of version of what a financial institution should be like, one that certainly thinks about the financial outcome of its customers and how they're having more money in their wallet, but also realizing that, for so many of us, we're approaching the daily financial decisions we make about what kind of eggs to buy in the grocery store and what kind of clothing to buy and what kind of car to drive or not drive, from the standpoint of sustainability and that there needed to be a financial institution build along those lines as well.
Jason Jacobs: And so, when I, uh, I'm an unsophisticated retail bank customer. And so when I think of where to put my money, it's kind of just like storage. And then, I can access it when I want and presumably there's some type of interest rate associated with it. But I guess help me and help listeners understand what are some of the ways that the traditional retail [00:06:00] banks might go against someone's values that maybe isn't widely known.
Andrei Cherny: What you say is what the vast majority of people think. And people who are very aware and [inaudible 00:06:12] think about it or really don't think about what their money is doing. I think so many of us think, as you said, you put your money into the ATM, you deposit a check on your phone, and then it goes to sit in some vault somewhere. And, of course, that's not the reality. The reality is banks make money by taking your deposits and then lending them out. And a major portion of that lending is around fossil fuel exploration, around oil and gas pipelines and drilling. And when you think about what is the actual fuel for climate change, it's money. That's what driving so much of the actions that are creating the kind of situation that, that we're facing in the world.
And so, what we wanted to do is [00:07:00] say, "Okay, there's a really different way to think about how you use your money," and that your money speaks for you and for your actions in the same way that the other decisions you make. For so many people, they're thinking about what kind of straw they're going to use, and they're making sure they're recycling, and they're thinking about their home energy usage, but then think nothing about paying for that with a Wells Fargo debit card or credit card, or any of these other banks. And it turns out, of course, that by leaving your money in those kinds of institutions, you're actually doing, in many cases, much more harm than the good you're doing by other actions you're taking.
And so, for us it's really been about how do you create a financial institution that both takes away some of the negative aspects of what the big banks are doing with your money, but also creates new kinds of financial products that are really core to to people's lives, and should be even more so as you go forward, that help people have a positive impact on the planet?
Jason Jacobs: And how did this all come to be? I know a [00:08:00] bit, but for anyone that might not, what were you doing leading up to this? And how did the idea for Aspiration come about?
Andrei Cherny: I am not a banker by background and by original training. [laughs] I've learned a whole bunch over the past eight years that we've been doing this. But I started by career, uh, almost 25 years ago, working in the Clinton White House.
Jason Jacobs: It sounds like we're around the same age. And how crazy is that, that that was 25 years ago. But anyways, I digress. [laughs]
Andrei Cherny: It does make us feel old. I still feel like I'm a 20 or 30 year old. But alas, I no longer am. I was working specifically for Vice President Gore and was a speech writer and then later helped, uh, be in charge of his policy platform when he was running for president in 2000. But, of course, that meant I was spending a lot of my time thinking about working on issues around climate change or global warming, as we called it back in the '90s. And just to take us back, this was a time long before those issues had anywhere near the kind of salience with people that they do today. [00:09:00] And it was watching him that I was really inspired and learned about the magnitude of what we were facing because he was having a pretty lonely struggle. He was vice president of the United States, he was getting ready to run for president of the United States, and he was flying around the country giving these speeches around what's happening to our climate. And this is long before Inconvenient Truth, this is long before there was a PowerPoint or anything.
He was giving these speeches where literally we, we'd set up an easel next to him, on the stage by the podium, and have these giant white boards that would show here's the graph showing CO2 levels in the Antarctic core. And people were saying, "What the hell are you talking about? Why are you giving these boring scientific speeches that nobody really cares about and about these issues that are not important to people when you should be talking about the things that really matter? And you're putting people to sleep and you're Al Bore," and all of these kinds of things. All you're doing is pissing off people who are working in coal mining in [00:10:00] West Virginia and places like that that were historically democratic states. Michael Dukakis won West Virginia. And he kept on doing it. And he said, "No, this is important. This is part of my job as a leader is to keep on doing that." And so that, of course, was a really formative experience for me.
And I kept on working on these kinds of issues and on issues around what's going on in our financial institutions generally, started my own, with some other people, think tank and policy journal called Democracy about 15 years ago. From the very first issue, we were publishing articles about what's happening to our climate and new policy proposals of what we can do about it. I worked then with then law professor Elizabeth Warren on the idea of what became the Consumer Financial Protection Bureau, and then was a financial fraud prosecutor. I spent a bunch of years working, doing consulting for some of the big banks and helping them try to do better from the inside. And then, again, about eight years ago, came to the realization that if you really wanted to move the needle on big issues, whether it is climate change or inequality of wealth and opportunity in our country, [00:11:00] or access to great financial products, there was only so much we were able to do, or at least able to successfully do, pushing from the outside, whether in terms of enacting different kinds of laws or whether it was doing some of the consulting work that I was doing, and that you really needed to have a very successful financial institution that showed the way that you could do things differently. And by doing things differently, you could do them better.
And that, if you did that, not only would you make a whole bunch of people's lives better by giving them better financial products, not only would you be able to have, as you grew a, a kind of gravitational pull on the rest of the industry, but that if you really did things at scale you'd be able to really move the needle on a big challenge like climate change. And so, that's what we set out to do, uh, myself and my co-founder and the first members of our team. And then, we grew with more team members and more customers, and we're still growing and there's still a long, long way to go on our own climate journey as well.
Jason Jacobs: And was the primary issue that you [00:12:00] saw with these big, traditional retail banks what they do with the money as it was invested? Or were there other kind of key issues that stood out to you as things that you wanted to tackle when you imagined what should be?
Andrei Cherny: You know, for us, it really came down as the main issue we were solving for was trust. That's our internal slogan and motto as we think about decisions is, is solve for trust. The realization that I came to, and it's not necessarily a novel idea but I saw that from working, especially when I was working more on the inside, is there's all kinds of challenges facing our financial industry, and therefore financial challenges facing individual Americans. Fees are too high, there's not enough great products, there's a mismatch between what very wealthy people are getting and, and everybody else. And all those are important challenges.
But the fundamental challenge was a massive amount of very well-earned distrust for the big, incumbents in that space, for the big banks, for the big institutions on Wall Street. And when you dug [00:13:00] into that, it was really because of two big reasons. One was a misalignment of interests and incentives. It was really clear to people across the board that they understood that their bank did better when they did worse. Most people understand that their bank does better the more overdraft fees that they're paying, the more late fees, the more out-of-network ATM fees, all of those kinds of fees is how banks might make money on most people. And that was, of course, then highlighted by the Wells Fargo scandal where they were not only pushing accounts on people to make more fees and getting them to adopt them, but when they weren't they were just creating fake accounts to rack up fees for people even more.
And the second was a misalignment around values. And again, looking back eight, nine years ago, there was this rise clearly of conscious consumers and of people who were bringing their concerns around the environment and ethics into the daily spending decisions they were making, what kind of companies they wanted to spend with, what kind of products they wanted to buy. They were looking at [00:14:00] the labels. They were doing research in ways that were dramatically different that it had been even 10, 15 years earlier. And those two big misalignments were driving this misalignment of trust which meant that Americans weren't adopting the kinds of financial products that they needed, and that if you had a financial institution that people could trust, the people, you shared their interest and shared their values and they had that confidence, they'd be not only willing to sign up but willing to do more with that institution and able to have access and adopt the kinds of financial products they needed.
Jason Jacobs: So, you mentioned that there was this distrust that was well earned of the big, traditional banks. And, and you mentioned that the incentives were misaligned and that the values, in many cases, were misaligned. So, I mean that's inspirational if you want to set out to create a bank where the incentives are aligned and the values are aligned, but what does that actually mean tactically in terms of how to fulfill that?
Andrei Cherny: That was our [00:15:00] challenge going into this. So, we knew what the problem was, and then it was, "Okay, how do you really solve something that big?" And the really fun part of it, as well as the daunting part of it, was we were starting from scratch. We had a blank whiteboard on a wall, and we had none of the institutional legacy structures that we were counting on 'cause we had to build it all, but nothing that was holding us back either. And so, we did a few things. Number one, we said that Aspiration customers will never pay a fee other than what they choose, so no overdraft fees, no traditional late fees on their accounts, no locked in management fees on investment products or any of these kinds of things that ended up being this dynamic where it was heads, they win, tails, they win kind of financial products.
And so, our fee structure for our core account, that we call it a spend and save account now, is pay what is fair. Customer decides what to pay us. Again, there's no overdraft fees, no late fees. There's a monthly fee, but the customer picks that fee. If you want to pay us zero, then you pay us zero. If you're paying us zero, we need to be doing a better job for you if that's what you think we deserve. But we really [00:16:00] wanted to align ourselves with that customer so that we built that trust.
Jason Jacobs: But can we double click on that? Like if most customers think of banks as storage, as we discussed from the outside of the discussion, then what kind of job are people expecting Aspiration to do?
Andrei Cherny: Yeah, I think it comes down to what we can offer that customer. And that's, again, a pretty high bar. Because for some people, they do think of that bank just as storage and it's more of a utility. They're flipping the switch on and off. But we've seen, even with utilities, that people are starting to have higher expectations of what they want their utility to be doing. And so, we wanted to fulfill that as well. And so, what are they expecting us to do? First of all, to have a better financial product for them. Number one, not having the kinds of fees that I mentioned, which for most people in the country add up to hundreds of dollars a year.
Jason Jacobs: And are those fees a meaningful percentage of [00:17:00] the traditional banks' revenue mix?
Andrei Cherny: They are, and that's kind of the trap that these traditional banks are in. They're not all of that revenue but, for instance, looking at let's say overdraft fees, overdraft fees are, rough numbers, a- about $40 billion a year of revenue being driven around those fees to the big banks. Now, they make 100+ million or 200 million of profit of a year. So, it's not everything but it's a big chunk of how they make money and certainly it's the way they make money on 95% of customers that are not your very wealthy customers. It is those kinds of fees that are the chief revenue source.
Jason Jacobs: If these fees are bad, then why make it optional to pay? Or what's the circumstance where you think paying a fee is going to feel good to the customer?
Andrei Cherny: It's the kind of fee you're paying. So, an overdraft fee is, of course, a fee that, when you don't have enough money in your back account, you're basically getting hit twice, right? One, you don't have the money and you're not able to pay that bill. But then, the bank will [00:18:00] charge you an extra $35, $40 of a fee for hitting that where they could just not allow the transaction to go through. So, it's these kind of penalty fees that the customer doesn't choose that is the problem. Now, we are an institution, and we still have to make money as an institution. But what was important was, yes, there is fee for what we do, there's no free lunches, but the customer should choose that fee. And the customer should choose that fee based on how good of a job we're doing. Again, in terms of the kind of financial product we're offering, not having fees, offering cash back where others aren't offering that, offering interest on our accounts, doing those kinds of things are a piece of that.
But also, being able to say to the customer, "Here's all the other products and services we offer, fossil fuel-free deposits." Or we'll talk more about, about our Aspiration Impact Measurement that shows your sustainability score, a whole bunch of other things that we do for the customer where we say, "Okay, we've set a high bar for ourselves. We want to make you so happy, so excited about being part of Aspiration, what we're doing for you, that you're going to [00:19:00] choose to pay a fee even though you could be paying zero. But you're excited to be part of this community and excited to drive it forward." And what we find is the great majority of our customers choose to pay a fee even thought they don't have to. And most choose a really fair fee. And so that's a piece of how we make money. And saying, again, in terms of your question about how do you take that big idea and translate it, a part of that was saying, "Okay, here's how we're going to align our interests with the customer so that they're only paying us when they're really happy, not when they've been put in a really bad situation.
And so, the other piece was really about how do you solve for this other misalignment around values and how do you create financial products that are both good for the customer but also good for the world and let them make a positive impact? And so, there's a bunch of things that we offer there. One is, when you deposit money at Aspiration, we guarantee that those deposits aren't going to be lent out to oil and gas exploration and pipelines and, and all of these other pieces that are driving the climate crisis. Two, we offer something called the, the Aspiration [00:20:00] Impact Measurement. It shows your own personal sustainability score. So, as you're going through your day, it's kind of a Fitbit for sustainability. It shows you how you're doing based on where you're spending your money.
And then, it also shows you the people and planet scores of the different places where you're shopping and spending. And so, if you're walking down the street and there's a CVS and a Walgreens, you can decide between the two of them based on how are they treating the environment, how are they treating their employees. If you're just going to go eat at a McDonald's or a Chipotle or a Burger King or a Taco Bell, whatever else it might be, not only do you feel like a Big Mac or a burrito but how are those businesses treating the planet, how are they treating people, and empower our customers to make those kinds of spending decisions.
And then, we offer other benefits that we can add on as well. And one of those is something called Planet Protection that's part of our Aspiration Plus subscription product that people sign up for where we make all of their driving carbon neutral by automatically purchasing carbon offsets for [00:21:00] every mile of gasoline, or every dollar of gasoline that they're purchasing. And another is something called Plant or Change which is a program where customers round up each one of their purchases to the nearest dollar, and then we plant a tree with every roundup. And so, every time you're out there buying something in the grocery store or buying something online, you're planting a tree every time you make that kind of purchase. And that's been enormously popular as well.
Jason Jacobs: So, I think what I'm hearing is that there's some banks that are more about storage, and then they're doing things that might not align with your values under the hood that you, in many cases, might not even be aware of. And then, they get you with these different fees and stuff that just kind of feel crappy and where the interests aren't aligned. And so, what you guys are doing is you're saying, "We're going to align interests in terms of fees for value versus fees for penalty. We're going to make sure that your money is put towards things that you can feel good about if you care about things like the planet and sustainability and things like that." And then, some of the other things that you might do in more of a [00:22:00] modular way where you seek out offsets for your flying or for your driving, or you try to shop at, with brands that have more of a clean, sustainable approach. You're providing transparency and tools to help your customers make better decisions as part of an overall portfolio of banking experience versus needing to go somewhere else for these on an ala carte basis.
Andrei Cherny: Absolutely, that's right. And I think it's part of this journey that, hopefully, we're at the forefront of and others are coming along on that journey as well. You had, in the past, some local financial institutions and others that were more green in their focus and that weren't doing the kind of harm in terms of their lending. And part of what we're doing is taking something like that national and building it out at scale so that people all over the country have access to it. But I think the big part of what we're trying to do is say, "Let's go as an industry from this do no harm approach to actually thinking about what are the kinds of financial products and services we can offer our customers that [00:23:00] allow them to do good and allow them to make an improvement in the planet and in the issues around sustainability with every dollar that they're spending, with every dollar that they're putting into their account." And that positive aspect is something that I think we're really helping to drive, and there's so much more that is still to be done there.
Jason Jacobs: So, that's very helpful, by the way, to understand kind of from a mission standpoint what the value proposition is to consumers and how it can be good for the world. Just from more of a like building a strong, enduring company standpoint, I know there's some other banks that have tried going down this path before, including, I think here was one recently that just got amalgamated. I forget the name of it. But why do you think that some others that have tried, maybe with similar approaches, have not been able to get to sustainable critical mass?
Andrei Cherny: So, yes, I think there have been other banks out there. And so, you mentioned New Resource Bank, which was up in Northern California and, and was acquired by Amalgamated Bank, which is also a really good bank as well. And, [00:24:00] and know those folks well, and there's other banks that we know well. But we're doing something I'd say fundamentally different. Those are good institutions, but they're local institutions. They're institutions in that area, and they have relatively a very small number or customers. And what we're trying to do is build a national institution, one that's available to everybody everywhere, all over the country, and build something at real scale. And then, the second part of that, again, is this switch from saying, "We're not going to do evil with your money," to "Here's how you can do good with your money." And that's the other thing that I think really separates Aspiration from some of these other really worthwhile institutions that have been more local and at a different kind of scale than what we're building.
Jason Jacobs: And when you think about the future, are there things that are causing headwinds not just to you but maybe to the overall category? And, if so, what are the ones that you think are most pronounced, and what could we change in order to accelerate the [00:25:00] adoption of cleaner retail banking at scale?
Andrei Cherny: I think our biggest challenge is really one around education and around societal shifts. Again, I, as I said, there's a lot of very smart, very well-educated, very well-meaning people who are very conscious in all, almost all aspects of their lives about the impact that they're making, and are making careful, informed decisions about what brand of cereal to buy in the store and how their shoes are made and what kind of car they're driving, what kind of cup they're drinking out of, and all of those kinds of things, and yet who have not made the connection between all of those concerns and the big, big impact of where their money is. And that's a big step that we are still working on, I think, as a country. What we find is when people do see the connection, for a lot of people the light bulb goes off and they say, "Oh my gosh, I've been doing all these things and then more than outweighing the good by doing damage by keeping my money at Wells Fargo or Bank of America," or any of [00:26:00] these large institutions that are turning around and taking that money and investing directly in the Dakota Access Pipeline or other big projects like that. And that's when they come to Aspiration.
But we have not yet made the societal shift. I think that's picking up speed. We've seen, just in the past few months, Bill McKibben, who's a name that many of the listeners on this podcast will recognize, write a couple of big articles, one at the end of last year in The New Yorker and one early this year in the The New York Times, really pointing to the fact that the banking industry and what it does with customers' deposits is one of the biggest, if not the biggest drivers of the climate crisis. And so, I think we're having this societal change, and it's starting to pick up speed, and we're seeing more and more people have that moment of realization every day.
Jason Jacobs: A few things that just kind of came to mind as we were talking so far, one is just, I mean you mentioned offsets, for example. And what some would say is that offsets are great in theory but not in practice. How do you think about the state of the offset market? I'm just curious?
Andrei Cherny: I think of it a few [00:27:00] ways. I think, one, not all offsets are created equal. And so, it's, I think, important to look at factors like additionality, which means the projects being funded by those offsets something that wouldn't already be happening. And so, that makes a difference. And it's also important to say that none of these things are a panacea. And we don't pretend that they are, and nobody else should pretend that any one thing you do is going to solve the climate crisis or even solve your own personal impact. Would it be better if people were not driving an SUV and getting an offset instead, taking the bike to work or walking to the grocery store? Absolutely. But it's also important to realize that when you have an opportunity to make a positive difference, you should. And it's better to do something that makes a positive difference as opposed to do nothing. And so, is the fact that somebody is planting a tree with every purchase, are those trees alone going to solve the climate crisis? No, of course not.
[00:28:00] Is your own personal decision to shop at CVS instead of Walgreens, let's say, because they have a better environmental record, are those few dollars that you spend on toothpaste at one place as opposed to another, is that alone going to make a gigantic impact on what happens to the planet? No, of course not. But when we have an opportunity to make a difference, we should take it. And that's what's we're really about is those individual actions that we take add up. And I think that's something that more and more people are coming to realize. We spend $36 billion a day as American consumers. And so, the three bucks you spend on toothpaste isn't going to move that. But if everybody starts spending three bucks in a different place based on how a business is treating the environment, that is going to have an impact, and it's going to have a bigger and bigger impact.
I think, in some ways, my hope is that the coronavirus will be serving as a moment of realization for people as we go forward. Wearing a mask alone, is that going to stop the coronavirus from spreading? No. But if all of us wore a mask, it would be dead in its tracks. [00:29:00] And that idea that we have an individual responsibility that adds up to a societal responsibility, I think is at the heart of how we're going to actually, in a real way, address the climate crisis. It's our only hope of doing so.
Jason Jacobs: And I have the same question for you I did about offsets but about ESG.
Andrei Cherny: Another area where all ESG is not created equal. Under this umbrella of sustainable investing, there's different kinds of investing. One part is what's called socially responsible investing which, again, usually means a do no harm approach. It's, "I'm going to invest in the exact same ways, but I'm going to strip out oil and gas or I'm going to strip out tobacco or gambling," or any of these other areas. Then, there's impact investing which is saying, "I'm going to not try to get the best returns on my investment, but I'm going to really invest in things that are going to have a positive impact." What ESG investing means, environmental social governance, means that you're looking at those kinds of factors as you're making investment decisions and thinking about the [00:30:00] companies that are incorporating those factors, not just for their own conscience but because they think it's actually going to make them better companies and more valuable companies.
I sometimes say, from an ESG standpoint, I don't really care if the CEO of Walmart cares about the environment or not. But if she or he is going to change all the light bulbs in all of their stores all around the world to be more energy efficient light bulbs, and they're willing to take that short-term hit to their profitability, understanding that they're going to recoup that over the long term in terms of lower energy costs, that's a positive thing. And that's the kind of behavior we want to encourage through ESG investing. And so, for instance, our core fund is called the Aspiration Redwood Fund, has both a negative screen, so none of your investment is going to oil and gas exploration. And that's important to look at because for a lot of the funds out there that are marketing themselves as ESG, it just means that maybe only 5 or 10% of your investment is going to oil [00:31:00] and gas. And so, you really have to look at that. And then, it invests in a positive way in ESG leaders.
And by that, we mean not necessarily the greenest companies out there by any means, it means leaders in their industry that are doing better than their peers, that are industry leaders in their space. So, if we're investing in, let's say, some kind of manufacturer, they're not going to be as green as somebody with a much smaller carbon footprint. But if they're thinking a lot more and acting a lot more on environmental or social or governance concerns than others in their space, we want to be investing in them. Number one, because we want to be encouraging that behavior. Number two, because we want to provide incentives for others to catch up. And, number three, because we believe that those kinds of companies are going to actually do best overall because they're thinking about the long term, because they're thinking about how to reduce their individual risk from climate change and, and the collective risk we face.
And so, you really have to think about what that strategy is. We've tried to provide a very simple strategy that's open to everybody. Again, [00:32:00] very low minimums to enter. And we have some people who are investing millions of dollars and some people who are investing $10. We want to make it open to everybody. And it has done, over the past five years, has beaten the performance of the stock market overall. And obviously there's no guarantees, but we think over the long term it's going to be a positive way to invest at the intersection of both value and values.
Jason Jacobs: Another question that came to mind is just that there's one school of thought that the fossil fuel companies are evil and need to die, and there's another school of thought that says that we do need to move towards a clean energy transition as quickly as possible but, in order to get there, no one is better positioned than the fossil fuel companies to help us make that transition, and we need their help. And correspondingly, there are those that say, "Divest," and there are those that say, "Actually, the best thing to do is to, to stay involved and exert pressure as a shareholder." So, how do you think about that topic?
Andrei Cherny: I think of it as both/and. And I think that my general belief is that [00:33:00] the biggest way you can impact any business is in their pocketbook. And so, that's what we've tried to do at Aspiration is say, "All right, how are you going to impact McDonald's versus Burger King?" Well, the biggest way to do it is to say to, let's just say Burger King, "Okay, we're all going to go eat at McDonald's because they're better for the environment," just using that as an example, not saying that that's, that that's true. And that competitive pressure is going to be the biggest possible driver you have. What are consumers doing? And what are the other competitors in their space doing? And so, if you want to change the behavior of big energy companies, the best way to do it is to build up and then spend your money at those who are doing better. And that's the biggest lever you can have. I'd say it's similar to our theory of change around the financial industry.
I don't think Wells Fargo is going to disappear tomorrow. I don't think Bank of America is going to disappear tomorrow. I think Aspiration is going to continue to grow, and the best thing we can do is, number one, provide a source of competition to those [00:34:00] institutions that is, one, going to, by the nature of what we do, make a positive difference but also force them to move what they do as well. And I think it's a similar dynamic with, uh, the fossil fuel industry.
Jason Jacobs: You could argue that because they're greedy, that they're going to invest where they can make the most money and generate the most returns. And as long as that's fossil fuel, oil exploration for example, that's where they'll put their dollars. But actually, driving the cost down on renewables, for example, may be the best way to get them to change versus like, "Pretty please, do what's right. Do what's good for the planet."
Andrei Cherny: I agree. Again, that's a big part of why we started Aspiration. I had spent so many years both whether it was in government and public policy or inside these institutions, to use your words, kind of saying pretty please, trying to preach that this was a, a better way to go. And really, that belief has just been strengthened, over the past eight years that we've been doing this, that the biggest force for change is to provide for them a real incentive to change, and financial incentive is what's going to move things.
Jason Jacobs: We're [00:35:00] approaching close here, but a couple of final questions. One is just, in your wildest dreams, if you can have the biggest impact that you can with Aspiration on helping address climate change and accelerate the clean energy transition, what role will Aspiration have played looking backwards at the end of this journey?
Andrei Cherny: I think it will be about two things, if we're successful at the scale that we want. One is, as I said, judging our success not by what we do but what happens all around us. If we've reached the kind of scale that we need to and continue to grow, you'll see that gravitational impact as other businesses are going to change, as the Well Fargos and others realize, "Okay, we can't keep on doing this because our customers are leaving us in greater and greater numbers, and so we're going to have to try to catch up and keep up and at least assuage some of these concerns and do better."
And the other, I think, will be not a big systemic change but an individual change. And that'll really be about empowering millions and millions and millions of people in their daily [00:36:00] lives to have a positive impact, to really be able to think about where their dollars are going with every purchase they're making, to be able to have a positive impact as they're saving their money and spending their money, as they're thinking about what kind of investments they want to make or what kind of life insurance they want to purchase or where they want to refinance their student loans, or whatever else it might be as we continue to grow, and to turn around a feeling that, for lot of people, is one of helplessness as these big changes are happening and to give people another piece of the puzzle that says that, no, actually we have more power than we think. And that ability to vote with your dollars every day both in terms of how you're saving your money but also how you're spending your money is a gigantic lever for change.
Jason Jacobs: And my last question is just if you weren't doing what you're doing, but you were interested in tackling the same problem, what would you be doing?
Andrei Cherny: Probably a question to [00:37:00] which I don't have a great answer other to say that I spent a bunch of years trying to tackle it in all different kinds of ways, through government, through public policy, working with some of these big companies. And, frankly, there's no other way I can think of for making the kind of impact that I think I can have on a personal basis than doing what we're doing right now.
Jason Jacobs: Awesome. Well, is there anything I didn't ask you that I should have or any parting words for listeners?
Andrei Cherny: No, I think we covered a lot. So, this has been great.
Jason Jacobs: Andrei, thank you so much for coming on the show and for all of the work that you do. And I wish you every success.
Andrei Cherny: Thank you.
Jason Jacobs: Hey everyone, Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey, you can visit us at myclimatejourney.co. Note, that is .co, not .com. Some day we'll get the .com, but right now .co. You can also find me on Twitter at @jjacobs22 where I would encourage you to [00:38:00] share your feedback on the episode or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.
