ClimateSmart.
Smart investing for a changing world.
We help individuals, companies, and organizations incorporate the realities of our changing climate and energy systems into their investments.
Welcome, we’re so glad you’re here.
Our collective
Our growing collective:
Investment philosophy
Our world is changing
Emissions from fossil fuels, which have powered our global civilization thus far, have destabilized our climate, a trend that is likely to worsen before it improves
Investment philosophy
Our world is changing
The technologies to continue building, powering, and providing raw materials to our global civilization without emissions are innovating so rapidly they are increasingly outcompeting incumbents.
Investment philosophy
Our portfolios should change too
We believe that global stock and bond markets are still failing to adequately price in the financial and political risks associated with extreme weather brought on by climate change.
Investment philosophy
Our portfolios should change too
Innovation drives longterm investment returns. Most of fossil fuels' innovation is in the rearview mirror. It's climate solutions that now have tremendous potential to improve.
About ClimateSmart
ClimateSmart is (deliberately) simple
Our goal for ClimateSmart is to answer the following question: How should one approach long term investing, like saving for retirement, in the age of climate change?
01. Start with the global stock market.
We're believers in passive investing. We generally think its hard to beat the market's crowdsourced pricing within any given sector. So we don't try to pick stocks, we pick sectors in a fashion we call "globally dynamic." We believe the coming decades will likely be more volatile than the previous ones, with greater, more sudden shifts of capital from one country to another, a trend that will likely be exacerbated by rising climate change. So rather than try and anticipate where that capital will flow, we aim to be ready to dynamically shift with it as the geopolitical landscape of the 21st century continues to evolve.
02. Cut the sectors reliant on the status quo fossil fuel system.
Would you rather invest in a growing industry or a stagnant/declining one? Historically, long term investment returns are driven by growth. One of the core assumptions ClimateSmart makes is that fossil fuels will be entering an extended decline over the coming decades as they struggle to compete with the next generation of tech (renewables, batteries, and EVs) amidst a geopolitical landscape that is prioritizing energy independence. If we are correct, this will not only add significant investment risk for fossil fuel companies themselves, but industries that cannot easily adopt non-fossil fuel alternatives (cement, steel, shipping, airlines, etc.), as they are forced to cope with unexpected supply shortages as key pieces of local fossil fuel infrastructure turn unprofitable.
Overall, we believe the stock market is underpricing the technological, market, and geopolitical risks facing fossil fuels, so we exclude them and their technologically dependent sectors (which generally account for about 15-20% of the overall stock market).
03. Replace their share with high-potential climate solutions.
We then replace that fossil-fuel dependent 15-20% of the global stock market with investments into the high-growth industries replacing them: climate solutions. From renewables, to batteries, to EVs, to energy efficiency, to the circular economy, we believe we are in the midst of an energy and materials revolution. A revolution that is being driven by a combination of technological superiority and geopolitical incentives. Overtime, we believe these growth potential factors will lead to climate solutions to outperform the overall market (irrespective of governmental climate action), so we overweight them.
01. Use active management, where possible.
Unlike the stock market, the bond market is not actually efficient. Certain kinds of bonds can end up representing large parts of the market, not because they are more valuable, but because governments have crafted policy to favor them. Therefore, unlike stocks where it has historically been challenging to outperform the market decade over decade, an experienced bond trader should be able to regularly outperform the passive bond market.
02. Avoid fossil fuel bonds. Overweight green bonds.
One of the core assumptions that ClimateSmart makes is that fossil fuels will soon enter a decades-long gradual decline in demand. If we are correct, it will likely mean that we will see a sharp rise in debt default from fossil fuel companies. We do not believe this risk is (yet) being priced into the bond market, so we avoid fossil fuel bonds entirely.
Instead, to get corporate bonds exposure, we use green bonds. Not only do they align with our climate-focused strategy, but we believe they have a higher upside that generic corporate bonds for the same amount of risk.
Green bonds are debt issued by corporations that must specifically be used on green projects. They must submit an annual third-party audited report each year on how the debt was spent. Green bonds have a sneaky investment upside, they could be a real hedge on climate-driven inflation. Central banks, who are tasked with fighting inflation, don't have many tools beyond incentivizing green bonds to mitigate climate change. As climate change worsens, we believe the likelihood of central banks incentivizing green bonds increases, which would positively impact existing green bond holders.
03. Diversify with government bonds
We complete our bond portfolio by diversifying into mid, longterm, and inflation-protected government bonds.
Ready to go deeper?
Individuals
IRA's, Brokerage Accounts, and more
401(k) + 403(b)
We're proud to serve 140+ employer sponsored plans
Endowment
Foundation setup and cash management
FAQ
Frequently asked questions
Who does Carbon Collective work with?
Individuals: We help individuals set up and operate brokerage, IRA, and safety net accounts.
Employers: We help employers manage their 401k and 403b plans, serving as the 3(38) advisor. We build and monitor fund lineups, assist with finding and collaborating with other service providers, and provide support and (awesome) financial education to participants.
Nonprofits: We help nonprofits build and manage ClimateSmart endowments and cash reserves.
Who is ClimateSmart for?
ClimateSmart is for savers who believe that climate change is here. That it's going to get worse before it gets better. And that the overall stock market is likely not pricing in the risks of climate-related investments like fossil fuels or the growth potential of climate solutions.
When was Carbon Collective founded?
Carbon Collective was founded in 2020 by Zach and James, two childhood friends and startup cofounders who could not find a way to incorporate the realities of climate change into a coherent, comprehensive and ultimately simple investment strategy anyone could use.
Will ClimateSmart outperform?
Over the long term, we believe it will. We simply do not believe that Wall Street is accurately pricing in climate risk or climate opportunity. But every investment strategy carries risk. There are no guarantees of returns.
To date, ClimateSmart has broadly tracked the ups and downs of the overall stock and bond market, but it's a different strategy than generic, passive investing. Some months ClimateSmart has outperformed, others it has underperformed passive indices. This is inevitable when you remove entire sectors, like fossil fuels, and overweight others like climate solutions. If you are looking for a strategy that strictly follows the returns of a given index like the S&P 500, then ClimateSmart may not be for you.
If you agree with our core beliefs, then using ClimateSmart to with a goal of generating superior long term returns likely makes sense. But everyone has their own investment philosophies and beliefs about the future. Our goal for ClimateSmart was to provide a simple, comprehensive investment strategy with climate change at its core that anyone could use. Whether that is the right fit for you is very much a personal choice.
How can I get ClimateSmart in my company's retirement plan?
There's two ways. The easiest is to engage your HR leader to start a conversation with us about becoming your plan's 3(38) advisor. We serve well over 100 organizations and we stand behind how much better we make the 401(k) experience for everyone: leadership, HR, and participants.
But if your company already is working with an advisor they like, another good option is to explore simply adding our ClimateSmart Target Date Fund series to the plan.
Our difference
01.
We're clear eyed.
We think financial security and climate health are directly linked.
02.
We're independent.
We're not owned by a big bank or Wall Street firm.
03.
We're real people.
You'll feel it the moment you meet us.