Latest news with #sustainableinvesting
Forbes
14 hours ago
- Business
- Forbes
Should You Add Fossil Fuels To Your Retirement Investment Portfolio?
Potential alternatives to having fossil fuel producers in your retirement investment portfolio Many investors believe that fossil fuels are essential for strong retirement investment returns. But is that actually true? In this article, we test that assumption—comparing the performance of portfolios with and without fossil fuel exposure. While we focus mainly on investment performance (also known as risk-adjusted return), we also explore considerations for those who care about aligning their portfolio with environmental values. We'll break down investment performance, explore fossil fuel-free indexes, and offer practical steps for values-minded investors. Whether you're saving through a Roth IRA, Roth 401(k), or taxable account, it's worth understanding your options. Retirement Investment: Discerning Fossil Fuels Role In Investing When people talk about investment selection, they often mention two styles of investing: passive and active. Passive investors believe markets are efficient enough that trying to 'beat the market' is a losing game. Instead, they invest in index funds that aim to match the performance of a broad market benchmark, such as the Standard and Poors (S&P) 500 or the MSCI All Country World Index (ACWI), while keeping fees low. But passive investing still involves making asset allocation choices—specifically, choosing which mutual index to track and finding a mutual fund or exchange traded fund that tracks that index. For example, the S&P 500 selects the largest 500 US companies. The MSCI All Country World Index (MSCI ACWI) captures Large and Mid-cap representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries. With 2,559 constituents, the index covers approximately 85% of the global investable equity opportunity set. If you're like many retirement savers, you may already be invested passively through a Vanguard Target Retirement Fund in your 401(k). While these are passive by design, the mix of index funds they include is determined by a portfolio manager. Once the allocation is set, the fund simply tracks its chosen indexes—regardless of what industries (fossil fuels or otherwise) those indexes contain. The following index funds represent the Vanguard Target Retirement 2050 Series portfolio: By contrast, active investing means trying to beat the market by choosing specific stocks, sectors, or timing. This might include increasing investments in fossil fuel stocks or technology stocks that vary from the index benchmark. Active investing involves choosing individual stocks or sectors—like fossil fuels—with the hope of outperforming a market index. But what if there was a way to invest in the same index, minus the fossil fuels? Retirement Investment and a Fossil Fuel-Free Index The MSCI ACWI is a common benchmark used in diversified global portfolios. MSCI also offers a fossil fuel-free version, called the MSCI ACWI ex Fossil Fuels Index. This index removes companies that own fossil fuel reserves or are involved in oil, coal, or gas production. According to MSCI's fact sheet, the fossil fuel-free version has consistently delivered similar or better performance over many periods. In fact, it has often done so with slightly less risk. As always, past performance isn't a guarantee of future results. But today's data offers something important: you don't have to sacrifice returns to align your investments with your values. Unfortunately, you cannot directly invest in an index. You will have to find investments that track the index or seeks to benchmark against it to invest in. A couple options will be included later. MSCI ACWI vs MSCI ACWI ex Fossil Fuels Comparison Let's put some dollars against the numbers in the fact sheet. Here are some detailed comparisons for two investors—one in the MSCI ACWI and the other in the MSCI ACWI ex Fossil Fuels index—across two investment strategies. Here are the visual comparisons: Lump Sum Investment ($100,000 at Start) Year MSCI ACWI MSCI ACWI ex Fossil Fuels 0 $100,000 $100,000 1 $113,650 $114,720 3 $141,625 $143,449 5 $187,280 $185,880 10 $242,222 $248,049Systematic Investment ($10,000 annually for 10 years) Year MSCI ACWI MSCI ACWI ex Fossil Fuels 0 $0 $0 1 $10,000 $10,000 3 $33,841 $33,997 5 $65,280 $65,060 10 $153,754 $155,677 As you can see from the data, either from a lump sum or systematic investing perspective, the fossil fuel free index wins over a historical 10 year period. Ways to Incorporate Fossil Fuel-Free in Your Retirement Investments If you want to invest in a fossil fuel-free global portfolio, you don't need to be a stock picker or hire a hedge fund manager. You can invest through low-cost ETFs that track these indexes. Sphere The Sphere 500 Fossil-Free Index tracks the Top 500 US companies by market capitalization minus 93 fossil fuel and related companies: The independent non-profit As You Sow creates the list of fossil fuel and other companies that are excluded. Green Century Green Century is a mutual fund manager that provides several fossil fuel free mutual funds. Two are index fund based and the other actively managed. The Green Century Equity Fund seeks to achieve its objective by investing in the stocks of the companies that make up the MSCI KLD 400 Social ex Fossil Fuels Index, a custom index calculated by MSCI, Inc. The International Index Fund tracks the MSCI World ex USA SRI ex Fossil Fuels Index. This Index is composed of the common stocks of the approximately 240 companies in the MSCI World ex USA SRI Index that is then customized for Green Century to eliminate the stocks of companies that explore for, process, refine or distribute coal, oil, or gas, or produce or transmit electricity derived from fossil fuels, or have carbon reserves. The Balanced Fund is an actively managed fund comprised of equities and fixed-income securities. It typically holds 60% to 70% of its net assets in multi-cap stocks and 30% to 40% in investment-grade quality bonds. The Balanced Fund was an early investor in green bonds and now has more than 74% of its fixed-income portfolio in green and sustainable bonds.[1] As You Sow's Fossil Fuel Free Funds Research As You Sow provides a publicly available Fossil Fuel Funds Free research tool. You will find that it's methodology and evaluation may vary from the other providers discussed earlier. There research highlights that some mutual fund companies may score high that don't scream like they are fossil fuel free. For example, the Amana Growth Fund doesn't have Green in its name but gets an A grade. All of the funds listed in this article do not constitute an investment recommendation. I am providing these as examples to encourage you to do your own research or find an investment advisor that is knowledgeable in this area. There are even professional tools that go beyond what I've shown. Final Thoughts on Fossil Fuel Free Retirement Investments For years, the narrative was that investing according to your values—such as avoiding fossil fuels—meant settling for lower returns. But that argument is no longer supported by the data presented today. So, if you're wondering whether fossil fuels deserve a place in your portfolio, should focus on your goals, your values, and what you believe about the future of energy and the economy. This article shows that fossil fuel-free retirement investments don't automatically mean sacrificing return. Related Reading: Evaluating Risk-Adjusted Returns: The Key To Smarter Investing Social Values-Adjusted Investment Returns: Balancing Profit & Purpose
Forbes
a day ago
- Business
- Forbes
How Individual Investors Are Shaping Corporate America
Balanced Investment Co. founder Suresh Basnet specializes in values-centered investing and is a certified meditation coach. We often hear that "voting with your wallet" is one of the most powerful ways to effect change. As a financial advisor who has spent decades helping families and institutions match their investments with their values, I've watched local investors grapple with a fundamental question: Can individual investment choices really make a difference? The answer is yes—but perhaps not in the way you'd expect. Despite recent political debates over environmental, social and governance (ESG) investing, America's retirement accounts wield more influence over corporate America than most people realize. Recent shareholder votes at major corporations prove this point dramatically. The Growing Influence Of ESG Investing Despite political debates over ESG investing, the numbers tell an undeniable story. Global sustainable fund assets reached a record $3.2 trillion at the end of 2024, more than quadruple the size in 2018, according to Morningstar. More importantly, companies with strong ESG performance have demonstrated remarkable resilience during market volatility. According to McKinsey research, 'companies that achieve better growth and profitability than their peers while improving sustainability and ESG outgrow their peers and exceed them in shareholder returns.' Research has found that companies with better ESG ratings enjoy both a lower cost of equity and a lower cost of debt. This translates to more efficient operations and influences how investors view companies. Corporate Response To Investor Pressure Recent events demonstrate that corporations are highly attuned to shareholder priorities, even amid polarized political narratives. While some companies publicly distance themselves from ESG terminology, their actions tell a different story when faced with shareholder interests. Major companies are strategically reframing rather than abandoning sustainability initiatives. A comprehensive May survey by The Conference Board found that 52% of executives are reworking their sustainability messaging, including moving away from the term "ESG," while 80% of companies are adjusting their ESG strategies in response to political pressures—but in most cases are continuing the underlying work. This aligns with the pushback from shareholders against attempts to abandon social responsibility frameworks. Over 97% of Apple shareholders voted against a proposal asking the company to "cease DEI efforts" at its February meeting. More than 98% of Costco shares voted against a similar proposal in January. Meanwhile, financial powerhouses continue defending these practices as essential to business success. JPMorgan Chase CEO Jamie Dimon said the bank will continue its outreach to Black, Hispanic, LGBT, veteran and disabled communities, as reported by Reuters. As an early advocate of ESG investing, I've watched this movement evolve from niche to mainstream from the West Coast to America's Heartland. The message is increasingly clear: Companies face greater risk from ignoring ESG factors than from embracing them. The Balanced Approach To Value-Aligned Investing I've spent my career dispelling the myth that investing according to personal values requires sacrificing returns. My approach helps clients evaluate decisions across multiple dimensions: spiritual, health, family, finances and career. This holistic view reveals that successful investing isn't solely about financial returns. It's also about ensuring your money works in alignment with your deeper values and priorities. One critical insight from guiding hundreds of clients through retirement planning: Investments that contradict personal values create cognitive dissonance that diminishes life satisfaction, regardless of returns. For the average professional with a 401(k) or investment portfolio, implementing this approach isn't complicated: • Review your current investments for alignment with your values. • Engage with your workplace retirement plan administrator about ESG options. • Consider direct stock ownership for greater shareholder voting power. • Participate in shareholder meetings and proxy votes. • Consolidate smaller accounts for greater investment flexibility. The Future Of Financial Influence As more investors recognize their power, corporate behavior is increasingly reflecting shareholder values rather than just quarterly profit motives. The rise of shareholder activism has created unprecedented democratization of corporate governance. The implications extend beyond individual companies to entire industries and public policy. When corporations see their market valuation and cost of capital directly tied to environmental and social performance, they become powerful advocates for policy solutions that enable sustainable business practices. The finance industry, once focused exclusively on short-term returns, increasingly recognizes that long-term prosperity requires addressing climate risks, social inequities and governance failures. Your retirement account or investment portfolio may seem like just another financial instrument, but in reality, it's one of your most powerful tools for creating the world you wish to see. As I often tell my meditation and financial coaching clients, true wealth comes when your money, relationships and values exist in harmony. The next time you check your 401(k) statement or investment account, remember: You're not just saving for retirement—you're shaping our collective future. The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation. Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
Bloomberg
2 days ago
- Business
- Bloomberg
J.P. Morgan's Chuka Umunna Sustainable Investing Outlook
Chuka Umunna, Global Head, Sustainable Solutions & EMEA Head, Green Economy Investment Banking, J.P. Morgan discusses the outlook for sustainable investing with Bloomberg's Francine Lacqua at the Bloomberg Sustainable Business Summit 2025 in London. (Source: Bloomberg)
Reuters
3 days ago
- Business
- Reuters
Sierra Club Foundation moves money away from BlackRock
June 25 (Reuters) - Prominent U.S environmental organization Sierra Club Foundation said it will move $10.5 million away from BlackRock (BLK.N), opens new tab because the top asset manager has not pressed portfolio companies enough on climate concerns. The money in question is tiny fraction of BlackRock's $11.6 trillion in assets under management at the end of March, more than $1 trillion of which is held in sustainable funds and energy transition assets that the company continues to build up. But the move underscores how BlackRock faces a balancing act on environmental and social issues with global customers who hold a wide range of views. Sierra Club Foundation Executive Director Dan Chu said its change came after BlackRock cut its support for shareholder resolutions to a new low on issues such as emissions reductions, and left the Net Zero Asset Managers initiative in January. "They never crossed the bridge where they would say they had an investment responsibility to fundamentally address the climate crisis," Chu said. BlackRock has said many environmental shareholder resolutions are overly prescriptive and that its participation in industry climate efforts had "caused confusion" and legal issues. 'We support clients that have made net zero commitments for their organizations through our industry leading sustainable and transition investment platform, research, and analytics," a BlackRock spokesperson said via e-mail when asked about Sierra Club Foundation's decision. Earlier this month Texas' comptroller removed BlackRock from a list of companies seen as boycotting the energy industry, a move that will make it easier for public agencies in the state to do business with the company. BlackRock still faces opposing pressures including in Republican-controlled states where it remains restricted, and an upcoming review from New York City pension funds, opens new tab that want more robust emissions-reductions plans. The Sierra Club Foundation oversees charitable activities of the Sierra Club and has some $200 million in all. It had warned BlackRock of its concerns in 2022. The foundation said it will move its funds to Nia Impact Capital and to Xponance, which are both focused on sustainable investing.
CTV News
4 days ago
- Business
- CTV News
Want your money to have a positive impact? What to know about ESG investing
John Bai, chief investment officer at NEI Investments, says investing in environmental, social and governance funds is very similar to regular investing, but there's an extra step. THE CANADIAN PRESS/Handout Investing in funds that align with your values such as supporting companies fighting climate change is much more accessible today, but experts say it takes research and diligence to determine if your money is actually working for a good cause. 'There's a whole cohort of young investors who have come to the realization that you can invest in a way that's consistent with the values that you have,' said John Bai, chief investment officer at NEI Investments. The environmental, social and governance-focused investment landscape has changed and matured over the years with way more options now on the table, Bai said. Steering away from investing in tobacco, ammunition or fossil fuel companies to those championing ESG issues can be appealing to investors but many don't know where to start — or what to look for when picking funds that support a good cause. Also, not all ESG funds are made the same. Bai said investing with an ESG focus is not much different from regular investing. Similar to any investment decision-making process, an investor would go through a laundry list of their goals, financial plan, risk tolerance, asset allocation, and exposure to stocks and bonds. But there's an extra step when investing responsibly. 'What you need to do as an investor is to write down the values that are most important to you,' Bai said. 'Then, what you need to do is read the disclosures of each fund.' A low-cost, diversified portfolio can be an entry into sustainable investments, said Tim Nash, an investment coach at Good Investing, which helps people understand sustainable investing. 'These are going to be what I call 'doing-less-evil' ETFs,' he said. 'Our goal here is to earn market rates of return while getting rid of things that don't align with our values.' Nash said it's important to see what's inside the fund and the companies it holds. He warned some ESG-branded funds could still hold equities that aren't completely aligned with an individual's values. For example, an ESG fund might exclude a tobacco company but keep Alimentation Couche-Tard Inc. despite the retailer selling tobacco at its convenience stores, Nash said. For a long time, many companies promoted themselves as being climate-friendly but that has changed. Companies have started to be more careful about their environmental and governance claims after the federal government tightened laws around sustainability disclosures last year. 'The key principle of regulations has been: Tell us what you do and do what you tell us,' Bai said. He added every sustainable fund is required to tell the investor what ESG means to them and their philosophy, and explain it in their disclosures. 'The easiest way to ensure that what you're investing in aligns with your values is to read those disclosures,' Bai said. And ask more questions. For example, question how a business that requires access to water or abundant energy approaches the issue, Bai said. He said investors need to think and ask questions like these: Does the business want the cheapest energy possible? Do they take access to the water for granted? Are they working with the local communities to make sure there's fairness in terms of human capital? Are they paying fair wages? How are you thinking about child labour and supply chain? The answers will give you a wider lens into how the fund managers think about risks and opportunities, Bai said. Experts say there's a myth about ESG investments that people often have to forgo gains. 'That's not true at all,' Nash said. 'The goal is really to track the standard benchmarks … to earn the same rate of return while doing it aligned with your values.' He said investing in ESG funds is a spectrum. A small step toward ESG-focused funds would not make an investor lose out on returns but the farther you go along the spectrum and cut more companies out of the fund, the returns could deviate — with returns a little bit higher some years while lower in others, Nash said. But the long-term goal is to earn the same rate of return and that's still achievable, he said. For instance, divestment from fossil fuels isn't really going to sacrifice huge gains as the industry makes up 3.8 per cent of the global market. If the energy sector outperforms though, investors are going to miss out on the high — ever so slightly, Nash said. Political risks can also overshadow ESG funds. An example is when the Alberta government temporarily paused approvals for renewable energy projects two years ago, or the ongoing uncertainty with U.S. President Donald Trump's penchant to favour fossil fuels over renewable energy. Nash said if investors are worried about political risk, they can opt for broader funds that focus on cleantech — a combination of energy, water, recycling and health tech, for example. An investor can consider three main approaches to ESG investing, Bai said. The first level is exclusion, he said. 'That means that these funds will just exclude bad actors in the way that they define bad actors — no cluster munition weapon providers, no tobacco, no nuclear are very common exclusions,' Bai said. Then comes the integrated approach, which looks into how the company approaches ESG issues and if they're aligned with an investor's philosophy of a company creating long-term value. A non-traditional and niche approach would include impact investments that focus on direct impacts. Those investments go into non-profits and co-ops, for instance, Nash said. 'But this is where we might be sacrificing returns, we might earn a little bit less or be taking a little more risk than we would have otherwise,' he said. --- Ritika Dubey, The Canadian Press This report by The Canadian Press was first published June 24, 2025.
