The Challenge of Climate-Friendly Public Investing

You’ve already made strides in the fight against climate change by investing in local and national climate projects on Raise Green. What about the rest of your portfolio? Do you have a 401(K), IRA, or another retirement account? Do you trade on a brokerage account? These are all channels to exercise your climate concern, as you can invest in environmental and social change on public markets. As there needs to be $5T (yes, trillion) of investment annually into climate-related mitigation solutions in order to avoid the most severe impacts of climate change and its consequences, there is no time to waste in aligning your various accounts and portfolios with your values (Lihyi, 2021).

You may have heard of exchange-traded funds (ETFs), or bundles of stocks from specific interest groups or industries. Recently, Environmental, Social, Governance (ESG) ETFs have headlined as one of the predominant options for climate-friendly investing. However, these wider market funds often include companies that have abysmal environmental scores, or poor social scores, as there’s no federal standard or definition of ESG or impact. Even more so, while these funds often claim to screen out environmentally or socially harmful companies (such as Oil and Gas companies or Military/Defense Contractors), they often fail to do so. As of July 2020, Vanguard’s U.S. and International ESG ETFs both have holdings in fossil fuel companies and defense companies (Stein 2021). If you can’t trust these broad funds to follow the missions they’ve set forth, where can you go to ensure your investment portfolio is truly climate friendly?

We have a solution. Carbon Collective, one of our friends in the climate finance space, focuses solely on ensuring that investment portfolios are as green and impactful as possible, with offerings for both individual investors and for businesses’ 401(k) plans. They’ve analyzed the main 11 sectors of the stock market to identify which are the most carbon-intensive and divest from the four main sectors: energy, utilities, industrials and materials. That’s 85% of emissions, but only 19% of the SP 500. From here, they created an index of the companies actively working to fight climate change, not the ones glossing over its impact, catalyzing further degradation, or funding dirty energy. This index, which they call the Climate Index, contains (at the time we’re writing this!) 169 companies that are leading the fight against climate change. From manufacturing and materials to technology, this is an encompassing portfolio that includes bond exposure so you can align your goals and your portfolio. Plus, it has a history of competitive performance (Historical Performance). If you’re worried about the current economic conditions and bear market, this set of environmentally-beneficial companies seems like it could be a good fit for your portfolio.