Exclusive: ‘Clim’ing out of a crisis’ – Duncan Grierson, Clim8 in “The Fintech Magazine”
Duncan Grierson and the team at sustainable investment platform Clim8 Invest have their eye on one prize, and are cutting through the greenwash to reach it.
Sustainable investment funds have doubled over the past three years. And the pandemic has played an accelerating role, as investors reassess their values and redirect their wealth.
Research by Morningstar reveals that net sustainable investment flows in the States hit $30.7billion by the end of the third quarter, compared to $21.4billion in the whole of last year, helping to push the global sustainable investment market to a record high of $1,258billion in assets under management. But the true trailblazer continues to be Europe. Soaring ahead, sustainable investments surpassed the $1trillion mark this year.
Unsurprisingly, we’ve seen swathes of funds repurposed and ‘greened’ (around 32 in Europe) and 166 new sustainable funds created to meet demand. It seems everyone wants a piece of the lucrative green market. Along the way, a fair amount of new digital wealth managers have appeared, too, each one striving to be more ethical than the last.
One of the latest is Clim8 Invest. Launching soon, it’s a symbol of our times: an app that empowers ordinary folk to invest for the environment. When Clim8 launches, it will offer customers a choice of investment portfolios.
“Our day-one product is aimed at keeping it simple; these are the themes we’re investing in and everybody gets a piece of what’s in our portfolio,” says CEO and Founder Duncan Grierson. “Exactly what they get will depend on their risk appetite: are they cautious, adventurous or something in the middle?”
There’s nothing unconventional there. Generally, investment portfolios are categorised by risk and the investments are available within a stocks and shares ISA wrapper or as a general investment portfolio. A quick count reveals there are around 28 mainstream digital wealth managers in the UK. Of these, at least three already offer ready-made ethical portfolios. Clim8 will have to compete with industry giants Tickr, Nutmeg and Wealthify, not to mention other environmental fintechs that are popping up left, right and centre. Added to this, the robo-advice industry is notoriously difficult to master, with even godfather of digital wealth platforms, Nutmeg, so far failing to make a profit.
So, what makes Clim8 different?
Firstly, it’s got some serious industry backing. Board directors from the likes of Monese and N26 are behind it. Clim8 has raised £4.4million, including from a venture capital fund backed by the British Business Bank and more than 3,000 retail investors via two crowdfunding rounds this year.
Secondly, its focus is on protecting the environment. Inevitably, as ethical investing gains popularity, some managers are capitalising on the trend without helping the planet much. Clim8 is different, claims Grierson.
“There has been a lot of jumping on the green bandwagon,” he says. “We bring something a whole layer above that, which is expertise and experience around sustainable investing.”
Appearing to be more sustainable than you really are, known as ‘greenwashing’, is the latest corporate embarrassment. In the UK, the Competition and Markets Authority (CMA) announced in November 2020 that it will be taking action to scrutinise the ever-rising sustainability claims from companies. Using sustainability as a marketing technique has become all too common. In the summer of 2019, US research found that the number of sustainability labels on bathroom products had grown by 150 per cent since 2013. In 2018, these labels appeared on 16 per cent of US products overall.
The same thing has happened in the investment industry. Within ESG (environmental, social, governance) funds across indexes created by ratings provider MSCI, you’ll find British American Tobacco, Coco-Cola, British Petroleum, Royal Dutch Shell and PespiCo. And, recently, ESG fund managers were left defending UK fashion house Boohoo’s double A rating after allegations emerged about how some of its suppliers exploited workers.
Boohoo subsequently launched its own investigation, suspending some companies in its supply chain. H&M is another fashion brand currently under fire for greenwashing from the Norwegian Consumer Authority. It’s a problem of our time, with 60 per cent of 650 frustrated institutional investors questioned in one survey agreeing that greenwashing is the most significant obstacle to sustainable investing.
“The only way you can avoid the greenwashing that some people in the asset and wealth management industry are doing is with bottom-up analysis,” says Grierson.
So that’s what he is doing. Together with a team of experts, Grierson’s building the investment portfolios himself, and the stocks guest list is strict.
“We’re not just negatively screening out fossil fuel, weapons and tobacco companies, and all those other nasties. We’re going all the way to the other end of the spectrum and looking for companies that have products and services that are solutions to the climate change crisis,” he says.
“Members of our investment team have a combined 50 years’ experience of investing in clean energy and sustainability behind them. We think of ourselves as pure play and very much focussed on the E in ESG. So, to be in our portfolio, companies need to have a product or service that is making a difference to sustainability and climate change.”
Unlike many other ESG funds, this means that Clim8 is not planning to include tech giants like Alphabet, Apple, Amazon or Facebook. In its view, they are simply not doing enough for the planet to justify it. So, here’s the crunch question: are Clim8’s investments any good?
Using historical simulations, the team at Clim8 have found that its portfolios would have delivered impressive returns.
“Over the last year, our balanced portfolio would’ve given investors a return of 16 per cent after fees,” Grierson reveals. “So, it would’ve been giving very good, outperforming returns, despite not having any big tech in there.”
In fact, it’s no secret that, overall, sustainable investment funds have outperformed traditional investments over the past decade – always with the caveat that it depends how you define ‘sustainable’.
Over the past 10 years, the average return has been 6.9 per cent and, over the past three years, an impressive 11.3 per cent. In this context, Clim8’s would-be returns are compelling. That said, of course Clim8 has had the benefit of building a portfolio in hindsight.
No turning back
According to Grierson, the ‘green rush’ – of investment into, as well as demand for, sustainability – won’t be turned back now. Even those who deny climate change cannot deny the favourable investment performance of sustainable companies.
“Cynically, even if you don’t believe in climate change, if you look at the performance of your money in companies that are on the right side of history, you would have done well,” he explains. “And we believe that’s going to be an ongoing thing… as consumers and as companies, as buyers of those products and services move more and more in that direction. We only see this going one way.”
There’s a myth that millennials are the only ones who believe in sustainable investing. Given the current economic climate for younger people, that could spell disaster for up-and-coming green investment platforms like Clim8. But S&P Research shows that sustainable investing is multi-generational. And, perhaps more importantly, people with vastly different wallet sizes are on board, too.
Recent findings from CREALOGIX indicate that 19 per cent of wealth from high-net worth clients will be inherited by millennials by 2027. And 60 per cent of them are unhappy with their parents’ advisors, citing unsustainable investments and a lack of technology as some of the main issues.
Platforms like Clim8 represent a turning point in our history. They offer a way forward for people who want a better tomorrow. From just £25, it empowers anyone, no matter their age or wealth to make a difference, not just to their own wallet – but also to the world.
This article was published in The Fintech Magazine: Issue #06, Page 38-39
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