Environmental Impact Investing

Environmental Impact Investing

“The dangers of climate change are mounting so rapidly that they could soon overwhelm the ability of both nature and humanity to adapt.”

This is the essence of a major research report recently issued by the Intergovernmental Panel on Climate Change, a group of hundreds of experts from around the globe convened by the United Nations. The earth is getting warmer, with potentially disastrous consequences for almost all living things.   

This growing crisis has led many individuals to shift their investment holdings away from fossil fuels in favor of energy sources that are clean and renewable and toward energy usage that is efficient and sustainable. These impact investors are seeking to reduce our reliance on fossil fuels and slow climate change with intentional decisions about how they deploy their assets.  

The Climate Threat

How significant is the threat?  The last seven calendar years were the seven hottest individual years in recorded history. That is causing increasingly widespread damage and suffering from wildfires, hurricanes, floods and droughts.

Poorer nations are at higher risk than rich ones, with average deaths from extreme weather events up to fifteen times higher in developing countries than in wealthier regions.

Non-human species are also facing a dire future; up to 10 percent of plant and animal species face a high risk of extinction, even if the world limits warming to two degrees Celsius. That means we could lose more species this century than in the entire 12,000 years of human history. 

What is Environmental Impact Investing?

We can all take steps to reduce our carbon footprint, driving less or switching to an electric vehicle, limiting air travel, conserving energy, and even reducing our consumption of meat and dairy. But another way to address climate change is through impact investing.

Impact investing involves investing intentionally for both financial returns and progress toward social (i.e. Affordable Housing or Sustainable Agriculture) and environmental goals. Impact strategies can focus on any number of themes, but one of the most prevalent is climate change.

Investing to slow climate change

Investors of all types—from large institutions to individuals and families—are increasingly recognizing that climate risk is investment risk.  They are taking an active role in shaping their portfolios so that they reduce exposure to environmental risks and shift toward renewable energy and other solution-based opportunities.

This can be done with both equity and debt securities across both public and private markets:

Green bonds

By purchasing green bonds, especially when they are first issued, investors can make impactful loans for renewable energy projects, parks and open space, energy-efficient buildings and transportation, sustainable agriculture, and technology that converts heat and waste to energy. The proceeds from the bonds are earmarked for specific environmental or social purposes and they typically offer competitive financial terms.  

Environmentally screened stock funds

While there are numerous environmentally focused investment funds, they are not all created equal.  Fees, performance, ESG ratings, and manager experience vary greatly. And so do holdings.

Most environmental funds will screen out companies that own large fossil fuel reserves. Many will consider various types of emissions. A smaller subset of funds actively seek stocks with climate-friendly products and services or valuable new technologies in energy efficiency, generation, and storage. Shelton Green Alpha, Kayne Anderson, and Change Finance are good examples.

Fund managers also differ in the degree to which they engage in shareholder activism to pressure company management to improve policies, disclosures and outcomes related to climate change. Calvert is a leader in this area.  

Private investments in clean energy infrastructure and forests

Private investments typically involve greater cost and complexity than public investments and generally offer much less liquidity. They are not suitable for every investor and may have large minimum investment amounts. However, they can also potentially offer attractive diversification, yield, total return, and impact.  

We believe the highest impact often comes from private investments, particularly when new funds are allocated to projects with specific measurable impact.

One example is NorthSky Capital which creates private funds to invest in renewable power and clean energy infrastructure. Past investments include a landfill project in Tacoma Washington that captured methane gas emissions (a chief contributor to climate change). The methane gas is converted to electricity while greatly reducing harmful emissions. Another project in California similarly captured and converted methane gas emitted from wastewater sludge and food waste. 

While NorthSky funds are illiquid and are suitable only for large investors, private offerings from firms such as Greenbacker are much more accessible. This firm develops and operates wind and solar farms across the country, essentially operating much like an electric utility. Since 2016, Greenbacker Capital has invested in hundreds of clean energy projects which together have generated more than 3.3 million megawatt-hours of renewable energy. The firm’s primary investment fund (GREC) has generated relatively stable historical returns and annual distributions in excess of 6%.  

The world’s forests protect against climate degradation by absorbing carbon, protecting watersheds, and providing a habitat for plants and animals. Lyme Timber is a long-term leader in land conservation and sustainable timberland. They offer investments in wetland mitigation banks that support healthy streams and wildlife, carbon sequestration projects, and responsible forest management.  

To help research and sort through all these options as well as to provide access to the private market opportunities discussed above, many investors rely on the assistance of financial advisors specializing in this field, such as Colorado Capital Management. 

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Jason Black, Financial Advisor (CFP)

Jason Black, CFP ®

With a drive to live purposefully and passionately, Jason focuses on helping clients to live in abundance.

Jason is a partner and senior advisor at Colorado Capital Management.  He brings more than 15 years of varied experience working in the financial services industry. He joined CCM after a long search to find the perfect firm that aligned well with his values and mission. Jason is passionate about helping individuals and families live abundant and intentional lives. He is proud to be part of a Certified B Corporation, doing meaningful financial and investment planning for clients, while also focusing on socially responsible business practices and making a positive impact. As a Chartered SRI CounselorSM, Jason has a strong background and keen interest in sustainable investing and enjoys helping clients understand the merits of this approach. Jason is also a Certified Financial Planner™ and has a bachelor’s degree in business administration from the University of Colorado. 

Before joining CCM, Jason worked with Jackson National as a consultant for financial advisors. He helped create meaningful connections with families, creative asset allocation strategies, and tax-advantaged retirement-income solutions. During his tenure there he worked with over four thousand financial advisors across the country, was recognized multiple times as consultant of the year, and also managed a team of twenty-five individuals. 

Jason is happily married to his wife, Bridget, of thirteen years, who he met while in college at CU. Together they have a son and daughter, and a Frenchie named Coco Disco. They live in the Whisper Creek neighborhood of Arvada. When Jason is not at work, he and his  family can often be found making turns in Summit County, wakesurfing in Glendo, WY, cooking, dancing and traveling.

Erica Loughrey, Associate Financial Advisor

Erica Loughrey

Erica is passionate about providing purposeful advice to help clients enjoy a meaningful life.

Erica is an advisor at CCM. She joined the firm in 2021, fulfilling her desire to work for a values-based company with a deep commitment to making an impact. She moved from her hometown of Anchorage, Alaska and quickly fell in love with the sunny and beautiful state of Colorado. She brought with her prior experience as a para-planner and is delighted to be engaged in a profession that empowers individuals to flourish financially. She believes strongly in exceptional client service and creating lifelong generational relationships.

In 2022, she accomplished two of her major career goals, finishing her master’s degree in financial planning (MSFP) and earning her Certified Financial Planner™ designation.

Erica enjoys spending time outdoors and traveling to exotic locales. In her free time, you can find her out skiing, hiking, scuba diving, practicing yoga or jetting off to new places to explore. She has a never-ending list of travel plans, having already visited over 20 countries, and feels lucky to have so many wonderful opportunities and adventures.

Lee Strongwater, Senior Financial Advisor

Lee Strongwater, WMS

An entrepreneur and world traveler, Colorado Capital Management vice president and co-owner Lee Strongwater brings a global perspective to investments and life planning.

For more than 15 years, Lee has passionately assisted clients with their financial planning and portfolio management needs. He especially enjoys helping them live more meaningful lives and invest in ways that are aligned with their values. Lee holds a bachelor’s degree in political science from the University of Colorado and a master’s degree in international affairs from Columbia University. He also holds the Wealth Management Specialist (WMS) certification.

Before joining Colorado Capital Management, Lee was a managing partner at Strongwater-Schott, a fee-only investment management and financial planning firm in Denver. Prior to that, he was an entrepreneur who helped start and manage several small firms, including a children’s product company that went public in 2007.

Lee is an active volunteer for several organizations. He is a past President and current member of the Board of Directors for the Boulder Jewish Community Center, an organization that is highly respected on both a local and national level. Lee is also on the Investment Committee of Girl Rising-Global Education, a venture philanthropy fund that invests in social entrepreneurs with culturally-relevant ideas. The fund’s investments promote gender equality and improve educational outcomes for girls and boys living in poverty in Kenya and India.

Lee is married and has two daughters. He enjoys hiking, skiing, traveling—mostly to Mediterranean countries—and trying out new recipes from his journeys. When he’s not on the go you can find him engrossed in a book.

Steve Ellis, Senior Financial Advisor

Steven Ellis, CFA

Steve Ellis has spent his career making an impact, so it’s not surprising that Colorado Capital Management’s founder and president launched the firm’s entry into impact investing.

He brings over 30 years of experience as a financial advisor to high net worth clients. His early work included teaching college courses in accounting and finance, consulting for a major accounting firm, and researching and acquiring investments as the chief due diligence officer of a leading national financial planning firm. Since 1989, he has advised individual and institutional investors on the management of their wealth. Steve is a Chartered Financial Analyst (CFA), holds a business degree from the University of Colorado, magna cum laude, and a master’s degree from Cornell University.

Steve launched the firm’s entry into impact investing in 2012 and is committed to helping build the field. Steve is a passionate speaker on the topic. He has taught about impact investing at various conferences and classes around the country, including as a past faculty member at Middlebury Institute of International Studies. He is listed in the Who’s Who in Impact Investing.

Steve is married, with two daughters, enjoys hiking, biking, skiing, tennis and bridge, and is actively involved in the community. He has served on numerous boards and committees for a wide array of nonprofit organizations, including the Boulder JCC, Rose Community Foundation, Jewish Family Service, and Friendship Bridge. His passion for impact and community service helped lead Colorado Capital Management to become a Certified B Corporation and to build a strong culture of volunteerism and philanthropy.