Is Your 401(k) Climate Friendly?
Probably not. While your 401(k) retirement savings are essential for your financial security, they might also be inadvertently contributing to environmental harm. Many 401(k) plans invest in oil and gas companies, which not only affect the planet but can also impact your investment returns.
The Dilemma
An April 2024 report published by the University of Waterloo (Canada) in collaboration with As You Sow highlights a critical issue. Technology giants like Microsoft, Amazon, Google, Apple, and Meta—companies that often champion sustainability—have employees who hold significant portions of their 401(k) investments in oil and gas firms.
Underperformance of Energy Sector Investments
The report, titled “The Impact of Energy Sector Investments on the Financial Value of Tech 401(k) Funds,” reveals that retirement funds invested in oil and gas companies have underperformed broader stock market results over the past 10 years (as of December 2023). This discrepancy raises questions about the alignment between corporate sustainability goals and investment choices within employee retirement plans.
Limited Options for Fossil Fuel Exclusion
While these publicly traded tech companies emphasize their commitment to reducing climate risks and carbon emissions, their 401(k) plans often provide limited choices for employees who want to exclude fossil fuel stocks and bonds from their portfolios. This disconnect between corporate rhetoric and investment options can leave employees feeling conflicted.
Here are three ways to potentially address this challenge:
1. Invest Your Values
When your 401(k) plan offers limited investment options, but you want to reduce exposure to oil and gas companies, consider using the Invest Your Values tool.
Diversified Fund Selection: Use the tool to identify diversified fund options that align with your financial risk tolerance and return goals. Look for funds that have minimal exposure to oil and gas companies compared to other available choices.
2. Advocate for Change
Reach out to your human resources and sustainability team contacts within your organization. Let them know that you’d like to see more fossil-free fund options in your retirement accounts. By expressing your preferences, you contribute to the demand for sustainable investment choices.
3. Consider Specialized Providers
If you’re a small to medium-sized business owner or involved in selecting and managing your company’s retirement plan (such as a 401(k) or 403(b)), explore providers like Just Futures that offer an extensive selection of funds focused on sustainability. By partnering with such providers, you can offer your employees investment options that align with their values and contribute to a more environmentally conscious future.
Remember that every small step counts toward creating a more sustainable climate. By making informed choices and advocating for change, you can play a role in shaping a better world for both your retirement savings and the planet.
