Mar 8, 2023 · 23m · catalyst
A theory of change for climate investing [partner content]
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Carbon Collective CEO Zach Stein and host Stephen Lacey examine the shortcomings of conventional ESG frameworks while outlining a science-aligned investment model that combines fossil fuel divestment, pure-play clean tech allocation, and active demand-side shareholder engagement.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
Shayle as informed peer 4.7 Guest teaching 4.1 Guest disagreement 2.0 Shayle pushing back 1.3
speaking balance: gold is Shayle, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 20:15 Rejecting shareholder engagement with fossil fuel producers
Stein dismisses the conventional ESG thesis of holding oil shares to pressure producers, comparing ExxonMobil to a store with a line around the block where talking to the clerk is pointless.
Hardest push from Shayle ▶ 9:12 Host challenges simplistic categorization of utility portfoliosLacey presses Stein on how to practically evaluate utilities that hold large fossil generation assets and resist straightforward climate classifications.
Biggest teaching moment ▶ 3:41 Deconstructing why ESG ratings obscure fossil fuel investmentsStein educates listeners on how ESG metrics blend governance and social scores to mask heavy environmental impacts, using BlackRock funds and BP's strategy reversal as concrete evidence.
Shayle holds their own ▶ 16:53 Host presents state-level economic data on anti-ESG legislationLacey demonstrates his command of current policy by citing a specific fiscal analysis showing an anti-ESG bill in Indiana could cost public pensions over seven billion dollars.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Shayle as informed peer | Guest teaching | Guest disagreement | Shayle pushing back | Why |
|---|---|---|---|---|---|---|
| Deconstructing Greenwashing and Flaws in Standard ESG Funds | 4 | 5 | 3 | 1 | Host Stephen Lacey asks a foundational prompt requesting an example of a greenwashed fund and why asset managers hold fossil fuels. Guest Zach Stein educates by breaking down how ESG aggregate scoring dilutes climate reality, citing BlackRock and BP's recent pivot back to fossil fuels. | |
| The Carbon Collective Investment Philosophy and Strategy | 4 | 4 | 1 | 1 | Lacey asks what foundational questions investors should ask when evaluating climate funds. Stein lays out Carbon Collective's three-part investment thesis: divest from fossil fuels, overweight solutions, and pressure non-energy corporates to decarbonize. | |
| Utility Sector Economics and Defining Pure-Play Climate Solutions | 5 | 4 | 2 | 3 | Lacey pushes on the complexity of utility portfolios that still operate vast fossil generation assets. Stein responds with an economic argument, citing data that almost all US coal plants are more expensive to run than replacing them with renewables, and defines his 50% revenue threshold for solutions. | |
| Clarifying the Vocabulary of Sustainable and Impact Investing | 5 | 5 | 2 | 1 | Lacey notes how broadening terminology into ESG dilutes focus and invites confusion. Stein agrees and provides a taxonomy differentiating risk-based ESG, secular trend sustainable investing, tangible impact investing, and values-aligned investing. | |
| Risk, Reward, and Historical Returns in Climate Portfolios | 4 | 4 | 1 | 1 | Lacey asks about historical performance benchmarks and short-term volatility. Stein cites the Colorado State Pension Fund study showing billions missed by holding fossil fuels, while acknowledging clean energy's post-2020 pullback. | |
| Analyzing the Political Backlash Against ESG Investing | 6 | 3 | 2 | 1 | Lacey demonstrates domain knowledge by citing a specific recent analysis of Indiana's anti-ESG bill and its projected multi-billion-dollar pension loss. Stein analyzes why ill-defined ESG terminology made the sector vulnerable to political backlash. | |
| A Demand-Side Theory of Change and Active Shareholder Engagement | 5 | 4 | 3 | 1 | Lacey synthesizes the tension between growing divestment and record oil company profits to ask for a theory of change. Stein forcefully rejects shareholder engagement with oil majors, advocating instead for pressure on demand-side corporations like big box retailers. |
Statements from this episode (12)
BlackRock's ESG Funds Heavily Invest in Fossil Fuels
“And so BlackRock, for example, has hundreds of ESG funds. A lot of them invest you in fossil fuels, an industry which fundamentally cannot exist in a world where we have solved climate change.”
Fossil Fuel Companies Are Not Necessary Climate Transition Partners
“Of saying that these are necessary transition partners, we hear this all the time, of you should be investing in these companies to either help them transition faster, or because we're not going to be able to solve climate change without them, and that just co…”
BP Increased Focus on Fossil Fuels Following 2022 Market Conditions
“At the beginning of this week, BP, which is probably the most notable as going, not as British petroleum, but beyond petroleum, they came out and said, yeah, we're actually just going to focus more on fossil fuels. Given what happened in twenty-twenty-two.”
Solving Climate Change Requires $5T to $9T Annually in Solutions
“We need to be investing five to nine trillion more dollars per year into climate solutions and stop investing in new fossil fuel expansion.”
Stein: Decarbonization is impossible without electric utilities participating
“There is no way we are going to be able to do it without the participation of utilities.”
Replacing 209 of 210 US Coal Plants With Renewables Is Cheaper
“There is probably a recent report you probably saw that 209 out of the 210 coal plants that are operating currently in the U.S. Would be cheaper to shut them down and just invest in the capital cost of building renewable energy to replace them.”
Stein: Carbon Collective does not identify as an ESG company
“We do not identify as an ESG company, and I think I'll answer your question by maybe taking a step back and giving some definitions of how we see these terms.”
ESG Was Originally Created to Diversify Institutional Risk
“So ESG was originally invented by institutional investors who wanted to be able to diversify across new classes of risk.”
Divesting Colorado's Pension From Fossil Fuels Would Have Added $2.7B
“If they had divested from fossil fuels in 2012, they would have had 2.7 billion more dollars. In that fund. It would have been about an additional 4100 dollars per pensioneer for that.”
Indiana Anti-ESG Bill Could Cost State Pension Fund $7 Billion
“Just a couple of days before we are having this conversation, a financial analysis was released looking at this anti-ESG bill in Indiana, and so there's this GOP push across the country to, you know, pull public pensions out of ESG Investing. And in Indiana, t…”
ESG Became Vulnerable to Political Attacks Because It Lacked Definition
“The problem here, and this is a problem to ESG and why it was so vulnerable to this, is it was not well-defined.”
Climate Investors Should Pressure Energy Consumers, Not Fossil Fuel Suppliers
“We think that engagement and pressure is incredibly important, but that focusing on supply makes no sense at all. Right now, ExxonMobil is like a business with a line out the door and around the block. It really doesn't make sense to go to the guy behind the c…”