Create Fossil Free Versions of Your Index Funds

Vanguard

The UN climate report says we have 12 years to dramatically change the way we live if we want to avoid climate catastrophe [1]. This has both moral and financial implications for fossil-fuel investments.  

Morally, it is wrong to support the fossil-fuel industry, which knew decades ago that its actions would cause climate change and engaged in a massive disinformation campaign instead of taking responsible action.  

Financially, it is inevitable as the world transitions from fossil fuels to renewable energy that the value of fossil-fuel companies will decline. Indeed, it is arguable that this has already begun--the energy sector is lagging the rest of the market. Coal investments have tanked completely; can oil and gas be far behind?

Many investors want to "green" their portfolios, but also believe in Vanguard's low fee, index-driven investment strategy. Vanguard should give these investors the option to choose fossil-fuel-free alternatives to its index funds [2]. It should start by offering versions of its 10 largest index funds minus the companies in the Carbon Underground 200 list of fossil-fuel companies with the largest reserves [3]. This will both add to the pressure on the fossil-fuel industry that already has been created by the divestment movement [4] and give climate-conscious shareholders the ability to take climate action and protect their portfolios.

 

[1] https://www.theguardian.com/environment/2018/oct/08/global-warming-must-not-exceed-15c-warns-landmark-un-report

[2] Note that Vanguard to its credit has recently offered two ETFs that are fossil-fuel-free and meet other ESG standards.  It is a good first step, but it is not enough.

[3] https://fossilfreefunds.org/carbon-underground-200

[4] https://cleantechnica.com/2018/12/27/cleantechnica-divestment-year-in-review-2018/