Episode 11: U.S. Green Mutual Funds Stink


Climate Tips, Episodes / Tuesday, June 18th, 2019

This month I’m focusing on climate finance. In episode 9, I talked about how money contributes to climate change. Last week, in episode 10, I changed my German checking account to a green bank and discovered that this simple, one-time change will save me 1 ton of carbon dioxide this year. This week, I looked into green banks in the U.S. And lemme tell you, things don’t look good.

Tips for checking out the climate credibility of mutual funds (in the U.S.)

  1. Go to a place with centralized listing of green investment options, like Green America’s financial business listings. These have lists of possible places to park your money.
  2. Check out the prospectus and annual report of funds you’re interested in. These are generally available online, and should have ESG metrics* and a list of companies the fund has invested in. The mutual fund I’m invested in held shares of 34 companies last year, including Amazon, Home Depot, Marriott, and Microsoft. Reading all this disappointed me in a way I can’t describe. I got the strong sense that I’m more radical than so-called green mutual funds, and even than the divestment movement itself. Because it’s not good enough for me just to not do bad with my money. I want it doing good, and I know there are projects out there that could make a difference if they could only find enough backers. This is kind of the thinking behind the Green New Deal: pumping billions into a green energy revolution.
  3. If you’ve already invested somewhere, contact the investment firm where you have your money and tell them your values. There are some arguments for holding shares in “bad” companies if you take your role as shareholder seriously and vote to change those companies’ policies. This works better if you’re a hands on investor than have shares with a mutual fund.

* A growing trend in the financial world is something called “ESG investment.” This is a more positive way of framing divestment: ESG stands for investment with environment, social and governance criteria. These criteria are implemented differently based on the bank, with some funds more interested in environmental or social criteria, and others focused primarily on avoiding the worst investments, like new oil and gas fields or companies with a track record of exploiting their workforce. Groups like MSCI, which is focused on analyzing financial instruments and investments, have developed tools to measure a fund’s ESG performance. MSCI’s tool includes a nifty number for the fund’s carbon footprint, which basically measures how much carbon the investments in the fund generate per dollar. This is perfect if you’re going on a climate diet and need the lowest carbon investment option.

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