More investors than ever are divesting assets from fossil fuel industries and looking to invest fossil fuel free. As interest in sustainable, fossil fuel free investing continues to grow, larger managers, funds, and other investment products are moving quickly to integrate or add offerings that cater to the growing demand. While there are authentic fossil fuel free options available, it is important for investors to remember that not all fossil fuel free investment products are created equal.
Our resource, “Extracting Fossil Fuels from your Portfolio,” developed in collaboration with Trillium Asset Management and 350.org offers insight and analysis about the financial viability of eliminating fossil fuel companies from investment portfolios and steps you can take to reinvest in clean, sustainable, and solutions-oriented options. A new version of the guide will be released in mid-April.
Checklist for Choosing a Fund
Research What Fossil Fuel Free Means
There are no regulated or standard definitions for “fossil fuel free” or “low carbon”. At Green Century, we define fossil fuel free as:
- No investments in any company with proven carbon reserves.
- No investments in any company that explores for, extracts, processes, refines, or transmits coal, oil, and gas.
- No investments in any utilities that burn fossil fuels to produce electricity.
Many fossil fuel divestment campaigns suggest excluding the top 200 fossil fuel companies ranked by carbon reserves. Many investors want to go further and eliminate coal, oil, and gas companies from their portfolios entirely.
As fossil fuel free investing gains favor among mainstream investment firms, it will become more and more important to determine what exactly managers, funds, and other investment products mean when claiming to be fossil fuel free.
For example, investigative reports show that new exchange-traded funds (ETFs) marketed as fossil fuel free may in fact hold companies that explore for, extract, process, or refine coal, oil, and gas as well as fossil fuel-burning electric utilities.
Meanwhile, products that are fossil fuel free may not also review prospective investments based on other factors important to values-based investors. Such products may include companies linked to factory farming techniques, use of genetically modified organisms, tobacco, or civilian and military weapons.
Determine which investments to exclude
The Carbon Underground 200™ is a reliable starting point that identifies the top 100 public coal companies globally and the top 100 public oil and gas companies globally, ranked by the potential carbon emissions content of their proven reserves.
Fossil Free Funds™ can help you identify whether/where your personal investments or an employer-provided 401(k) hold any of the largest publicly-traded coal, oil and gas companies by searching for the fund name, ticker symbol, or fund family. You can learn more about fossil fuel industry classifications on that site as well to help you set your exclusion/inclusion boundaries.
When you decide which holdings you want to divest, sell them. If you own shares in a mutual fund holding companies you do not want, sell your Fund shares by contacting your mutual fund directly or your financial advisor. **
Identify and invest in fossil fuel free investments
There are ways to ensure you are investing as you intend. Start by reviewing the prospectus, a legal document that provides details about the funds’ objectives, investment strategies, risks, performance, and other details. Without a clear statement addressing what fossil fuel free means in the prospectus, other use of the phrase may be a marketing tactic to attract carbon-conscious investors.
There are several fossil fuel free investment options out there, including Green Century’s Funds. If you want to invest in individual stocks with a positive investment story, see chapter three of our new, “Extracting Fossil Fuels from your Portfolio.” See information on fossil fuel free mutual funds and investment managers compiled by 350.org here or by Green America here.
Now, more than ever before, investors have the opportunity to make a statement an impact through their investment choices. It’s never too early, or too late to begin investing based on your values and principles. If you would like to start investing fossil fuel free with Green Century, please visit, www.greencentury.com.
President at Green Century Capital Management
As President of Green Century Capital Management, Leslie focuses on the firm’s current and emerging investment strategies, business development, and impact investing program. She is a frequent speaker on impact, gender-lens, and environmentally sustainable investing. Prior to joining Green Century, Leslie served as the Chief of Staff at Corporate Accountability International and Executive Director of Green Corps. Leslie earned her BA in economics from Boston College and currently serves on the Board of Directors for US SIF, the membership association for professionals, firms, institutions and organizations engaged in sustainable, responsible, and impact investing, as well as the Advisory Board of the Intentional Endowments Network.
** The sale of a stock, bond or mutual fund may produce a capital gain for tax purposes. Consult your tax advisor to determine what is appropriate for your individual tax situation.
The views expressed are those of the authors at the time this material was created. These views may not be relied upon as investment advice or as indication of trading intent on behalf of any Green Century Fund or the Distributor and should not be construed as an offer to sell or a solicitation of an offer to buy securities or any product mentioned in this guide.
Stocks will fluctuate in response to factors that may affect a single company, industry, sector, country, region, or market as a whole and may perform worse than the market. Foreign securities are subject to additional risks such as currency fluctuations, regional economic and political conditions, differences in accounting, and other unique risks compared to investing in securities of U.S. issuers. Bonds are subject to risks including interest rate, credit, and inflation. The Funds’ environmental criteria limit the investments available to the Funds compared to mutual funds that do not use environmental criteria.
You should carefully consider the Funds’ investment objectives, risks, charges, and expenses before investing. To obtain a Prospectus that contains this and other information about the Funds please visit www.greencentury.com, email [email protected], or call 1-800-934-7336. Please read the Prospectus carefully before investing.
This information has been prepared from sources believed reliable. The views expressed are as the date of publication and are those of the Advisor to the Funds.
The Green Century Funds are distributed by UMB Distribution Services, LLC. 3/17