Large Cardinal is an investment practice focused on reducing portfolio carbon intensity while maintaining performance.
The Investment Process
The Large Cardinal process was developed by Dana Grigg, Founder of Camelotta Advisors and a physicist from Stanford. This method of divesting begins by gauging the carbon intensity of the portfolio, removing the carbon emitting companies, and most importantly, replacing them with a special asset called “Large Cardinal.” The Large Cardinal asset seeks to mimic the characteristics of carbon intensive investments while producing a carbon score of zero. This method makes it possible for Large Cardinal to maintain a similar level of risk and return for investors trying to divest.
Background on Carbon Divesting
There are many ways to divest from carbon, however many are unsuccessful due to the tradeoff between risk management and full divestment. A sound goals-based asset allocation strategy focused on maximizing risk adjusted returns can leave investors using assets that are highly exposed to fossil fuels. This exposure continues because carbon intensive firms offer a unique basket of inflation hedges and plays on macro-economic growth. Omitting fossil fuel exposure generally hurts investors either in terms of risk or returns.
How Large Cardinal Compares to Other Methods
There are three types of carbon divestment: subtractive, analogous, and neutral. Subtractive divestment is a simple and cheap way to divest however the social impact is very minimal. Analogous divesting has a much higher social impact but also has a high cost associated with it. Large cardinal is a form of neutral divestment, which has higher social impact than subtractive divesting and much lower costs than analogous divesting. Therefore, Camelotta Advisors believes our form of neutral divestment, Large Cardinal, gives investors the best value in terms of their social impact to cost ratio.
Successful Carbon Divesting
Large Cardinal was rolled out in 2011 by Camelotta Advisors for its wealth management clients. The strategy has proven successful or a vast number of clients looking to divest from fossil fuels. By using Camelotta Advisors’ 3Rs divestment strategy in combination with the Large Cardinal assets, there is no longer a sacrifice of risk or returns to divest from fossil fuels.