April 28th, 2022 — For over a decade I searched for a sustainable investing platform that is not only “fossil free” but one that actually advances climate solutions, and I wasn’t able to find one because it didn’t exist. This shouldn’t be the case since sustainable investing as an asset class—largely driven by environmental, social, and governance (ESG)-focused funds—has rapidly grown into a $35 trillion industry.
While a few sustainability-forward credit card and banking providers today offer tree plantings or other client perks, real and lasting decarbonization impact remains limited, and retail investors are surprised to find that many leading ESG funds and so-called ‘fossil free’ portfolios actually invest in oil and gas companies while others rely solely on avoiding carbon-intensive sectors without offering a strategy to invest in companies whose primary focus is decarbonization.
Today, I’m happy to share that Powerhouse Ventures found and backed Carbon Collective.
Carbon Collective has built a climate-first wealth management platform that offers low-fee, diversified investment portfolios built specifically to advance climate solutions. By providing a comprehensive financial platform for sustainable investing, Carbon Collective captures the financial upside potential of the climate investment opportunity while at the same time supporting companies building climate solutions and assets that accelerate the financing of sustainable infrastructure.
Demand for sustainable investment options is rapidly expanding.
In 2020, over a third of investment assets managed globally were classified as “sustainable”, driven by demand from clients trying to find ways to integrate ESG factors into their portfolio strategies.
Alongside strong growth trends in the market, changes in consumer wealth management demographics continue to shape the sustainable investment landscape. For example, millennials, the largest generation group in the U.S., are projected to hold 25% of wealth by 2030. According to a 2021 Morgan Stanley report, close to 99% of millennials and 79% of all other individual investors expressed interest in climate-themed investments.
However, access to robust sustainable investment products that include alternative asset options remains a challenge for retail investors.
ESG investments are surface-level only and just don't cut it.
While interest in sustainable investment opportunities continues to grow, financial regulators, industry experts, and individual investors continue to struggle with the broad use and lack of standard definitions of ESG metrics, leading to investor scrutiny, brand risk, and increased instances of backlash against companies and fund managers who mislead environmentally and socially oriented investors with options that are nearly equivalent to non-ESG products.
One in five investors say they’ve decided not to invest with a particular fund manager because their ESG policies were inadequate.
Additionally, investors interested in renewables are often surprised to find little to no exposure to solar or wind companies in their portfolio’s prospectus. In 2021, the 20 largest ESG funds collectively accounted for 13% of total global AUM but only allocated 1-2% to the energy sector, of which included stakes in nearly a dozen oil majors like ExxonMobil and Chevron.
Traditional wealth management is stuck in the status quo.
The inability of wealth managers to offer robust sustainable investment portfolios highlights the fact that those offerings are incompatible with their current strategy.
To offer truly sustainable investment options, traditional fund managers face substantial risks to their core business, shining an unwanted light on their unsustainable, status quo fund strategy, making traditional fund managers ill-positioned to attract and service investors looking for products and portfolios that actually accelerate decarbonization and climate action.
Carbon Collective redefines sustainable investing from the ground up, providing investment options that support climate solutions and maximize returns.
The Carbon Collective wealth management platform offers diverse investment products for individual investors that are fully dedicated to climate solutions, offering robo-advising services and green 401(k) retirement portfolios that offer similar fees and risk-reward ratios as traditional funds.
Carbon Collective’s climate index offers a mix of 169 stocks building solutions to climate change, including clean energy, building efficiency, food, agriculture, and mobility stocks carefully curated based on leading frameworks for the most impactful and proven climate solutions available today.
Unlike most fund management platforms, Carbon Collective also includes embedded investor engagement options through shareholder activism initiatives like collectivizing shares to propose and vote on shareholder resolutions that move companies faster on their decarbonization efforts.
Powerhouse Ventures is proud to join Carbon Collective’s $2.2M Seed round, led by HyperGuap with additional participation from Precursor Ventures, Climate Capital, Elevation Ventures, Looking Glass Capital, Keiki Capital, and angel investors. We look forward to working with CEO & Co-Founder Zach Stein, CTO & Co-Founder James Regulinski, and the entire Carbon Collective team to scale the climate investment opportunity.
Special thanks to Shaandiin Cedar and Marie Thompson.
To read more about Powerhouse Ventures’ other publicly-announced investments, visit our Insights page.