Crowd Funding Meets Carbon Reduction

CarbonCrowd is a crowd funding platform for individuals who want to take part in climate change reversal. We spoke to Co-founder and CEO Henry Sims about it…

How does it work?

People too often feel powerless when it comes to climate change reversal. There’s a sense that the problem is too big for any one individual to make a difference….

CarbonCrowd is a crowdfunding platform dedicated to providing individuals access to investment opportunities into residential projects aimed at reducing greenhouse-gas emissions, regardless of how much capital they have. You could invest $1000, or as little as $1. The reality is: corporations and governments do have significantly more resources than individual people, but this doesn’t mean individuals can’t play a central role. We allow corporations to invest on the site as well. If they want to, individual users are given the opportunity to collaborate with corporations on the site. The collaboration results in additional investment into the project from the corporation, and also increases the efficiency of the user’s investment. It’s completely optional.  We empower individuals by giving them tools that maximize the impact of their investments on the platform.

We use various techniques to assess a home’s potential for greenhouse gas emission reduction. Homes with high potential reduction can earn a spot on the platform. We secure quotes from qualified professionals, and put these on the site. Users on the site can then purchase the CarbonRights of the project from the homeowner by funding the quote—there are no donations. For example, if an efficiency upgrade costs $3,000 and you fund $60 of the quote, if the campaign succeeds you will own 2% of the project’s Carbon Rights. If it doesn’t succeed, you will get all of your money back. Ownership of Carbon Rights allows you to claim responsibility for the greenhouse gas emission reduction resulting from the project, proportional to your percent of ownership. CarbonCrowd uses various methods and technology to measure the reduction. A user can log in to their dashboard and check the progress of their investments, which have an emission reduction return. This is why we define CarbonCrowd as an impact investment crowdfunding platform. Our main goal is to provide users with efficient mechanisms to invest in greenhouse gas reductions, which is also why, unlike most crowdfunding sites, we won’t take a percentage of your investment. The homeowner owns the solar panels and reaps the benefits of reduced overhead.

Why did you decide to start this organization? Is your background in sustainability? Tell us about your professional journey.

I’ve been interested in starting a sustainability-oriented company since I was in high school, around 2008. Like many young people, I was incredibly disturbed by the prospect of global warming and a changing climate. I imagined myself running a company that went into people’s homes and made them more efficient. I remember reading “Residential Energy: Cost Savings and Comfort for Existing Buildings” by John Krigger, and thinking, “I could do this.”

I was curious about the so called ‘energy efficiency gap’, or the general skepticism people have towards savings estimates provided by energy auditors. You can’t blame people for being skeptical when many of these auditors are compensated with commissions on the insulation they sell.

I was fascinated by the idea that if you could quantify and predict energy savings in an accurate way, that you might be able to offer a financing arrangement where the efficiency savings pay for the upfront costs of the audit and retrofit overtime. If you could eliminate the upfront costs, hopefully you could eliminate the skepticism.

I ended up going to Wheaton College and was really torn between creative writing and economics. In the end I decided economics made the most sense since I wanted to start a business after graduating. I met my co-founder Justin my sophomore year. We hit it off pretty quick. We both shared a penchant for philosophical discussions and shared a lot of the same concerns about climate change. At the time I was submitting proposals to Wheaton College to try and secure funding for an independent study aimed at developing the financial model I had imagined in high school. One of my professors was even nice enough to help me develop an economic equation for my idea. I submitted my proposal each year, and was denied each time. This was really discouraging, especially when other proposals that seemed meaningless, like an indoor AstroTurf-walking-park, were accepted.

Fast forward to my senior year of college. Economic majors aren’t required to do a thesis, but I really wanted to do an econometric paper on an energy related topic. In microeconomics, it’s typical to model individuals as informed decision makers that act to maximize utility. These kind of assumptions underpinned the residential module of the national energy modeling system developed by the EIA. They assumed electricity consumption was driven mainly by factors like income, the price of electricity, etc. Even when you hold the economic factors constant, there are still unexplained variations in residential electricity consumption. My thesis was an attempt to explain these variations with the addition of sociological variables.

Fast forward 2 years later. Justin and I were committed to starting a business, but were looking for the right idea. We had our fair share of setbacks, but you can’t let these things discourage you.  Eventually Justin and I came up with the concept of CarbonCrowd, and we’ve hit the ground running since.

What projects will users be able to help fund?

Users will be able to fund three different types of residential projects: solar installations, permaculture-style carbon gardens, and energy efficiency upgrades. A single home could feasibly qualify for all 3 project types if it meets our requirements, which are based on greenhouse-gas reduction potential.

What does this vetting process look like?

We want to maximize the impact of our users’ investments in every way possible. This means only bringing quality projects onto the site that have high potential for greenhouse gas emission reductions. We use a variety of techniques and models to assess a home’s potential for our various project offerings. As an example, for a solar installation we use state of the art techniques to estimate a roof’s solar potential. It’s a complex equation that involves tapping into several different data sources. The home must first meet our reduction-potential thresholds, which are different for each project type. After this stage, we assess the homes potential compared to all other homes we might be looking at, and only the ‘cream of the crop’ makes it onto the platform for funding.

What do you envision for CarbonCrowd 10 years from now?

Impact investing is only going to become more important as time progresses. In my experience people can typically agree on goals but will disagree on the methodology required to reach those goals. Think about this as it applies to climate change. In general, most people want to reverse climate change, but there’s a lot of disagreement over the best approach. Fortunately, there are generally accepted metrics that we can use to judge the effectiveness of one approach over another. For climate change reversal this metric would be a measurement of greenhouse gas reduction. When you have a social goal that people agree on, and a generally accepted metric to measure progress towards that goal, then you have an enormous opportunity for impact investment platforms. The only way to capitalize on such an opportunity, is if people trust your measurement of greenhouse gas emission reductions, which is why we have an emphasis on transparency and have adopted the framework of carbon rights, rather than carbon offsets. If they want to, people can learn precisely how our models work —we’ll even encourage people to find flaws. This is what we are working towards. Carbon Rights are intrinsically a clearly defined asset because the project scope and ownership is clear. At the same time, it allows for improvement of the techniques used to measure greenhouse gas reductions. The truth is what it is, and our job as an impact investment platform is to give you the most truthful sense of the impact you’ve had, and to do this in the most efficient way possible. If all goes well, 10 years from now CarbonCrowd will be one of the most efficient mechanisms for reducing greenhouse gas emissions and I would be able to prove mathematically that a dollar invested on CarbonCrowd will produce a greater impact than a dollar invested elsewhere. Since climate change is a global problem, I would hope that in 10 years we would have a global presence. That would be ideal.

When will users be able to get started?

The platform launch is planned for late 2016/early 2017. Users will be able to get started as soon as we launch.

Be sure to check out CarbonCrowd today!