[Nick Depsky, ERG graduate student]

Welcome back for the second in a three part series about divestment from fossil fuels. To learn about divestiture in personal banking, check out the first installment here.

Besides personal banking, one of the most common ways in which people are invested in fossil fuels is via funds in retirement savings accounts (e.g. IRAs, 401k, 403b). I currently have a 403b account with Vanguard to which I accrued a small sum in my three years working in the non-profit sector following undergrad. I was disappointed to learn that many of the funds tied to my account were heavily invested in fossil fuel companies.  Large mutual funds and index funds are invested in everything, from big tobacco to Monsanto to fossil fuels. Their objective is to encapsulate and track the entire economy, using benchmarks like the S&P 500. However, recent research shows that performance of such fossil fuel-invested portfolios do not outperform those that are fully divested (Trinks et al 2018).

So, how does one find out where their money is invested?

1. Find out which financial asset company manages your retirement account and the name of your plan
2. Determine which funds comprise your plan. Mine was a blend of four different Vanguard index funds
3. Review the fossil fuel holdings associated with each of these funds. You can look through huge, cluttered annual reports online or check out this beautiful tool built by the Oakland non-profit, As You Sow: Fossil Free Funds

Here’s a snapshot from FossilFreeFunds.org of one of the Vanguard funds from my retirement account:

We can see that 10.51% ($33bn) of the portfolio is in shares of companies in the global top 200 carbon-emitters, coal-fired utilities, the coal industry, fossil-fired utilities, or the oil/gas industry. You can filter by these categories individually to see the more detailed breakdown.

Alternative Mutual and Index Funds for Retirement

While many funds are tied up in fossil fuel holdings, there is an increasing number of companies that are offering sustainable funds as an option to investors and some that offer exclusively fossil-fuel free funds. One such example is Green Century Funds.

Green Century Funds has three funds it operates, totaling roughly $500m in holdings. Compare this to over $300bn in the single Vanguard fund above.  Another popular socially responsible fund is the Portfolio 21 Global Equity Fund (also ~$500m in holdings), which you can invest in via Trillium Mutual Funds.


A potential concern with these smaller index funds is greater volatility and slower growth compared to traditional index funds. However, both the Portfolio 21 Fund and Green Century Equity Fund have generally tracked their economy-wide benchmarks well.  Another consideration is that many of these funds do tend to have higher operating fees, known as ‘expense ratios.’ In the case of Green Century, this is due to their concerted efforts to be active shareholder advocates. Their non-profit structure also means that any accrued profit is distributed to the consortium of non-profit groups by which they were funded back in 1991.  Most of these groups are Public Interest Research Groups, including our state chapter, CALPIRG.

Here are five-year snapshots of growth for both the Vanguard Total International Stock Index Fund shown above and the Green Century Equity Fund:

Vanguard Total International Stock Index Fund

Green Century Equity Fund

How to Switch to these Alternatives

Transferring funds from an existing 401k or 403b account into a traditional or Roth Individual Retirement Account (IRA) is called a “rollover.” For tax and income reasons, the Roth IRA may be a better retirement investment option for younger, early-career individuals.

Here’s how you would initiate a rollover:

1. Identify your IRA of choice
2. Contact* the financial institution that currently manages your retirement account about their rollover policies and get the appropriate forms. Here's an example from Green Century.
3. Go down the rabbit hole of the transfer process…

*code for calling and being put on hold for 5-300 minutes

In all seriousness, the transfer process can be completed in an afternoon. I hope this post shows that there are good long-term investment options available that don’t sacrifice your financial future nor the health of the planet by supporting fossil fuels. For a big breakdown of socially responsible funds across metrics than beyond fossil fuels, check out the Wikipedia page on Socially Responsible Investing. Remember to supplement these tips with your own research or conversations with a financial advisor.

Stay tuned for the third and final installment in this series where Nick will discuss stocks, institutional divestment and community activism.

[Nick Depsky, ERG graduate student]

Do you feel powerless in the face of climate change? Do you have money in a major bank? Do you own any stocks? What about that retirement account you forgot about from a previous employer? Are you confused by the massive, opaque financial world but acknowledge the need to save for boba tea and multiple pairs of socks? Maybe you want to know how your money can be used to take a tiny bit of power away from the fossil fuel industry and reinvested in better alternatives.

If you answered “YES” to any of the above questions, I encourage you to read this post. You may become inspired, as I have, to personally divest from fossil fuels and reinvest in better alternatives.

Why Divest?

It’s true that the most impactful acts of divestment would be from large institutions and corporations, rather than from starving grad students paying a million dollars a month for a leaky little apartment room in the Bay Area. But this doesn’t mean that you can’t still wield what money you have to cast a real financial vote of indignation against the fossil fuel industry, symbolic though it may feel.

Maybe you’ve had the same thought that I’ve had in the past: “I don’t have enough money to make any kind of a difference to Chase Bank or Wells Fargo.” But I think it helps to think of your money as a form of voting. Those of us who are compelled to vote for people and policies we support should be equally compelled to align our financial assets with those ideals, regardless of how insignificant a single vote may feel in a culture that under-values voting.

Collective divestment really can make a difference. The campaign to divest from South Africa in the 80s contributed to dismantling formal apartheid, and we are starting to see a similar swell organize around fossil fuels. Besides taking money out of the hands of industry players whose actions we oppose, divestment also erodes the political and social capital upon which these industries rely to lobby and continue operating.

Major Banks

Beyond being complicit in long-standing predatory lending and discriminatory lending practices, major banks and financial institutions have also invested billions in fossil fuel industries, financing tar sands, pipelines, and arctic and deep-water drilling.  JP Morgan Chase (Chase Bank) sinks roughly seven billion dollars a year into such endeavors, with Bank of America and Citibank each investing between four and five billion annually.  Wells Fargo’s annual investments come in around one to two billion dollars.  The full rankings of banks’ contributions to fossil fuels by industry type can be seen via this tool maintained by the Rainforest Action Network.

Total financing of fossil fuels by year (source: Rainforest Action Network)

Previously, I had my entire savings in Wells Fargo, and while they contribute comparatively smaller amounts to fossil fuels than some other banks, they have also shown a tendency to disregard the law in terms of both predatory lending and opening of fraudulent accounts in the years following the 2008 crash, a practice for which they were eventually fined $185 million last year (a whopping 0.2% of their 2016 revenue).

Alternatives to Major Banks

Credit Unions:

Switching over to a credit union is a good bet, since they are not-for-profit institutions by their nature.  However, some credit unions are intertwined with large banks and the fossil fuel industry in obvious ways, and in some ways that I still don’t totally understand. Credit unions are not all equal. Make sure their practices align with your values. Generally speaking, going with a local credit union that is community-focused is a solid choice, though it might still be worth chatting with a representative about what varieties of loans they issue.  Here are some local credit unions I’ve been recommended:

• Patelco Credit Union (Bay Area local) 

• Provident Credit Union (Bay Area local) 

• Pacific Service Credit Union (Bay Area local) 

• Golden 1 Credit Union (CA) 

• Self-Help Federal Credit Union (CA, Chicago/Milwaukee, FL) 

This list is non-exhaustive and there are many more.  All of the institutions above are equal housing opportunity lenders. 

Values-Oriented Banks:
I switched over to a mission-oriented bank rather than a credit union. I like the fact that they are an example of a successful triple bottom line banking institution (B-corps certified) that actively funds a wide array of socially-conscious sectors.  I found two candidates in the Bay Area and chatted with representatives from each to find out more information.  Here’s what I learned:

	Beneficial State Bank	New Resource Bank
0% fossil fuel investment	✓	✓
Branches	California, Pacific Northwest Closest: Downtown Oakland	San Francisco only
Non-profit foundation	All profits dispersed in forms of grants or loans to communities	All profits dispersed in forms of grants or loans to communities
Housing lending	Directly lends to affordable multi-family housing	No direct housing lending, but invests in construction of affordable units
ATM Networks	MoneyPass (US Bank, Mechanics Bank, Atlantic Credit Union) & All Point Network (inside big retailers like Walgreens, CVS)	STAR & MoneyPass
Credit cards	In-house Visa credit cards starting 2018 Currently partners with various non-profits (i.e. Sierra Club) to offer cards to clients	Does not offer credit cards, but partners with a credit-union credit card agency
Targeted lending sectors	Affordable Housing Multi-Family Sustainable Food and Agriculture Green Energy Rural Communities Minority-Owned Businesses	Sustainable Business Green Real Estate Nonprofits Organic & Natural Products Clean Energy

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Interest Rates

I looked into interest rates on savings and checking accounts for Beneficial State Bank and New Resource Bank, and compared them to Wells Fargo.  Beneficial seems to have the best interest rates for small accounts out of all three; Wells Fargo comes in last.  Beneficial also had the lowest minimum ($1,000) requirement to open a certificate deposit (CD) account, compared to $2,500 for Wells Fargo and $25,000 for New Resource.

Here is a snapshot from an investment infographic from New Resource Bank:

New Resource’s index of “Real Economy Assets”  illustrates their departure from the policies of big banks that typically have their money tied up in the financial economy instead of community investments. Beneficial State Bank has a similar “Real Economy Assets” figure of roughly 80%.

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In the end, I decided to go with Beneficial because of geographic advantages.  Their nearest office is in Oakland rather than San Francisco. And they have locations in Los Angeles, so I can tell my friends down there to switch over.  Both New Resource and Beneficial seem like great options, and I would encourage you to get in touch with them yourself if you’re thinking of switching.


Stay tuned for the next installment of this three-part series, where Nick looks at retirement accounts mutual funds.