We recently talked about “How to Switch to A Climate-Positive Bank” because:

• Your bank is probably using your money to support the fossil fuel industry and climate collapse.
• What you do with your cash may be the biggest part of your carbon footprint.
• There are sustainable banks out there that will only use your money for climate solutions.

So that newsletter has a ton of great resources for you on the cash and banking side of things.

Today, we’re diving into the impact of your investments and how to make sure they too are funding climate solutions, instead of climate collapse.

The Big Picture

The science has been crystal clear for years. And even historically conservative organizations like the International Energy Agency have now agreed: to limit warming to anything even remotely “safe”, there cannot be any more new exploration or development of fossil fuel resources.

On top of that, every country in the world has agreed to aim for cutting greenhouse gas emissions in half by 2030.

All this to say that fossil fuels are a dying industry because they are the main cause of the climate crisis which is putting everything and everyone we love at risk.

Meanwhile, the companies and industries building the solutions to the climate crisis will grow exponentially in the years and decades to come.

This will undoubtedly be one of, if not the biggest, macro trend in the next few decades.

However, even though large majorities of people want to invest sustainably and help make this happen, practically none are. Instead, the average person has about 20% of their retirement savings invested in the carbon-intensive sectors of the economy, 8% invested in fossil fuels specifically, and much less in climate solutions.

Not only is this a major values misalignment for most people, but it’s also a financial risk to have so much invested in a dying industry.

And perhaps most importantly, as James Regulinski pointed out on our latest podcast episode, we’re not going to build the world we want to live in by investing in the status quo or even “less bad” companies. We need to invest in the organizations that are actually doing the most good and primarily focused on doing the work of building that better world.

So, if you’re like me and want to make sure your investments are actively moving us toward the world you want to live in, here are some ideas and tools to help get you started.

What’s the Impact of Sustainable Investing?

In a way, it’s obvious that switching your investments out of fossil fuels and into sustainable options is good – it’s like a vote with your dollars.

But the reasons why are a bit more nuanced.

Here are a few ways it makes a difference:

1. When enough people divest from fossil fuels, it decreases their stock price and increases their cost of capital. Also, the $40 trillion assets under management that have pledged to divest is a material risk to these companies, incentivizing them to…not suck so much.
2. As more people reinvest their money into sustainable options, the companies leading on climate and building climate solutions see their stock prices go up, and their cost of capital decrease. This helps them to expand their operations and deploy more climate solutions.
3. Switching your investments helps to change the narrative, increase confidence, and build momentum for a sustainable future – especially if you talk about it! It helps shift the zeitgeist of what people see as possible, what is financially smart, and where the world is headed. It can also help early-stage companies working on climate solutions to attract more investment because investors see the stock market giving high valuations to the sustainability sector. Narrative and cultural changes like this are harder to measure but can have massive ripple effects on policy and investment decision-makers at every level.

Finally, there are also some exciting changes happening in the world of shareholders around voting. If you own stock in a company, you’re a shareholder. And as a shareholder, you have voting rights that can influence a company’s Board of Directors and the actions of the corporation. Currently, most shareholders don’t vote or share their two cents at all when it comes to voting. However, for anyone who has a 401k or 403b retirement plan, this could change very soon so stay tuned!

These answers around impact largely come from our recent panel with Andy Behar and our latest podcast on sustainable investing with James Regulinski! The one with James was just published today and it was a fun one – he has quite the story and brings a refreshing, holistic perspective to investing. You can watch it on Youtube if you’d like or listen wherever you get your podcasts!

Getting Started: Find Out What You’re Invested In Now

If you don’t know exactly what your retirement savings are invested in, you’re not alone. Mutual funds, ETFs, and the like can have hundreds of companies in them and it gets convoluted pretty quickly.

To my knowledge, the best tool to use to see what you’re invested in and whether those investments align with your values is Fossil Free Funds or the sister page, Invest Your Values. By typing in the ticker symbols of your mutual funds, ETFs, or target date funds, not only can you see what percent of it is invested in fossil fuels, but you can also see grades for other important areas you may care about.

Here’s an example of Blackrock’s ETF of the S&P 500:

If you work at a large company, you may even be able to see grades for your company’s retirement plans.

You can also get a quick sense of your likely exposure to fossil fuels by looking at your Fund Manager’s overall exposure. For example, Vanguard invests around 9% of your money into fossil fuels on average, Fidelity is 10%, Black Rock is 9%, State Street is 14%, etc.

Thanks to these tools, it’s possible to get clarity on what you own. If you’re happy with what you’ve got, great! If not, here are some ideas on next steps.

Finding Investment Options That Align with Your Financial Needs and Values

Quick reminder: I’m a sustainability nerd. And although I studied economics, I am not a financial professional and this is not investment advice. I’m sharing this to educate people on exposure to fossil fuels and the climate impacts of investments. So, as with all financial decisions, please do your own homework and/or talk to a financial advisor!

Financial Performance

Though 53% of investors believe that sustainable investing means sacrificing financially, the data does not back this up.

If anything, it actually points to the opposite.

According to Morgan Stanley, “there is no financial trade-off in the returns of sustainable funds compared to traditional funds, and they demonstrate lower downside risk.”

More recently, a meta-analysis out of NYU looked at hundreds of studies from 2016 to 2020 and found that “Positive and/or neutral results for investing in sustainability dominate”.

Finding Value-Aligned Investment Options

Unfortunately, there is a lot of deception in the ESG world right now. A recent study found that over 60% of funds with ESG in the title had a “D” or “F” rating on at least one ESG criterion.

It’s important to know that usage of the term “ESG” is currently unregulated by the SEC, so companies can use the label essentially however they want to. This means we need to look deeper into whether or not they’re backing up their sustainability claims.

In my opinion, the best way to find the most sustainable options is to use the fantastic Fossil Free Funds tool. You can filter and sort to your heart’s desire on whatever matters most to you.

For example, if I want to start getting a sense of which options are the most climate positive, I can take a look at the cross-section of which funds have zero fossil fuel companies, no deforestation exposure, the best gender equality grades, etc and sort those by which have the highest percentage of the “Clean200” (the companies making the most clean energy revenue).

It probably comes as no surprise that I personally am a fan of the sustainable investing options made by people who are coming to finance from a climate perspective. One I mentioned years ago was ETHO, after interviewing Ian Monroe. This is a diversified climate leadership ETF that invests in the most sustainable companies across all sectors, after excluding fossil fuels, plastics, guns, etc. I’m also pretty excited about their soon to launch Global Climate-Positive ETF and a newly launched nonprofit they’re involved in, the Climate+Positive Investing Alliance. For anyone interested in joining the alliance, it’s open to everyone and they’re working to “cut through greenwashing and empower investors to align all portfolio assets with a Climate+Positive planet now, not decades in the future.”

More recently, we had the chance to chat with James Regulinski on the CS podcast. James is a Co-Founder of Carbon Collective, which recently launched their first ETF, CCSO. As a sustainability nerd, this one really resonates with me because it’s focused exclusively on companies that are working on climate solutions and was inspired in part by Project Drawdown’s list of solutions.

Although there still aren’t as many options as there should be, and there’s a lot of greenwashing to work through to find the good ones, there are way more sustainability-oriented investing options than there used to be. With these tools, some of your own research, and speaking with a financial advisor where applicable, you can find the best, value-aligned options for you!

How to Get Your Company to Offer Sustainable 401k Plans

Now, many companies still don’t offer their employees sustainable options in their 401k plans. If you’re in this situation and are currently being forced to invest your retirement savings in things you don’t want to, I encourage you to check out Invest Your Values’ “Five steps to a sustainable retirement plan” or Zach Stein’s in-depth explainer for a step-by-step guide on what to do, who to talk to, and sample letters you can send to get the ball rolling.

Hopefully, you can get what you need from your existing 401k recordkeeper or investment advisor. However, if they are unwilling or unable to provide good enough options, you can find other organizations that can. One such company, mentioned above, is Carbon Collective. In addition to managing the climate solutions ETF, CCSO, also serve as an investment advisor for companies who want to offer their employees at least one 401k plan that aligns with their values.

Please note: After our interview with James, Crowdsourcing Sustainability partnered with Carbon Collective as we’re aligned on addressing climate change and helping more people to switch to sustainable investing options. Because of this partnership, if your company ends up making the switch to having Carbon Collective as its investment advisor (and tell them you found them through CS!), our nonprofit will get a referral bonus. We see that as a mission-aligned win-win-win, and, quite frankly, every little bit helps our scrappy nonprofit!

If you know of other investment advisors offering fantastic sustainable investing options, please let me know!

Getting your company to offer sustainable retirement plan options is especially impactful because you empower all of your co-workers to make the switch as well if they so choose!

Final Thoughts

As Andy Behar said on our recent panel:

But now we know. And we also have a roadmap for how to reclaim that power so that our money is aligned with our values and helps to build the world we want to live in.