Introducing: ClimateSmart.
A holistic portfolio approach for long term investing in the age of climate change.
Our Core Belief
Wall Street struggles to incorporate long-term,
gradually emerging trends like climate change
Your Goals: Long
When do you need the money? That’s the most important question when investing. For many savers, it’s decades in the future (e.g., retirement), representing a long-term horizon.
Wall Streets' Goals: Short
Wall Street traders are typically not incentivized to consider long-term risks. They often focus on evaluating potential risks within the next one to two years.
Climate Impact: Sudden
Climate change has generally not been a risk consideration that traders have ‘priced in’ to their models—at least not yet. When that time comes, we believe the pricing reaction will be swift and significant.
We built ClimateSmart to proactively get ahead of the following trends:
Even oil companies are projecting flat demand over the coming decades.
Read moreFrom renewables, to EVs, to batteries, to efficiency, climate solutions are outcompeting legacy systems.
Read moreBonds: Stranded asset risk is underpriced for fossil fuels. Green bonds have a unique inflation upside.
Read moreIn a world of growing uncertainty, we position our portfolios to follow capital flows as they move around the globe.
Read morePortfolio exclusions
Here's some additional portfolio exclusions we make (and why):
01. No aerospace/defense
We generally avoid holding industries that are technologically dependent on fossil fuels, such as aerospace and defense. Such industries are more exposed to economic uncertainties in a world with declining fossil fuel demands and particularly should we see anti-fossil fuel legislation pass in response to escalating climate change.
02. No big banks
Should fossil fuel demand meaningfully decline, we likely will see a string of "stranded assets" where previously profitable oil rigs, pipelines, and refineries shut their doors. Big banks are some of the largest financiers of such capital projects in the fossil fuel industry, and therefore are particularly exposed to such a risk.
03. No factory farms
Industrial agriculture is one of the largest contributors of GHG emissions outside of the energy system. As climate change escalates, we believe we will see escalating legislative and legal pressures on such companies, particularly in the beef industry, a risk we do not believe is being accurately priced in by the market today.
FAQ
Frequently asked questions
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 it will have a material impact on investment returns over the coming decades.
If that's you, welcome. We're glad you found us.
Is ClimateSmart ESG?
No. ESG is a distinct investment philosophy that seeks to remove or reduce exposure to companies that have higher Environmental, Social, and Governance risks.
ClimateSmart revolves around the thesis that climate change will emerge as one of the leader driver of investment returns in the coming decades. It then seeks to work backwards, excluding industries that face higher climate risk and overweighting those with higher climate opportunity. While this has can have some overlap with the "E" part of ESG, ClimateSmart is a fundamentally different investment philosophy that seeks to cater to investors looking to specifically incorporate the theme of climate change into a comprehensive portfolio.
What's actually in the ClimateSmart portfolios?
Good question! See the full breakdown in our portfolio visualizer page.
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. Past performance is no guarantees of future 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.