Until recently, I thought divesting fossil fuel stocks and mutual funds was the enterprise of the "big boys" — well-endowed universities, philanthropic foundations, and faith-based organizations. After all, those muscle clubs have been seriously divesting for at least a decade. Me? I dropped out of Girl Scouts before I finished my insider trading badge. But my millennial son shamed me into action. So, I plunged into research and quickly found out it is easier than ever to assess the damage done and discover what funds to buy to remedy this oily situation.
In October 2019, FossilFreeFunds.org initiated an online sustainability report card that grades 1,500 of the most-held mutual funds according to their investments, not just on fossil fuel exposure but on several other social and environmental issues. So I began with my IRAs, sitting in a brokerage account, and drilled down into my vanilla plain 500 Index fund, formerly considered a "good buy" due to the tiny expense of owning an index fund, right? Well, it was graded D in fossil fuel exposure. And that wasn't all. It received an F in deforestation, an F in military weapons, and an F in tobacco. A managed fund I thought had been such a smart buy was even worse! It was graded with four Fs, all in the same categories. My sense of urgency rose with my blood pressure. Clearly it was time to do something fast.
Once I identified the funds I needed to divest, I studied the top graded funds on the Fossil Free Funds site. I looked into the companies in which they invested and considered how diverse was their staff who managed the funds. I compared the fund performance over the years and was pleasantly surprised. Then I found another site to confirm my decisions. Naturalinvestments.com has provided a socially responsible heart-rating system for a long time but is now partnering with Green America to assess environmental sustainability, too.
This is the process I took; yes, this is Introduction to Investing 101. Starting with one IRA from my brokerage account in a large investment firm, I sold the entire fund online, transferring the money to a settlement fund. Once that was completed in a day or so, I bought the new fund simply by typing in the ticker number. Even though it wasn't a fund through my investment firm, I maintained all record keeping within it so I didn't have to open a new account, nor did I incur any fees or tax withholding as transferring money within an IRA isn't a taxable event. You can see this takes a very short time. Divesting from fossil fuels in non-IRA funds is a taxable event, so I will spread that process over the next few years to ease the tax burden.
Your mission, should you decide to accept it, will be to join the tens of thousands of individuals and institutions divesting now. The latest estimate of divestment is over $14 trillion involving 58,000 individuals and 1,183 institutions. Has it made a difference? Well, Peabody, the largest coal company in the world, filed for bankruptcy in 2016 claiming the divestment movement made it difficult to raise capital. As the fortune and reputation of oil and gas takes a nosedive, just know that the companies most responsible for the destruction of our global climate will dive more steeply — if we all divest.
Donna Davies is a Mountain View resident.