Carbon Collective
Our Investment in Carbon Collective
Carbon Collective’s backtested historical returns from 01/01/15 - 03/31/2021 vs. S&P 500 and Barclays Aggregate Bond Index.
We’ve previously shared our belief that there’s a rising trend of climate consciousness, driving a new breed of consumer behavior. For many people, a significant share of their wealth is stored in investments and retirement accounts which back a breadth of companies, whose stance, strategy, and risk toward climate is unclear. As a result, there has been a growing interest in ESG funds not only reflecting a desire for greater socially responsible investing, but also to help insulate investors against exposure to climate change-impacted companies. Attracting nearly $8B in the first quarter of this year alone, ESG funds have experienced a resurgence of demand; however, despite their growing popularity, they remain largely opaque and without uniformity in how companies are meeting specific climate criteria. Moreover, ESG funds don’t necessarily exclude investments in fossil fuel companies. Attempting to address this challenge, the E.U. and the Biden White House are respectively working to codify disclosure requirements in an effort to standardize reporting of ESG funds. As the industry struggles to set a widely-accepted definition of sustainability, we believe there’s an opportunity to provide a transparent and trusted way for individuals to invest their financial resources in a manner that aligns with their values.
One company that is doing this is Bay Area based Carbon Collective, which has launched a robo-advisor that makes investing in climate-committed companies easy, educational, and transparent. The company was founded in 2020 by Zach Stein and James Regulinkski, longtime co-founders who have both held careers focused on sustainability. We’re happy to announce our investment in Carbon Collective, as it empowers individuals to allocate their financial resources to deliver both financial returns and climate impact.
What is Carbon Collective?
An example of how Carbon Collective constructs a decarbonized portfolio.
Carbon Collective is a climate-focused robo-advisor that enables individuals to decarbonize their retirement (IRA and soon 401(k)) and brokerage accounts while investing in climate solutions. Ultimately, it envisions helping people eliminate the carbon footprint across their finances. While it adopts many of the same practices found among popular robo-advisors, such as low fees and index fund-based investing, it applies a thoughtful climate filter in the investments it makes. For its clients, Carbon Collective constructs a portfolio that replaces companies, who are dependent on fossil fuels, with those building climate drawdown solutions. In addition, Carbon Collective’s mission is to pressure companies with significant carbon footprints to eliminate their emissions urgently.
In its first six months, Carbon Collective has attracted >$6MM in AUM purely from word of mouth with no churn. Most encouraging was seeing a quarter of clients move over their entire IRAs to the platform. This willingness to move huge portions of one’s financial life to Carbon Collective undergirds our belief that the company is well-positioned to capture value in this multibillion dollar sector by positioning itself as a better alternative to ESG. The company intends to make money on low-cost fees, a model proven out by robo-advisor incumbents like Wealthfront and Betterment as well as other areas of unmet need like a climate-focused 401(k).
Why did we invest?
Encouraging Signs of Product-Market Fit
As mentioned, we’re most impressed by the traction achieved by Zach and James in only a few short months. A pivot from an earlier venture, Carbon Collective has not only shown it can amass a considerable amount of client interest and elicit trust based on its value proposition, but also that it can retain it for months and, hopefully, years to come. A climate-focused IRA, its initial offering, is already proving to be a sticky product. We foresee this will only compound as the company eventually rolls out additional services, such as 401(k), ETFs, and other solutions rounding out the full-spectrum of the client's financial needs.
Capitalizing on the Consumer Climate Zeitgeist
While Carbon Collective believes in its potential for mass appeal, it perceives its value proposition particularly resonates with millennials who are concerned about climate change. The company believes it can capitalize on a growing segment of the over 70 million U.S. millennials, many of whom have signaled a desire to modify their personal habits to mitigate the climate crisis.
Influencing Corporate Change
If it can successfully achieve scale, the founders’ goal is to push its portfolio companies to adopt aggressive climate policies with clear incentives and punishments. Utilizing the weight of their assets and the public opinions of its many retail investors, they aim to pressure companies using both shareholder activism and brand risk to advance progress on decarbonization. We support this vision and believe it begins with individuals making informed decisions of where to place their money. With a focus on building a trusted and transparent brand, Carbon Collective is on a mission to pioneer the category of “true green personal finance” and prove impact and returns can go hand in hand.
Current Offer
For the month of September, Carbon Collective is hosting “Green Retirement Month.” If you have been looking to roll over an old 401(k) or find a new, climate-aligned home for your IRA, they will do all of the hard work for you in setting up the transfer. Plus, they will send out welcome bonuses of between $10 - $25 for every $10k you transfer.
Additional Resources
Check out: Green Retirement Month
Weekly Webinar: “How to be a Smart Investor… Who Cares About Climate Change”
