The Companies Democratizing Climate Investing

Of the trillions that will need to be invested annually to transition to net zero, public financing, institutional investors, and private debt will all play significant roles. However, restricting investment and the accompanying returns to public financing and venture funds risks leaving retail investors out of the wealth this transition will generate. Finding ways to incorporate retail investors into climatetech and renewable project financing will simultaneously diversify economic benefits, open a significantly larger pool of capital, and create far more stakeholders in the transition to clean energy.

Democratizing climate investing does more than provide capital; it allows more people to have an economic stake in decarbonization. One of the early leaders in this field was Raise Green, which helped to pioneer crowdfunding to provide capital for solar projects, as seen through New Haven Community Solar. Rather than restricting its investors to community-scale solar projects, Raise Green built a Green Bond Platform and provided venture capital for early-stage climate tech companies. After being acquired by HoneyComb Credit, the platform continues to allow investors to find and research potential clean energy projects on their platform. Users can then study anticipated returns and invest in the project that most fits their interests. 

When asked about the reasons for creating products such as the mini–green bond, Co-Founder and CEO Franz Hochstrasser explained that their product allowed non-accredited investors to finance clean energy projects. Hochstrasser outlined how these bonds allowed low-cost or no-cost debt financing for energy efficiency and clean energy projects while providing investors a strong risk-adjusted return. A climate and capital win-win.

The idea of allowing retail investors to invest in specific clean energy projects has grown through companies such as Climatize. Climatize has developed a platform enabling investors to read about and invest directly in projects such as EV charging, battery storage, and solar arrays. In conversation with Climatize CEO and Co-Founder Will Wiseman, he explained that the goal was to be able to finance the small to medium-sized projects that do not receive attention from banks or investment funds. 

Over 50 investors used the Climatize platform to finance this solar installation on a family farm in Tennessee. Photo provided by Climatize.

One challenge addressed during my conversation with Wiseman was the ability to find and then properly vet new potential projects. Wiseman described how combining federal grants, referrals, and partnerships with the Department of Energy can create a pipeline of projects that meet their standards. This process is made easier by the common practice of developers working on several projects for Climatize. This ensures the quality of the projects and facilitates an easier workflow.

For everyday investors who want the security of publicly traded stocks, companies such as Carbon Collective and Carbon Equity offer an alternative to investing in specific projects. One benefit of a longer-term approach to climate investing is allowing retail investors to plan for their future while divesting from the worst emissions creators. For instance, an investor who wants to use their 401 (k) not only as a retirement tool but as an impact tool can use Carbon Collective's platform to invest in companies committed to net zero. For Carbon Collective, this means divesting from companies directly responsible for fossil fuels, such as Chevron and Exxon. At the same time, it invests in companies involved in clean energy, energy efficiency, and circular economic practices.

During a conversation with Carbon Collective Co-Founder James Regulinski, he outlined the tools that Carbon Collective can use to hold companies in their portfolio accountable. Regulinski explained that they are working to secure the ability to vote as a fund manager to influence the company to pursue more sustainable practices. However, he further pointed out that a vote is often unnecessary; instead, they must recommend steps and show examples of other companies that have taken them to encourage corporate responsibility. Large corporations, susceptible to public opinion and share price, often choose to take the initiative once shareholders demonstrate interest. 

An understandable fear of retail investing in any market, but predominantly in climate tech, is the fear that the investor will choose a company whose value falls. The inherent riskiness of investing, coupled with the view of green technology as untested or unprofitable, are hurdles that must be faced to incorporate more investors into the market. 

Luckily, creating investment funds to reduce risk is nothing new. Carbon Equity, a clean energy investment platform founded in 2021, applies this principle to the cleantech world. Carbon Equity utilizes the expertise of cleantech investment groups to create a "fund of funds" approach that significantly reduces risk in climate investment. Carbon Equity Co-Founder and CEO Jacqueline van den Ende explained that Carbon Equity allowed investors access to the best climatetech venture capital and infrastructure funds through a digital platform. Retail investors, who may not have had access to these funds in the past, can now draw on the expertise of seasoned climatetech investors.

It is not just the companies transforming renewable generation, decarbonization, and electrification markets that will spur the development of the green economy. Green financing companies like Raise Green, Carbon Equity, Climatize, and Carbon Collective are leveraging retail investors' immense pool of capital to meet the trillions required for a net-zero world. They are able to accomplish this by lowering the entry barrier and allowing everyone to invest capital and see returns through climate projects. The democratization of climate financing is channeling billions of dollars into climate investment while creating millions of stakeholders in the new economy.