The divestment movement is growing as individuals and organizations take a greater interest in the activities their money is supporting. More people are ending their investment in funds that include fossil fuels or corporations associated with the fossil fuel industry.
Investors divest for a number of reasons: to align actions with their values, to support a cleaner economy, or because they know fossil fuel investments carry real financial risks. Whatever your reason or interest in divesting, there are tools to help you review your current portfolio, and choose your next investments.
Below are two tools to analyze your portfolio and encourage thinking about the benefits of investing in a cleaner, greener, economy. Remember, these tools are for information only. Investment decisions should be made in consultation with a financial advisor.
Analyze Your Portfolio: Fossil Free Funds
This tool is built to help you analyze your current holdings for exposure to fossil fuel companies. Fossil Free Funds allows you to look up individual investments or employer-provided funds to see if they are being used to extract or consume fossil fuels. It is an easy way to get a deeper look into funds or plans at a glance instead of pouring over prospectuses and researching companies individually.
Fossil Free Funds uses five classifications to help you identify fossil fuel focused companies:
- Carbon Underground 200™ – the top 100 public coal companies and the top 100 public oil and gas companies, ranked by the potential carbon emissions of their reported reserves.
- Filthy 15 – some of the largest, dirties coal companies in the U.S. identified using As You Sow’s Coal Divestment Toolkit (2012).
- Coal – industry identification from Morningstar’s Global Equity Classification Structure that includes companies engaged in mining coal.
- Oil/Gas – industry identification from Morningstar’s Global Equity Classification Structure that includes companies engaged in oil and gas drilling, exploration, refining, transporting, selling, and equipment.
- Utilities – industry identification from Morningstar’s Global Equity Classification Structure including power production, transmission, distribution, and storage.
After finding your fund you can create your own definition of “fossil free” using the five classifications above. Fossil Free Funds gives you a readout explaining the number, percentage, and value of holdings in your fund in each of the categories.
After comparing funds, you are ready to consult with your financial advisor to make smarter, values-based decisions for your investments.
What if I Divested: Decarbonizer
At Community Energy Development Co-operative, we believe that you don’t have to sacrifice strong financial returns for environmental impact – you can invest in projects that benefit our planet, while earning rates equal to the levels desired by professional investors. Decarbonizer goes a step further and answers the question – “Does it pay more to decarbonize?”
With Decarbonizer you select a portfolio (either upload your own portfolio file, choose a pre-existing fund, or choose an index), then decide what types of fossil fuel exposure to eliminate (coal, oil, polluters, etc.), and how to re-invest your assets.
Decarbonizer breaks down the difference between the current value of the portfolio you chose, and what it would be had you changed your investment strategy 3 years ago. You can review the Carbon Intensity and Green Exposure of the portfolios, as well as the Value, Annualized Volatility, and Sharpe Ratio.
Although you may find it disheartening to know how much money you left on the table by not divesting earlier, Decarbonizer validates that environmentally-minded investing isn’t just good for the planet, it’s good for your pocketbook.
What are you waiting for?
Get out there, test your portfolio, and talk to your advisor about changing your investment strategy. By divesting from fossil fuels and investing in companies focused on a cleaner, greener future you can maximize your financial returns and your environmental impact. Let us know how it goes!
