I was having dinner in someone’s garden the other night, it was about 30 degrees in Surrey and far too hot and then out of the blue and completely off-topic someone almost shouted “climate change is real people”. We were discussing something that wasn’t all that relevant to climate change at all. But it was, because actually everything is relevant to climate change now. It’s especially relevant as I’m inside writing this review with the blinds closed and the fan on because it’s too hot to go outside. And one area where there is a big shift to be more climate change inclined is investing, and one app that addresses this issue is Clim8.
I interviewed the CEO of Clim8, Duncan Grierson a while ago because I was intrigued about whether or not he thought that people needed to sacrifice sustainability for performance and he said:
Actually, what we’re finding now, certainly in the investment space, is you can have as good, if not better returns, if you’re putting your money into companies that are making a difference on climate change.
So there you have it, past performance shows that you can beat the benchmark by impact investing. The difference of course between ESG investing and investing in many ethical, sustainable and ESG funds is that it can just be a box-ticking exercise that discounts certain types of industry. Whereas impact investing is investing in things that are seeking to directly reduce climate change.
There are a few impact investing apps on the market at the moment and many are still in the very early stages, mostly trying to raise money on crowdfunding sites. But one thing I particularly like about Clim8 is that they are quite transparent and have shown how many users they have in their latest round. It really annoyed me (and many other equity crowdfunding investors) when Circa5000 raised funds on Crowdcube and refused to say how many clients they had, how much money their clients had invested with them and what their profit and losses were like. How can you invest in something when you don’t know if it makes money or how it intends to make money in the future? I interviewed the CEO Tom McGillycuddy (when it was tickr) a while ago, so even asked him directly and was blanked.
Valuations on crowdfunding sites are absolutely bonkers though because from the very start, the angel investors backing the company, then the investment funds that buy-in, then VCs, and crowdfunding investors want to see growth, and ultimately an exit on massive multiples. So, despite the fact that Clim8 as a business doesn’t really make much money and doesn’t really have very many customers, they are valued at more than £30m. Maybe to some, that doesn’t really matter. Maybe what matters to them is what they are trying to do, which is encouraging people to invest in things that make the world a better place.
Clim8 do that by investing your money in either funds or shares that help climate change. The more risk you are prepared to take the more the percentage of shares are in your portfolio, if you want to take less risk you have a higher percentage of funds. So it’s all about investing money directly into things that create climate change solutions rather than problems. Their portfolios so far have just about beaten the benchmark. But what is really interesting is that they are looking to create their own funds in the future focussing on what they see as 6 megatrends over the next three decades, green energy, clean mobility, clean technology, sustainable food, circular economy and water systems.
It’s relatively cheap too. Account fees are 0.6% a year, which is the same as Weathify, but less than Moneyfarm and Nutmeg. Although the underlying fund management fees (which are charged by the funds that Clim8 invests in) are slightly higher, than the other investment apps at 0.35% to 0.5%. This is to be expected because unlike Nutmeg and Moneyfarm Clim8 invest in specialist funds and the more work you have to do to ensure a fund and portfolio are adhering to impact investing criteria the more it will cost to run.
Clim8 says that “the defining feature of our customers is that they want to invest in companies making a positive climate impact”. So if you want to funnel some of your money into doing good, you can do so through a general investment account or ISA and coming soon they say a junior ISA is coming along, so you can invest in your children’s future, by investing in your children’s future.