When the week-old Biden administration announced its first steps on climate change — such as halting new oil and gas leases on public lands and mandating electric vehicles for the federal government — Zach Stein cheered.
He did so in part because the Albany resident, an alumnus of Urban Adamah’s Fellowship program in Berkeley, happens to be an ardent environmentalist. But he also cheered because every step back from fossil fuels is a step forward for the Carbon Collective, the online investment advisory firm he co-founded.
The Carbon Collective isn’t a mutual fund or a brokerage house. Rather, it offers clients low-fee portfolios that invest in companies dedicated to climate solutions (such as solar, wind and other renewables) or any company as long as it has committed to fully decarbonizing.
Stein, 31, takes into account the investment industry’s now-commonplace ESG scores (environmental, social and governance) and does them one better, eschewing banks, industrials, materials, utilities and the energy sectors — what he calls “the worst of the worst” — and instead investing in “drawdown companies,” those demonstrably moving away from our carbon-heavy past.
It’s a lineup that includes everything from LED lighting companies and state-of-the-art battery manufacturers to innovative plastic recyclers. And it also includes carbon-neutral, pro-environment companies such as Slack and Zoom.
The Carbon Collective launched only three months ago, but already it manages more than $2 million in assets. And, so far, its performance has outpaced the S&P 500.
“If you assume we’re going to solve climate change, then you have to have a clear logic chain of how our economy is going to have to change,” Stein told J. “We built our portfolios to be forward-looking, based on that assumption. The energy industry as it stands is one in decline. It has to be, and here are companies on the horizon making the transition.”
Neither Stein nor his partner, James Regulinski, are veteran Wall Street guys. They’ve been best friends since their childhood days in the South Bay, and a few years ago teamed up as Silicon Valley entrepreneurs, launching their own startup. Eventually, both came to believe that their long-term financial success, not to mention their very futures, ultimately depended on society effectively confronting the climate crisis. “We both had been looking for the right place for our retirement accounts, and investing in a world we wanted to see,” Stein said.
If you assume we’re going to solve climate change, then you have to have a clear logic chain of how our economy is going to have to change.
For Stein, the passion for a better world did not form in a vacuum. He credited his Jewish upbringing for imbuing the values that guide his personal and professional life. His grandmother was a Holocaust survivor, and he was in the second graduating class of Kehillah Jewish High School in Palo Alto. He studied abroad in Jordan during his college years and later served on the staff of Camp Tawonga, which he calls “one of the best summers of my life.”
But he considers his time 10 years ago as a fellow at Urban Adamah as supremely formative in aligning his Jewish values with his real-world environmental concerns.
“I remember sitting around our dining room table at Urban Adamah,” and founder Adam Berman “bursting into tears talking about his fear of climate change,” he said. “It really hit me: the importance of working to create a world that is truly more sustainable.”
Stein said his connection to Judaism goes beyond environmental concerns. “There’’s this evolution of Judaism that appeals to my wife and me,” he notes. “I got this at Tawonga and Urban Adamah: Learn the principles, find the wisdom. and then adapt it to what you need in your life. I take a lot in pride in a religion that could give room for that kind of creativity.”
In 2016, he and Regulinski launched Osmo Systems, a startup that developed a new sensing and monitoring system for fish and shrimp farms, notoriously dirty industries. After a few years of funding rounds and a heroic effort to scale up, the two realized it was time to close one door and open another, and the Carbon Collective was born.
Though plenty of experts ring alarm bells about the looming global dangers of climate change, Stein said he wants to stay optimistic about the possibility that people, and the carbon-dependent civilization they built, can change. That includes even the worst polluters.
“We can’t take these all-or-nothing views,” he said. “The world is nuanced. It means we need to give room for people and companies to improve. Yes, Exxon has been an evil awful company, but I can’t wait for the day they make changes, so we can include them in our portfolios.”