Carbon Collective, Climate Focused Investing

In the latest episode of Advisor Ally, we sat down with Zach Stein, CEO and Co-CIO of Carbon Collective, to explore how retirement savings can be reimagined for a world facing accelerating climate change.

Zach’s journey is as unique as his vision. From building agricultural technology startups to creating a platform that aligns retirement planning with climate realities, his story offers a compelling roadmap for financial advisors, wealth managers, and mission-driven employers looking to serve a new generation of investors.

From Agriculture Startups to Climate-Focused Finance

Zach’s entrepreneurial career began far from Wall Street. Along with his lifelong friend and co-founder, he built a startup focused on solving sustainability challenges in aquaculture. While their early company showed promise, the technology proved difficult to scale.

By early 2020, just before the pandemic, the duo decided to pivot. They wanted to stay mission-driven but shift to a problem space where their skills could have a bigger impact. Through 120 in-depth interviews, they discovered a recurring frustration among investors in ESG (Environmental, Social, and Governance) funds:

• Confusion about top holdings

• High fees with unclear benefits

• Uncertainty about real-world impact

This insight revealed a gap in the market. While ESG investing was gaining popularity, it lacked true product-market fit, especially for those deeply concerned about climate change.

“We realized climate change and retirement savings were two realities that had to be addressed together,” Zach explained.
“The goal wasn’t to overcomplicate things but to build something simple, transparent, and deeply aligned with climate action.”

Why ESG Isn’t Enough

Many investors assume ESG funds are inherently green, but Zach shared why that perception is often misleading.

During a conversation with a nonprofit client, he reviewed a so-called climate-focused mutual fund. The top holdings? Nvidia, Microsoft, and Amazon. While strong companies, they were hardly leading climate solutions.

This lack of clarity erodes trust and leads to accusations of greenwashing.
Carbon Collective’s answer was to create portfolios where every holding is justifiable and transparent — so clear that, as Zach says, “an intelligent eight-year-old could understand why it’s there.”

The Birth of Carbon Collective and Its Growth

Initially, Carbon Collective targeted individual investors. But as demand grew, a pattern emerged: employees at mission-driven companies began asking their HR teams for fossil-fuel-free 401(k) options.

This led to a strategic pivot toward employer-sponsored retirement plans. Today, Carbon Collective works with nonprofits, startups, climate-tech firms, and even traditional businesses seeking differentiated, values-aligned investment options.

The growth has been dramatic:

• July 2023: $60 million in assets under management (AUM)

• September 2025: Over $220 million AUM

This expansion is powered by both organic demand and a generational shift in investor expectations.

The Generational Wealth Transfer and Climate Tailwinds

One of the most profound forces reshaping finance today is the great wealth transfer. Trillions of dollars will soon pass from baby boomers to millennials and Gen Z — generations far more concerned about climate change.

Zach believes this represents both an opportunity and a challenge for advisors.
As he put it:

“Millennials and younger investors want to see their money working toward the future they care about. But advisors must balance these values with rigorous economic reasoning.”

Carbon Collective’s philosophy rests on three key assumptions:

1. Fossil fuels are declining as long-term investments due to underpriced risk.

2. Green bonds and climate solutions offer underpriced upside potential.

3. Global diversification is essential in an increasingly volatile market.

Advisors who share these assumptions will find strong alignment with Carbon Collective’s approach. Those who don’t still have many traditional investment options to choose from.

Addressing the Returns Question

One of the most persistent myths about sustainable investing is that it automatically means lower returns. Zach addressed this head-on.

In some years, Carbon Collective’s portfolios have outperformed traditional benchmarks, such as in 2020, 2021, and 2024. In other years, like 2022, they underperformed, largely due to energy sector volatility.

This variability isn’t a bug; it’s a feature.
Different investment philosophies naturally lead to different performance patterns, which is the essence of diversification.

Zach also provided a brief history lesson on ESG:

• Originally developed by hedge funds to quantify non-financial risks like environmental liabilities and governance issues.

• Over time, other movements, including values-based and impact investing, merged with ESG, creating confusion and diluted purpose.

As ESG disaggregates into more targeted approaches, Carbon Collective focuses squarely on climate impact combined with financial rigor.

Technology, Trust, and Compliance

Technology plays a central role in Carbon Collective’s operations. Zach’s team has been cautious but strategic in adopting AI tools.

Key innovations include:

• AI-powered compliance software that automatically documents meetings and integrates with clients’ 401(k) plans.

• Internal AI systems to streamline sales outreach while avoiding the pitfalls of impersonal automation.

For advisors, this blend of human trust and technological efficiency offers a competitive edge in today’s compliance-heavy environment.

Lessons for Advisors and Employers

The conversation highlighted several actionable takeaways for financial professionals:

1. Clarity beats complexity
   Simplify portfolios so clients understand exactly what they own.

2. Offer diversification, not restriction
   Always include low-cost passive options alongside climate-focused strategies.

3. Be transparent about performance
   Explain that differences in returns are natural when following a distinct philosophy.

4. Leverage technology thoughtfully
   Use AI to enhance documentation and compliance, not replace human relationships.

5. Prepare for generational shifts
   Millennials and Gen Z will demand values-aligned investments as they inherit wealth.

Life Beyond the Office

Outside of work, Zach is a devoted parent to two young children. While free time is scarce, he dreams of returning to his favorite hobby: playing basketball on an indoor court.

“If I had two or three hours a day just to shoot around and play pickup games, that would be my happy place,” he shared with a laugh.

Final Thoughts

Zach Stein’s journey with Carbon Collective is a powerful reminder that retirement planning is no longer just about numbers. It’s about aligning financial futures with the world we want to build.

For advisors and employers, the path forward is clear: embrace transparency, serve client values with integrity, and leverage technology to deliver exceptional experiences. As the climate crisis and generational wealth transfer converge, those who adapt will lead the next era of wealth management.

Listen to the full episode of Advisor Ally to gain deeper insights into this conversation.