Just a few years ago, if you wanted your investments to be even remotely environmentally friendly, you had to pick and choose from a limited set of funds offered by the investment firm holding on to your retirement savings.
But these companies are starting to realize that the environment is a priority for their clients, and that offering sustainable investing options needs to be an area of focus.
Investment firm BlackRock announced this week that it will consider climate change in its investing strategy, including “exiting investments that present a high sustainability-related risk,” according to a letter from CEO Larry Fink.
Starting this year, the firm will offer what it calls sustainable versions of its “flagship model portfolios,” which use environmental, social and governance (ESG) factors rather than focusing on growth alone. Thermal coal production is one industry BlackRock will retreat from, particularly companies that generate more than one-quarter of their revenue from it. In addition, investors will be able to see the sustainability risks of their BlackRock mutual funds by the end of the year. Plus, the firm will double its ESG ETF options.
The bottom line for the everyday investor: You’ll be able to choose a passive investment option like a target-date fund that doesn’t include fossil fuel companies at all.
One move the firm will not make is to divest from fossil-fuel producing companies completely; The New York Times notes that BlackRock is one of the largest investors in fossil fuel companies in the world.
The firm has received criticism in recent years from those who believed it should do more to promote sustainability through investing. BlackRock is the world’s largest asset manager, and its announcement could kick the doors open for firms that have not yet made considerable efforts to shift their strategies toward the environment rather than profits alone.
But until that fundamental shift sweeps across the bulk of investment firms, it’s up to you to seek and choose investing options that fit your desire to put your money behind companies that aren’t actively destroying the planet.
If your investment portfolio is managed by a firm that isn’t quite as transparent as BlackRock plans to become, you can visit Fossil Free Funds to search for sustainable funds you can choose right now.
Try searching Fossil Free Funds for Fidelity, Vanguard, or Schwab for a quick peek at some of your options. Each fund has a letter grade, a carbon footprint score, and a percentage of fossil fuels listed.
Don’t see enough options that excite you? It might be worth contacting your portfolio manager to (politely) demand change. As Fink said in his letter to corporate clients, “Climate change is almost invariably the top issue that clients around the world raise with BlackRock.”