If you’re like me you found this site searching for information on how to make your investment dollars align with anything you actually care about. You discovered there isn’t much information out there on the whole topic of impact or Environmental, Social, Governance (ESG) investing. I will share my experiences at trying to have my investments reflect my personal values. I’m genuinely curious how successful I will be.
This isn’t my first rodeo in the blog world. For 10 years I ran the site Sustainable is Good where I covered developments and innovations in green product design and packaging. Fast forward a few years and I’m a government employee (no I don’t work for the “Stable Genius”) and I have a decent retirement plan.
I’m a fan of JL Collins NH and his whole investment philosophy and was following it. But I woke up one day and had a realization, “holy shit my investments are supporting corporations involved in making the climate worse, firearm manufacturers, military infrastructure, deforestation and more.” I felt like an idiot, I thought I was doing everything right, index investing with low fees at Vanguard, what could be wrong. Well plenty.
I embarked down the path to realign my investments to more closely match with my views. This site will explore this topic and related issues investing and personal finance.
I use two brokers to manage investments, Vanguard and Charles Schwab. Each has pros and cons which I’ll explore in a future post. I also have an account with TIAA CREF where I manage the my retirement account through work.
Until my recent epiphany, I had most of my money in my personal rollover IRA account in VTWAX, Vanguard’s low cost world index fund and one of Vanguard’s Target Retirement Funds through work. I thought it was ideal, wide diversified exposure to the US market but also investments in many countries. One day when I had nothing better to do, I ran the funds holdings through the Invest your Values tools on As you Sow and found the funds had holdings in more than 60 coal companies, over 300 oil/gas companies, multiple civilian firearm manufacturers etc. I was mortified.
Identify your investments and run through screening tool(s)
The first step in this journey is to identify the problem. Check your 401K, 403B, 457 or other plan(s) and see what holdings you have. Then run the ticker symbols through the screening tools based on the issue(s) you personally care about. Make a list of any funds you find objectionable. If you are dealing with a retirement plan through your employer, you likely have a limited set of options so the next step is to review the other offerings to see if there is something that better aligns with your values. The answer may be no.
Through my employer I was putting retirement savings in Vanguard’s 2045 Target date fund (VTIVX). An ideal investment I thought with a .07 expense ratio and a good balance of holdings that primarily holds the fund everyone in the FIRE community loves VTSAX. Fortunately my work also offers Vanguard’s FTSE Social Index fund, VTFAX which has a .14 expense ratio and much better alignment with my values.
I switched all of my holdings in my work account into this fund. I also set future investments to this fund. VFTAX mirrors the Russell 1000 but screens out companies that do not meet ESG criteria for the fund. Since I am in the “accumulate” stage of my retirement savings, I am personally okay with having 100% of my retirement funds in equities. As I get older I may tweak that balance.
I also have a rollover IRA from a previous job, which I have at Vanguard. The main difference between this account and my current retirement account through work is I have an endless array of investment options through my rollover account. In future posts I will look at the rollover account and where I’m envisioning going with it. For the time being I have a piece in VFTAX.