How one advisory hones in on funds that promise the most impact for net zero solutions and provides access for more investors.
If you’re an investor looking to support solutions to climate change, how do you know your money can make an actual impact? Jacqueline van den Ende has made it her mission to provide an answer. The CEO, co-founder and “company storyteller” of Carbon Equity has leveraged her experience as a private equity investor and company builder to create an organization that directs capital to top-class climate funds. In a recent conversation in the TBLI Talk series conducted by Robert Rubenstein, van den Ende describes her career transition, the purpose of Carbon Equity and how it directs capital toward climate-related investing that makes real progress toward a net zero future. The following is an edited transcript of her comments. — John Howell
I’ve spent half my life as an investor and half as an entrepreneur-venture builder. I started off in private equity with HAL Investments, a 12.5 billion euro (US$12.9 billion) fund in The Netherlands, buying and building companies. After four years in private equity, I felt I wanted to be on the other side of the table: I wanted to be building rather than being an investor standing on the sidelines. So, I joined Rocket Internet, which has powered many European tech companies. They asked me to move to Southeast Asia and build that country’s online real estate platform — which was a real-life MBA experience for me. Then I accidentally became an investor again, as a partner at a Dutch venture capital fund investing in software as a service.
While I was there, climate change became much more of my top issue. It had always been an issue for me, but in the past couple of years, it began to move from background awareness to top-of-mind, red-hot alert. For me, the book “Six Extinctions” was a pivotal point. The writer [Elizabeth Kolbert] describes how in the last 300 years since the Industrial Revolution, loss of biodiversity and temperature increases have gone so incredibly fast, on a scale and at a speed that the world has never seen. For me, the book helped me realize that nothing else matters. I could be successful in building my career and companies, but if we don’t have a livable planet, there’s no point.
I could be successful in building my career and companies, but if we don’t have a livable planet, there’s no point.
I decided to refocus and spend the next thirty years of my career building companies that help solve climate change. My weapon of choice is capital. Why? Capital is my background. I strongly believe that, ultimately, money makes the world go round. I’m not saying that’s a good thing, but I am saying it’s an important reality. What receives funding grows, and what does not receive funding quietly dies. So, I’m interested in how we move the needle on climate change with capital. That’s what we’re trying to do with Carbon Equity.
The value proposition of Carbon Equity is that it allows you to invest along with the world’s top climate investors in the world’s best climate solutions through climate funds. The funds are vehicles to deploy capital. The reason why we’re doing this is that if you are a private investor, whether a retail or high-net-worth investor, your options to deploy capital with impact are pretty limited. Take the view of a retail investor. What can you do with your money? First, you can invest in publicly listed stocks. If you buy shares of Tesla, what is the impact? Virtually none. If you buy a stock from someone else, your actionality is virtually none. Shareholder activism is a strategy that is proving to have some effect but typically, just investing in or divesting from a particular company stock has very little impact.
The second thing you can do as a retail or high-net-worth investor is to do angel investments or crowd equity. That can have an impact on early-stage startups and scale-ups. However, it is very risky. You’re putting all your eggs in a single basket. You have to do all the diligence by yourself.
The thesis of Carbon Equity is, one, you can have way more influence investing in private markets rather than public markets. Carbon Equity only does private investments. Our second thesis point is: if you want to invest in private markets, it makes a lot of sense to do that in the form of a fund. Why do ultra-high-net-worth and professional investors invest in venture capital and private equity funds? Because they lean on professional management of these funds. They do the investing work for you. And you get to diversify because you’re not investing in a single company but a basket of companies.
Unfortunately, it’s virtually impossible for even high-net-worth individuals to invest in these funds because, typically, the minimum to invest is 5 million euros (US$5.2 million). What Carbon Equity does is democratize climate venture capital and private equity investing by bringing down that threshold. The first step we made was to lower the threshold to 100,000 euros. The second step is to launch a climate investment club. Through the club, you can invest even 10,000 euros. The vision is that it should be possible for anybody who has a pension, an inheritance, a savings plan or a bonus from their company to invest in climate solutions through Carbon Equity in a sensible way.
What do we do on a daily basis? Carbon Equity does four things: One, we curate fund opportunities. We look at 800 global climate venture capital and private equity funds, and we select the top five percent of most impactful funds, based on a proprietary time and diligence framework, and the top five percent of most interesting funds. First, they need to be impactful; then, we look to see if they are financially solid — an attractive investment.
What Carbon Equity does is democratize climate venture capital and private equity investing by bringing down that threshold.
The quality of our climate diligence is our biggest point of differentiation. The purpose is to separate funds that are greenwashing or positioning themselves as climate virtuous from funds that are intrinsically end-to-end committed to realizing climate impact. The first thing that we obviously screen for is whether a fund is really screening for decarbonization solutions. Carbon Equity is not investing in slightly better companies but in companies that can deliver a material solution to decarbonizing the planet. We have developed a proprietary diligence framework that consists of forty to fifty questions where we assess every single step of the investing process to understand how impact is safeguarded within the fund. We look at who is on the team, who is responsible for impact and what goals are set for impact for the company, for the portfolio. How do you decide on impact at the level of your investment committee? To what extent are the incentives for fund managers tied to actually realizing impact? We look at the portfolio to see what investment decisions you have made and how they stack up against your impact statements that are on paper. So, we assess a fund based on how impact is realized, safeguarded within the mandate, and executed.
We score funds on a scale of one to five. Funds need to score at least a three to progress to the next step of the process, which is full financial diligence — what is the track record, what’s the expense structure, what are the key risks and how are they mitigated? We are uncompromising in selecting funds based on their impact execution.
The second thing we do is provide access by lowering investment minimums. The third thing is that we allow for diversification — because you can invest in lower amounts, you could invest in more than one fund, even a fund of funds that invests in hundreds of companies. The fourth thing we do is to bring it alive. For us, it’s not just about deploying capital but making it tangible how your money is making an impact. Through our app, you can see exactly what companies you’re invested in, what they do, videos, education and webinars. We want to take you on an active climate journey about how your capital is helping build the net zero future.
The “TBLI Talk” series is presented by the TBLI Foundation, serving the global ESG and impact investing communities through conferences, educational services, investor research and tools. Its mission is to increase understanding and awareness of the benefits of a value(s) based financial system and thus help mobilize money flows into ESG and Impact investing to ensure a brighter future.