War on entropy

How I got here

Working as a high school math teacher, I started growing a retirement account through TIAA-CREF. In an effort to align my personal philosophy with my investments, I prioritized the “socially responsible” fund for the largest percentage of my account. Over time, I researched more about the companies this money was invested in and discovered my savings were being lent to fossil fuel companies.

 Through this personal exploration, I saw the ease with which companies extract savers’ money and use it to further causes that the individual investor might not condone. The structure and branding of investment tools in the market favor perpetuation of the status quo by indexing the current distribution of capital.

Therefore, a challenge I see to scaling and accelerating clean energy deployment is the emergence of more financial tools that monetize energy savings and deliver those as returns for investors. Such financial tools must be simple to understand and easy to invest in. 

Invest/Divest

Momentum has swelled for divestment from fossil fuels everywhere that money is invested from colleges and universities to pension funds and governments.

Part of my life’s philosophy is that collective action is important and must complement proactive policy. Divestment is important because it is an action that scales from the personal level to the largest actors.

The idea is simple:

1. Look at your current investments. Determine if any investments support the fossil fuel industry.

2. If the answer is yes from step 1, sell those holdings.

3. With the cash from the sales in step 2, invest in solutions.

This strategy is important because it devalues the things we don’t want and places value on the things we do. Of course, in life there is nuance and complication and that is why this section intends to help you navigate how to go about this in your own way.

Step 1: Surveying your current investments

In order to take action, you must first establish your baseline. A great tool that has only gotten better over time is the Fossil Free Funds website.

Your investments most likely include mutual funds, which contain investments in dozens to hundreds of individual companies. The tool on the fossil free website makes your baselining process easy, telling you exactly how much fossil fuel exposure you have.

They also allow you to sort explore your priorities. For example, each fund gets a rating of the carbon intensity of the fund as a whole measured in tons of CO2 per $1 million invested. They also flag the 200 largest polluters and allow you to screen and ensure none of your money is invested in those companies.

Step 2: Divest from Fossil Fuel Assets

Here is the fun part. Sell your mutual funds that have exposure to fossil fuel companies. This will enable you to have the cash to invest in the future.

You can determine for yourself what the best strategy is. In my case, I quickly sold my TIAA-CREF Social Choice Equity Fund. The fund was flagged on 4 out of 5 categories for its fossil fuel investments. Furthermore, almost 8% of all investments were related to fossil fuel companies.

As a first step, I prioritized divesting from all funds that contained fossil fuel assets. Researching and finding what to invest in was the next challenge.

Step 3: Invest in the future

When I moved to a new job, I transferred my retirement accounts to a rollover account with Charles Schwab. This opened up access to ETFs and Mutual Funds outside of the TIAA-CREF purview, and gave me much more flexibility on how to invest my money. This was naturally an important consideration for me in my decision.

I also made the choice that I wanted to prioritize ETFs because of lower fees and the comparative successes of passive investments benchmarking the whole market versus the more mixed success of mutual funds and active managers trying to beat the market.

Any fund that I was considering for investment needed to be absent of fossil fuel investments. I also tried to screen for ETFs that were investing in the clean energy companies of the future. Fossil Free Funds flags the 200 largest polluters, but also highlights the 200 companies with the majority of their revenue coming from clean energy technologies. This is an important strategy for me to not only take money away from the polluters, but also to actively put it in the hands of the future enablers. Once I found funds that satisfied both of the divest and invest criteria, I also made an effort to choose funds that had a low carbon intensity in their investments, essentially placing value on low-carbon technologies.

What did I Choose?

Ultimately I found several funds that I decided to invest in. Before I do so, please note that this is not an endorsement of any specific investment, nor financial advice on how you should invest your money. Instead, it is an exploration of my strategy and appeal for you to do your own research on what works for you.