Crystal:  Guess what, friends! I am now also producing and hosting a podcast for the marine conservation organization Healthy Seas! It’s called The Healthy Seas Podcast and it’s all about the people working to help the seas and oceans thrive. You can find it wherever you’re listening to this show. Check it out, and if you’re so inclined, subscribe and leave a rating! I am so grateful for your support.

I’m Crystal DiMiceli and welcome to the Forces for Nature show.

Do you find yourself overwhelmed with all the doom and gloom you hear of these days? Do you feel like you as just one person can’t really make a difference? Forces for Nature cuts through that negativity. In each episode, I interview somebody who’s doing great things for animals and the environment.

We talk about the challenge they’re addressing, the solution they have found, what keeps them going, and we’ll leave you with practical action tips so that you too can become a force for nature.

Having an eco-friendly lifestyle tends to require conscious choice-making on a daily basis. However, there are a few things that you can do which are sort-of like set it and forget it. You could choose a renewable power source for your home, you could buy an electric car. And how your money is invested is another one. If the places we work for offer a 401k plan, we often check it on the sheet and forget it. Or if we invest with a broker, we are offered what they say fits best for us and we then just hope it all works out as they manage it. Turns out though, if you looked carefully at what companies the money is going to, it can often, without us realizing it, go to industries that may not align with our values such as fossil fuels, arms, or nuclear weapons. Today I’m chatting with James Regulinksi, cofounder of Carbon Collective, the first investment advisory firm focused solely on solving climate change. I was excited to talk with him because I’ve been on my own personal journey trying to learn about sustainable investing. He had so much insight to share and offers a lot of food for thought. This is not meant to be financial advice but I do hope you get out of it as much as I did.

Crystal: James, thank you so much for joining me on forces for nature. It’s so great to have you,

James: crystal. It’s such a pleasure. Thank you for having me. So let’s get

Crystal: started of all the professions. Why did you choose investing as your way to solve climate

James: change? It was not an obvious solution for me. So I’m an engineer by probably by both training and predilection.

I tinkered a lot growing up. I actually grew up on a sailboat, which has a lot to do with why I chose sustainability in the first place, because of the connection with nature, the limitation of resources, the way in which that the, the forces of nature. Incredibly, prevailing and you feel very small when you’re on a sailboat in the middle of the ocean, but it also meant that I would tinker around with the engine on the boat and help my family fix things when they broke.

and that kind of probably sent me down the path of building things. And I went to school for engineering at a small engineering college and focused on sustainability. And my first few jobs out of college were. Building like gasifiers that helped convert , agricultural waste into renewable energy as a way of sort of closing the loop and providing baseline power.

James: So that was like the kind of work I was doing. It was very technical, very focused on technical solutions to climate change. And I did that for a while and I think the big transition happened, when I was working on a startup that was building sensors. shrimp farms trying to make them more sustainable, use less resources and provide less waste because they’re a big problem.

And, but I was reading Project Drawdown and project drawdown lays a path forward, a very positive look forward on all the things we have to do, do to a point where we’re pulling more CO2 out of the atmosphere than we’re releasing, which is an amazing thing to know exactly what we have to do now. It’s also terrifying, cause it’s a lot.

Yeah. But none of the things that they talk about in that, in this model, which is a model that’s done in collaboration with over a hundred engineers and scientists, and they built this model out, and none of those things in the model were technologies that we didn’t already have. So I’m working on new technologies as an engineer being like, ah, yes, if we build a new technology, we’ll save the planet and they’re saying, no, we have all the technologies we need.

What we need is to redirect our focus as a global community, do use those technologies. We built. And sort of imagine a different future. And when it comes to imagining a different future engineering is not the forefront. There’s some inventors who, who to, who sort of can paint a picture of like what the world will be like.

That’s better in the future, with a new technology. But as far as like, how do you collectively create a vision for people to follow? How do you mobilize people? How do you start building that change? Engineering is not the top of that list. So it wasn’t the skills that I had been drawn to initially that seemed like they were going to make the changes we need to see on the timescale that we needed to see them.

Now that’s not to say that there aren’t brilliant people out there whose technologies will help us get to these solutions faster. And I think they’re doing incredible. But I am not going to kid myself in thinking that I was the right person to do that. And the skills I built in entrepreneurship in, in, you know, running companies and finding investments.

These all started to come to bear into this realization that we could create a product that helped people in their personal lives change, how they’re investing that would then scale up into filling this gap and the gap I caught with talking about. If you look at project right on, or really any other model where if we get below, we stay below 1.5 C or stay below two degrees.

1. And you’ll look at how much money we need to invest, which is a proxy for sort of collective effort. What do we believe the future should look like when you invest in a home? For example, you’re saying that home values are going to stay high, that this is something that people will continue to want when you invest in renewable energy or in any of the decarbonization technologies and closed loop economy, et cetera.

You’re saying that these are the spaces that will grow. These are the spaces that have. Value and we’ll continue to have value into the future. So you’re making a claim about what you believe in the future. So we are helping people realization that you can help people connect that vision of the future.

And their actions today. So that was a, that was sort of like a powerful realization. And it came also in part, you know, of course I said it was from project drawdown at the beginning, but another part was, I was trying to invest my own money and I’ve been trying to do this in a sustainable way since I was in college.

I’ve, I’ve invested in probably half a dozen different mutual funds that, or, or ETFs that made claims about how ethical they were. way to deal with this tension that I felt were on the one hand, it was unwise not to be investing. It was, it was sort of hoarding your money in a weird way that wasn’t good financially.

It wasn’t good. Like you were making a dumb decision was sort of the meta conversation happening by my peers.

Crystal: If you invest

James: sustainably, since I was a kid, I was. So if you don’t invest, you’re losing money through inflation, et cetera. That’s very relevant right now. And there’s this idea that. From , the social groups I was in, that you should be investing.

and I bought into that idea and I still think that there, there is value in that DIA for different reasons now, but. It was a tension with this idea that a lot of the companies I saw, I didn’t see their actions being consistent with the kind of world I wanted to live in the type of extraction that was happening, the type of sort of blatant disregard for human and animal wellbeing.

James: These things were not, . How I wanted to be making money. And to some extent, that’s what you’re doing. You invest in a company or you’re giving your, your life’s energy over to another company so that they can create more of whatever they create. And, and often cases that wasn’t.

Beneficial in the way I want it to be. So I had that, I had that tension. I think a lot of people feel this tension, which is how do I not fall behind in , this economic system that’s set up for, you know, to extract as much from people, individuals as possible. How do I not fall behind, but how do I do it in a way that doesn’t compromise who I am and what I believe?

And I didn’t find a lot of good ones. Up until the point where we started carbon collective, where we chose a theme, we were like, we were going to focus on , fighting climate change and we’re going to do it through investments and work. That’s going to be our focus and we are going to go into the weeds and ask all the hard questions and sit with , those challenges so that it can be a little bit easier for other people to do the same.

Yeah,

Crystal: I can completely empathize regarding the, I myself have been on a journey as well, trying to learn about investing and how it helps or hurts in climate change. because I don’t want to be sitting here making all these personal changes for myself, either driving less or reducing food waste or, you know, all of the other, things that you can do to help slow down climate change, but then.

Wherever my money is it’s just contributing to climate change. Cause the companies then in turn, invest in fossil fuel companies or in practices that I, that I don’t value. So I can completely empathize with, with what you’re saying. And for many years, W, well, I would say in the past this way of investing, like trying to invest, quote unquote sustainably had a reputation or a better way.

I can say it is a misconception that you would get lower than average returns has. If, if this has changed, why and what are the prospects

James: for the future? Ah, that’s such a good point. when I, going back to the story of like, trying to find this in college, the recommendation I got when I asked people, how do I invest sustainably was invested in the market and then donate the difference in performance to a just.

Cause I thought that was so outrageous. You’re like do a bad thing and then. You know, make a donation to sort of alleviate your guilt. And that was a consistent with a lot of thinking of the time, sort of carbon offsets had just , , starting to come , out of the woodwork and like that path was developing.

And, and, I think that folks just assume that we could go on doing essentially what we were doing and there are going to be some, you know, weirdos who wanted to invest in a different way. So this is the advice they gave, The advice is flawed for a whole bunch of reasons. first of all, the way we invest does matter, it does have an impact and the donations that you could be giving you should be giving.

If you believe in them, regardless like you shouldn’t connect that donation to the way you invest.

Crystal: As kind of a salvation, like cleansing of your sins. Annoyed.

James: Yeah, absolutely. And if you believe that that has value and you can afford it, absolutely donate to causes that make a difference and investing is such a cool thing in that it’s a one-time change you make, and then you don’t have to think about it.

When you choose to bike, when you choose to like whether to bring reusable bags to the grocery, that’s a decision you constantly have to be making and people get decision fatigue. We were putting a lot of burden on individuals to make choices throughout their life in the most sustainable way possible.

And while that’s, to the extent you can do that, that’s incredible. And I applaud anyone who does, but I also understand everyone who fails to do that because it is such a big ask to have all of the burden of this change, fall on decisions that have to be made countless times a day. And there are changes you can make that are big one-time changes.

What kind of vehicle you own, how you power your house, how you invest and making those shifts means that , you can take this big part of your life and have it be in alignment with your values, but going back to what you were talking about in terms of returns, I think there are two reasons why , you had this historical idea.

One is there, weren’t a lot of firms doing it and they were kind of expensive to do. And to the expense ratio creates a drag on your portfolio. So that’s a really fancy way of saying if you pay a lot more in fees, you make less money. So that’s part of why I think that these funds, had a lower return. The other reason is I think there wasn’t as much scrutiny around asking this question just assumed that that was the case because the financial world assumed it was the case.

Wanted it to be true. It was a self-fulfilling prophecy. There was no one there who said, this is so important that I’m going to figure out how to make it work. Everyone was saying, this is a niche thing that a few clients want,

I’m going to hand them something. And that’s what we saw with ESG. And that.

Which is a big misconception. ESG stands for environmental, social and governance, and people assume it’s the measure of a company’s goodness. It’s not the measure of a company’s goodness MSDI. The largest data provider for ESG says that on their website, this is not the measure of a company’s goodness.

This is a. Economic hedge against these three risks and have economic hedge against those three risks is not the same thing. As we are trying to build a world in which we solve climate change. We are trying to build a world in which there is equitable governance and that there is social responsibility to other people.

And when we hear those things, we often assume we want it to be that and the financial world as a whole, because they’ve been doing their thing in their own way for so long. And they have so much money to be made by keeping that system constant. They don’t, they’re not incentivized to make a change on this.

They’re not incentivized to scrutinize everything else they’re doing. And ask the question of, is this ethical? Is this right? Should we be participating in. so there’s a mismatch in what they’re providing and what people actually want. And so when we looked at the space, we said, what do we want, what do we want the reality to be in the future?

And we built our portfolios around the creation of that reality, and there’s a couple of different ways we did that. and the future will only tell if they’re actually the same performance, because most we haven’t been around that long. and we had to do back testing for further back than. Now two years.

so I can’t say that we have fully matched, the S and P 500, for example, but our portfolios, both in back testing and, and, and sort of recent trends that have matched,a market tracking portfolio, at least our core portfolio, which is designed to do that. And so we think that it is possible.

James: To build portfolios that are funding the kind of change we want to see in the world without sacrificing, financial performance and in part that’s because a lot of the technologies now that exist to make this transition happen are cost-effective, they’re not just better for the environment. They are economically better than some of their peers.

, it’s easy to forget this. When we look at oil and gas, those industries have been so heavily subsidized that money has already been spent. We don’t see that as a drag , on their economic feasibility, but it was a bunch of money was put into making them work.

And if you don’t factor that in, then you think that, , oil and gas has performed a lot better than it has. Even in that reality where they’ve been heavily subsidized and renewable energy has been only a fraction subsidized as well. Renewable energy is often the more cost effective solution.

So. Given these, these changes that are occurring, and this is happening on a number of fronts. This is happening in renewable energy and clean transportation in agriculture. We’re starting to see this inflection point, this shift, which is even more exciting than just track the market, kind of shift those technologies, have the potential to start outperforming, to become the new dominant paradigm.

and. Well, I’m not going to be giving any investment advice on the show. I will say that, we are looking forward to that future because to solve climate change, we do need these technologies to take off in a way that is exponential. That is not just a linear adoption.

Crystal: And so how does carbon collective work are you investing in those renewable energies that you were just

James: Yeah. So let me walk you through how we built our core portfolio. This was the first thing we did when we said we want something to replace the conventional wisdom of investing, and we want to do it in a way that meets our, view for how the world should be. So the core portfolio is that you take the total market, all the companies on the stock market and you cut.

The high carbon industries and the oil companies. These are the worst of the worst. There’s no way in which we solve climate change and continue to invest in those, those companies. Then , you take what you have left it. We call sort of the low carbon economy. These are companies that are kind of agnostic to the change, and we switch all to renewable energy and, electric vehicle fleets and smart buildings, et cetera.

These companies , it’s not going to change their business model. But those companies still should be taking climate action. So we have to use our shareholder pressure. We have to use shareholder activism to push these companies to move faster. And that’s the pressure part of our philosophy.

And then the final part is we need to be proactively investing in. companies that are building the change that we need to see, not just cutting out the worst of the worst companies. So we cut out the bad actors and we replaced them with the companies that are building climate change solutions. Now the climate change solutions fund that section of our portfolio is built up by taking Projects Drawdown’s work, which has incredible work.

And they identified all the technologies we need to be in that. And we found all the publicly traded companies that are working primarily on one of those technologies. So we don’t include companies that build, you know, gas turbines, but also make a few wind turbines because investing in that, isn’t going to speed our transition to wind energy there.

so they have to be primarily. And this, this solutions fund it’s kind of cool, cause it’s not just a clean energy fund. It’s not just like an another, Iclean, it’s also in, you know, grid infrastructure. It’s also in clean transportation. It’s in agriculture, it’s in sort of meat alternatives. It’s in the closed loop economy.

James: It’s in all of those different solutions that sort of span the, the space of, of human activity that are, you know, dramatically, dramatically better for the, for global carbon emissions. so that’s the solution smart, and that makes up our core portfolio. And it’s a fair, it’s like a fairly market tracking portfolio.

Now, if oil does incredibly well, because people’s fear about a war in Ukraine, it’s not going to perform as well because we don’t have oil companies in it. and that’s a, an additional risk, but for the most. It does track the market. And that’s really cool. Now I want to add something else. , we are focused on climate change.

That’s our foremost part, but we do also exclude any meat companies. We exclude any tobacco companies. We exclude any private prisons. , there are some things that are not worth investing in. We don’t want to see them in the world.

so we do create some hard filters that are just sort of, there are common decency filters. We’re not going to invest in nuclear weapons. We’re not going to invest in, in arms. Like again, that’s not the kind of world we want to live in. And if we underperform a little bit because of that, It’s not going to be a lot and it’s going to be worth it.

especially when you’re investing in this transition, which has the potential to have a lot of upside.

Crystal: And I don’t think a lot of people realize , what they are investing in because it has some. , very undisruptive name, that it includes things like nuclear weapons and arms and prisons and all those things.

getting into the weeds of your investment is, is complicated. And. I have the time or the energy to look into it necessarily so

James: hard. So there’s been a big trend towards what are called ETFs, which are electronically traded funds. They are, kind of like mutual funds except less expensive. and there are a collection of stocks that are wrapped up in a single ticker.

So you might buy something like I used, Iclean earlier, which is an example of a ETF and there are lots of other ETFs out there almost as many as there are stocks. And they are, they are little portfolios. They’re collections of stocks underneath, but when you go and buy that, it’s not obvious what it is.

It takes a lot of digging to go find all the holdings and most websites, if you even do a cursory search,

only show you the top 10 holdings. but it means even you need to make, go make a decision about how you’re investing. There’s a lot of digging that goes in and a lot of those companies are not well-known companies.

The private prison companies are not like household names. And so you might just completely. Through no fault of your own missing and the companies that are selling you, if you go to like a Betterment or a Wealth Front, or one of these other robo-advisors out there, and they sell you a sustainable fund, you’re, , you’re going to have to trust them and that’s not great.

And when we dug into them, we found a lot of things that were inconsistent stories that weren’t fully coherent with what we believe. A company that said they were focused on climate change or on ethical investing should have in their portfolio. You shouldn’t have an oil company in a low carbon funnel.

It doesn’t make sense. And when you go and buy that, it feels very dishonest to then go discover that. And that kind of greenwashing has burnt a lot of people in terms of their trust of the industry, willing to deliver. so. Just as a call-out to a great website resource. If you’re going to make the decision yourself, if you aren’t going to work with someone like carbon collective, there’s a group called As You Sow and they make a tool called fossil free funds.

And if you go there, you can type in most mutual fund or ETF tickers, and it will give you a score card. It will tell you what’s in there, it will flag certain things like oil companies, fossil fuel holders, weapons manufacturer, et cetera. And it will help you sort of be able to dissect. what you’re actually buying into.

So if you’re going to go down that path, there are a couple of tools out there that makes it a little bit easier, to demystify.

Crystal: I have two questions from what you were just saying. When you were describing the way that carbon collective does their investing. So there’s, there’s a 20, 80 split in there.

Right. Can you just clarify what that.

James:  , when we talk about the makeup of securities in the core portfolio, so in that section, whatever, whatever your allocation is, that section, let’s say it’s 50% of your funds are going to be in equities.  80% of the market is what the low economy is. It’s only when you cut out the high carbon industries for carbon and many sectors.

That has, you know, energy utilities, materials, industrial. This is where you have the ExxonMobil, the Shells, et cetera, in them, as well as other players that are sort of high intensity carbon. when you cut that out, that’s only about 20% of the market and we replaced that 20%. With the climate solutions fund for the core portfolio, we also have for people who want, if this is a supplemental investment or something, if they want to be investing just in the climate solutions fund, that’s what they’re excited about.

they can sign up for our climate only portfolio and we do a mixture of green bonds and the climate. Solutions. and it’s a much more volatile portfolio. It’s not necessarily going to be a good fit for all of your investments, but if that’s, if that is something that’s really important to you, or you do want to supplement something else you have, it can be a really great option.

James: So those are the two things that we offer this sort of total investment solution option. And then this more niche. Okay.

and we’ll get back to that 80% of the low carbon market in just a minute, because I have another question regarding them. for you, you’ve been saying robo investors and they’re online investors, essentially.

Crystal: Correct? Like clarify if, if I’m misspeaking, and even. And there, there are ones like you were saying that are claiming to be eco-friendly, but how can someone discern between the legitimate spaces for investing and those that are not?

James: So when you’re choosing who to trust in the space, as far as what is environmentally friendly, I think looking at what their philosophy is on how they choose investments is core.

You can double-check anyone’s work. They’ll tell you what they’re invested in. You can go and check all the stocks, but if you don’t have time for that, which a lot of people don’t, you’re kind of back at square one. So the question is how did they make their decisions? You can also do a few spot checks to see if you agree with them.

This is like the, is Exxon mobile in the portfolio. Is it labeled as a low carbon or climate friendly portfolio? And yet it’s investing in fossil fuels. That to me is a red flag. Now not a lot of companies share their methodology. So to me, that’s the first flag you should look for. I say this in part I’m very biased.

I’ve created a whole platform and we, we publish everything we do. We have, if you wanna look at the methodology, if you want to look at why a sector is in there, if you want to look at why a particular company is in there, it is all on our website because we believe that the industry has sort of used up the good face of, of individuals and have proven itself unwilling to act in a primarily.

Environmentally ethical way. And so, instead of saying, trust us where, you know, we’re not them, we’re trustworthy. We’re just going to show you what we do. And you can, from there, if you like the process which we go through and trust that process, then , we might be able to earn your trust as far as being your investment.

Yeah. I do think it’s worth digging. The sec has also started to regulate this sector more. as far as making the claims about being, ESG about being climate focused, et cetera, and other rating organizations, Morningstar just unlisted, a whole bunch of ETFs that had claimed to be, environmentally friendly and they decided that they didn’t meet their standards.

So . There’s both industry, you know, within industry and sort of external government regulation, both pressuring the space to become clearer and,more accountable. I don’t think we’re fully there yet. and I’m not sure that those regulating bodies will ever get us to a level that most of us, most of us who care deeply about the space would trust, but I we’re, we’re headed in that direction.

I think we’ll see, at least more consistency with reporting. So those are sort of my two. My overall, my overarching view on, on how you choose that.

Crystal: I do agree. I think that time goes on, it’s going to become more transparent because people are demanding that. and, and you, and you mentioned ESG before, which is something that the more I learned about.

The more I’m feeling disenchanted with, because it sounds like greenwashing. ,

James: to give, fairness or to give credit where it’s due back when it was first released was pretty innovative in the space, but times have changed a lot since then. Just further adoption of something that was, was built for a different time in a different space is not going to be enough.

So I think we’re ready for , the next wave of, ethical examination of investor.

Crystal: Now, what would you, I think you, you may have mentioned this, but I’ll ask anyway. what are the risks of investing in this space as compared to a more traditional portfolio?

James: Yeah, I think asking the question about risks from , putting on the fiduciary hat as, as they say in the industry, there are risks that go beyond, even in our type of portfolio where it’s broadly tracking the market’s still widely diversified.

you’re exposing yourself to the sector, because we’re more heavily weighted on renewable energy on a whole host of technologies. but even so. When build back better was looking like it was going to pass a bunch of the companies in our portfolio price went up substantially because everyone was thinking that there would be government subsidies and funding and support for this kind of infrastructure.

James: And then when it didn’t pass, those companies all fell and that risk didn’t exist. Strictly speaking for , the market as a whole. Now we don’t believe in our investment philosophy. We’re not. picking individual stocks and saying that these are going to outperform the market. We’re saying , we buy and hold because the market’s going to tend to go up.

And these industries, we think in the long run are going to tend to go up. , if we’re get serious about solving climate change, a lot of them are going to go up regardless if it gets serious or not, because they’re economically better, but as a whole, as we make this transition, They will do well now that does not mean every year they’re going to do well.

And that does not mean that there won’t be political risk and, sort of regulation risk and these other risks that exist, those will, will be exposed to those. And if oil gets, if we have things like a war that cuts the oil supply, or if we have new regulations or, or monetary support of expansion of fossil fuels.

People are going to see that as a cut to renewables, even if they still are more economically feasible in the long run.

Crystal: So that was, I was going to ask you, with this terrible war that’s going on in Ukraine and the pinch that it’s putting on fossil fuels. we we’re seeing governments backpedaling on their climate change commitments, like the U S just opened up federal lands to, to some leasing and.

you, you basically did just say that it can negatively affect the investments of climate change. I mean, I personally, I maybe it’s just, no, I personally believe that the world knows now that climate change is a huge problem and we are gonna, we’re moving in the direction of, of solving it and. Anyway.

let me, let me backtrack my

James: go ahead and respond to what you have already, because what you said is I think incredibly important, and there are three main points that I, I heard in there. One was the backpedaling of, of climate commitments in terms of backing and supporting fossil fuel companies. The second was the global trend that we know that this is a really big problem.

And those two elements in there. Sort of say what our long-term view of investing is. The first one is that, because we know this is a problem and governments are going to continue to take this seriously climate change, climate change seriously, and talk about use the, the solutions that are, are known, proven, carbon reducing technologies, that those, those sectors will continue to grow in the longterm.

We have seen some backpedaling in terms of climate commitments, but. If you look at them, it’s a little more nuanced of a story in several ways. One countries like Germany, which are heavily dependent on imported gas from Russia, while they do need to find other sources for that natural gas, there are also now.

Exploring and looking at how do they get off of natural gas all together? Now they’ve been looking at that for a long time, but , on sort of the longer term, not the immediate term, cause they’re scared about a recession, but in the longer term, they have more foresight and planning into that transition.

So right now, while prices are high, but if Germany can get to a place where it’s fully off of natural gas, that is a pretty significant. Place the beat. And so in, by 2030, if they’re hitting their targets for a carbon reduction, , it’s going to dwarf the kind of infrastructure that is changes that are happening.

if you look at the question about the leases on public lands, I think that one’s a little misleading. We will companies already own so many leases on public land for oil rights, that the new leases are like a drop in the bucket. They almost don’t matter. The number of reserves that are contained by oil companies existing would put us past our climate goals several times over.

James: So while it sucks that. We there’s so much, so much resource and time is being put into, oil companies talking about how they need to have more resources to be able to prevent this energy crisis, which they are not doing because it is not in their economic interest to keep gas prices down or to increase supply based off of any humanitarian crisis or need.

They have explicitly said they will never do that. That is not in their shareholder interest. That is not in their personal interests. So there’s no world in which us giving them more leases or more support is going to help reduce the price of gas or the hardship that’s being put on people. So just sort of refocusing away from like the individual policy element sides of it and asking, what else is this pressuring for change in the long run.

And I see some hope there. I see some, I’m, I’m fairly optimistic that. Countries like Germany are going to see this as a prod to accelerate their plans to be fully not zero.

Crystal: Yeah. And if, if they are going to accelerate those plans who, who doesn’t want to be on the ground floor of those of that movement of those investments.

James: Yeah. , and if they’re saying we need to build a new gas terminals with a 40 year payback and import gas and you buy up that bond. You’re taking on the risk that on a larger global scale that we, we transitioned faster away from that kind of infrastructure investors will push for trying to get their money back on that.

But the stranded asset problem where oil becomes obsolete, it’s a really optimistic place to be. But that’s what I’m, that’s what I’m banking on is a big risk of investing in fossil fuels that isn’t talking to.

Crystal: Now some argue that it’s better to have a seat at the table. And so in other words, invest in fossil fuel companies and as a stakeholder, you can engage them and encourage them to change in the same, in a similar way that Engine One had done with the, with the board of directors with Exxon, if I’m not mistaken, what are your thoughts?

What are your thoughts on

James: that? I applaud Engine One. And I applaud them because they had a theory of change and they acted on it. Whereas a whole bunch of investment companies were talking about, you know, exclusionary filters and hedging risks, and they didn’t have a view of how their investments changed the world. So on the front of taking the bold stand and then making it happen, I think engine one, number one sort of pushed the whole space for it really impressed with that.

I disagree with their theory of change. I do not think that having a seat at the table matters. I don’t think we’ve seen it matter. Even in the case of engine number, one’s getting these board of directors elected. The change that ExxonMobil needs to take to be a proactive force in solving climate change is fairly drastic.

And the changes that a board of directors is going to be able to do. I view as being very small, during that period, we saw the opening up of a massive oil reserve in south America. That ExxonMobil. . This goes back to how much oil reserves do we have .

Like if this was all burned, it would exceed our, , our global budget for carbon.. we saw a sort of a, not so much a doubling down, but like a continued pressure and lobbying around carbon capture. and sequence duration or direct capture, not direct air capture, but capture on, on smokestacks as a way of, of dealing with the carbon emissions from fossil fuel burning.

We have a problem with, because we have no engineering proof that we can get one of these systems working. We don’t have enough space on the planet to store all the carbon we’re going to be admitting. And, it’s incredibly expensive, both in R and D and in sort of time and resources.

So there’s like this sort of a trifecta of like this, does it really make sense? and that’s, that’s where they’re going, as opposed to saying no, we’re going to use our expertise in, in lane pipelines and in, and in offshore oil platforms to do wind and green hydrogen and change over the energy academy.

So we’ve not seen any indication that the electing of these board members have done any type of radical shift. So there’s a question of opportunity. Whereas shareholder advocates, are we going to spend our time are going to spend it on the ExxonMobil’s or are we going to invest in the companies that will make the ExxonMobil’s obsolete and spend our resources, pushing the companies that we think will make a difference and a change, the Coca Cola’s of the world.

These other large industries that do have the. fear of being perceived as, you know, not forward on these issues so we can pressure them and whose changes need to also be made. So our view is let’s spend our, our shareholder advocacy energy on those companies, who don’t have a clear climate mission, but could be pushed to have that baked into their company, as opposed to trying to make the worst actors marginally better, which is questionable, whether we can even get.

That’s where carbon collective ended up on this.

Crystal: And I imagine it’s also a much slower push than, than just making them obsolete because of all of the other technologies are so much more

James: economical. We have people hold up Ostred and a few other oil companies who did make the transition fully away from being oil companies as examples.

And I love those examples, but I still see them as by.

Crystal: I don’t think I’m even familiar with the name that you just said.

James: Ostred, I think I’m saying that right. I think it’s a Dutch company. and they fully divested all their oil. And gas reserves, assets, et cetera, and are now focusing fully on green, hydrogen and offshore wind.

Now there’s also things that could be outside of that. You could be working on thermal batteries and other technologies that oil companies could support on. those were the ones that they chose. It’s a fairly common argument, I think because of the expertise and pipelines and platforms that these companies have, and those are what it needed for offshore wind and, green hydrogen, however, They were owned, I think 51% by the government.

and so you had a government who was making climate commitments as an owner of the company. It’s a slightly different situation than a company that was fully public owned in a decent. under different economic regulation. So in the U S there’s a lot more laissez Faire, a lot more fear of any type of government involvement as sort of collective action in business.

James: Whereas in Europe, the outlook is very different outlook on climate change is very different in Europe. So there are reasons why I think that we won’t necessarily see a wide like this taking off in the space as what all the oil companies do. but it is an example of that it’s possible. And so we hold open the possibility that a company.

Formerly wouldn’t have ever invested in does make it onto our climate solutions list because they reorient and we think that’s really important. We’re not going to penalize a company for making a change for making that dramatic.

Crystal: Now you said divesting, which maybe the listener has heard of, but they don’t entirely know what that is.

Can you clarify what divesting is?

James: Yeah. In the, in the financial investment space, it refers to no longer investing in a sector, in a country, in a technology, something, often it’s referred to for fossil fuel, companies in particular. So to divest this through, sell off . All of your holdings in that. You can also, as a company divest in terms of like your own holdings, whether they’d be oil reserves or, platforms or other, other physical assets.

Now there’s a big argument in the space about how much good you’re doing. If you’re selling off that someone buys it. So it’s not like it’s being retired and there’s sort of the, like if you had retired at that would have been a far. I used to like, hold onto that license for that, that reserve and to make sure it never gets burned.

and there might be a marked carbon market in the future where that has some value, I don’t know, but there’s just ethical value in having done that. however, there’s also an argument. If the market is flooded with, with, these resources, then maybe the price gets depressed enough.

and then. You get into sort of a bunch of economic arguments on whether that’s a good thing or a bad thing in terms of, climate change impact. However, I think for most people, there’s sort of three reasons why we do this. The first is you just don’t want to be making money from oil and gas at this point.

James: And you don’t want to be making money from companies lending money to those who are making money from oil and gas. There’s no way to feel good about. Your belief in climate change. Another way to feel good about having an electric car and driving it or walking to the store or eating vegan, if part of how you pay for that is from people clear cutting forests to, to mine, tar sands.

It’s just, it doesn’t work on that little. The second is if we change the overall perception of oil and gas, being a good investment, their ability to raise additional funds is going to be hurt. And if we penalize the companies, who are lending money to oil and gas, exploration, and operations, then there’s going to be a cost like financial institutions will have to make that decision of whether they’re willing to take that.

About the, you know, having folks withdraw their funds as a result of their investment practices. and finally, when we do lower the share price, , their ability to raise additional money directly. That, is reduced there. The compensation with CEO’s is reduced.. Like you’ve sort of, you’re giving a penalty for being in a space as opposed to a premium for being in that space.

and so those three things together, I think are valid reasons from an investment standpoint on how it can be good to divest. And if I ever get too technical and on this stuff, I’m now. Eating sleeping and breathing all of this. So if I like asked me, I do not need to sound smart.

James: I’d rather be intelligible to most people. and I think it’s, in the industry, it’s particularly bad people. We’ll spend a lot of time and energy making themselves sound smart and everyone else dumb so that they’re fearful and ne like, feel the need to be paying lots of money for someone to take care of that fear.

And I don’t want to contribute to people being fearful of financing. I want to contribute to people, understanding and feeling empowered, to make decisions consistent with their values.

Crystal: No, I think, I think we’re, we’re doing well. But kind of pivoting from that statement, what would you say to a person , who is uncomfortable with investing with an online company and not necessarily a real person and.

You said that you don’t have, you’re not from the finance background.

James: So, so if you, if you believe that you need to have someone with deep expertise in the financial world and you don’t buy that, mostly we should be doing buy and holds like passive investing. Then, like our investment philosophy might not be a good fit for you that said we do still have a lot of resources.

We have the ultimate guide to sustainable investing. We have our entire climate solutions list. We put all of our resources out there. You can use them as an individual. Like you don’t have to work with us. In fact, it’s so important that we be closing this investment gap and moving this. I’m thrilled when people tell me that they used our resources, but invest on.

Yes, it would be cool if they invested with us because that allows us to grow and to have more positive impact and change. But like, it is so critical that we are doing this right now. It is exciting to me. So go onto our website, use that resources use As You Sow’s resources to figure out what’s right.

And you might not want to have an online, only investment advisor. You don’t want to, might want to be doing robo investing. This is, if you like, know how much you want to be investing and you’re going to invest it in an automated fashion. That’s when it’s a good fit. If you need financial planning, if you need someone to like, hold you through the details and complexities of the tax world and figure out modeling for your own personal life, we don’t do that yet.

And so that’s also a valuable service that people offer. Now, I encourage you. A lot of those folks don’t know much about sustainable and ethical investing and they might not give you a lot of good options. So again, I would recommend you take the resources. We have get comfortable with them and bring your financial advisor.

If you choose to get a individual person into that space, have them learn a little bit about what we’re doing, how. Work with us or copy some of the things that we do, but you know, it might take some education. If you’re going to work with someone who’s deeply in the space and doesn’t know it doesn’t have as broad or expansive a view about what you could do with investing.

Crystal: I so appreciate your, your transparency with that. And I do remember seeing on your website, there’s a safety net. So if somebody does want to invest with you guys, there’s a safety net. And correct me if I’m wrong. But if carbon collective were to shut its stores, it’s not like you lose your money.

Like that money actually is being held by. I forgot the company. It was a very well-known

James: company, apex clearing houses, our custodian, a lot of people when they, when they hear about us, they’re like, oh, you’re a startup man. I started going out of business. What happens? And. R our services and advising service, essentially, we are investing on your behalf, but we’re not actually holding the record of your investments.

That is held by a third party. Who’s massive. And they have a bunch of insurance. If , they were to go out of business, not against loss. If the market goes down, you’re still going to lose money, but against like, you know, somewhere in the record, things going on. We’re not going to be able to run off with your money in any way.

and we use a third party brokerage for the transaction. So we were using established parties who are, able to do all this efficiently and effectively, to make this portfolio reality for folks. And if we were to like say we’re a small company, say like that the worst was to happen and we, to all perish in a tragic bus accident, R anyone who has an account with us can call up the custodian.

James: , but they can get their money transferred to another hold, like another custodian, investment advisor, et cetera. So the money is never going to be. Fully outside of your ability to retrieve I’m sorry. Not never. I can never say never there, there might be some procedural, but all of the safeguards that the industry puts in place for the top tier organizations are also in place for us.

but on top of that, we made a personal guarantee, Zack and myself, as co-founders as individuals that if we ever have to shut down our doors, for whatever reason, we’re going to help all of our clients transition . They’re putting a lot of faith into making this vision a reality . And that means that we have an obligation businesses, not this like fully transactional space, we’re ultimately people and people have responsibility to other people.

James: And so we take that really seriously. And so we on our website made that. Which I think is what you’re referring to. That guarantee that we will, if we’ve ever had to shut down our doors so that we would help everyone get to a place where they felt comfortable with their money,

Crystal: just

James: about, which has been a wild ride.

It’s been exciting.

Crystal: These first two years have been a wild ride.

And so just to wrap things up, what should investor look for when they’re wanting to invest in a more sustainable manner? Like what, what can the listener do to make sure that they’re not investing in things that aren’t in alignment with their values. And I believe we’ve talked about this,

James: but I’m really clear about what your.

With yourself. that’s I think as the first step, when we do anything, that’s sort of in an ethical sphere and then to try to push that to be like, okay, where’s my line. Cause we’ve had to ask this question a lot. We’ve had to ask the question of there’s a company that is one of the largest holders of renewable energy projects.

And , , have also lobbied against. , power lines coming down from Canada that would allow for more clean energy into the space, into, to, for new England to meet their energy goals. So like, that’s the question. Would you feel comfortable investing in that? Would you feel comfortable investing in a utility company that had coal plants, but had a plan and a track record of retiring them?

So getting into the, like the little details of what it means, because that is where you get clarity on what sustainable investing is. So that’s like one part that’s a pretty heady response and most listeners may not want to do that. The next thing I’d say is , find someone who’s in the space who is sharing, how they invest in Y that you agree with and work with them and trust them.

And then if you’re going to do it yourself to use the tools available, to sort of peel back the layers of observation. So they can look in a little bit and just do that spot, checking on whether the companies in there seem to reflect the values that are espoused. So those are the really high level on practical stuff, as I said, As You Sow is a great resource. we have the ultimate guide to sustainable investing out there that listeners can look at if they’re trying to do it themselves and want , different ways of thinking about the problem. And, I think those are, those are probably my top recommendations.

Crystal: Like you mentioned before, carbon collective is very transparent , in the companies that they are putting the money towards. And so you’re able to see if those are in line with, um,

James: also I would be remiss if I didn’t talk about this a little bit. a lot of people do most of their investing through their company.

So the companies they work for and , one of the most tax efficient ways of doing that is through 401k programs. If they’re being offered there, hasn’t been a lot of choice in the past. if you’re working for a small company, a smallish company, or even now larger and larger companies, we’re actually offering 401k services.

companies so that they can offer our portfolios and other portfolios to,, their employees. And if that’s something that’s exciting, you, if you don’t feel like you invest outside of your 401k, but you want more sustainable options, even if it isn’t with us, you can pressure your company, your HR department and say, Hey, where’s the sustainable option?

Why aren’t these things? Like, . There are good opportunities now for this. And we don’t see that and companies do listen to their employees. And so that’s a way that you can kind of have a larger lever arm of change. If you get a whole company to, to move over all their employees, 401k, that can be a pretty impactful step.

Crystal: Great, James, this has been so enlightening. . Thank you for all that you do. You’re making a difference.

James: Absolutely. My pleasure. And I love what you’re doing with this podcast. So thanks for bringing me along.