Tag Archives: ESG

JL Collins, VTSAX, FIRE & Impact Investing can they all get along?

A blog I highly recommend is JL Collins. A book I highly recommend is Jim’s book A Simple Path to Wealth. Both are tremendous resources for building wealth and savings. I follow Jim’s methodology which is to save as much as possible and invest it into low cost index funds. The key is not to waiver, stay focused and keep investing even when the market tanks. The beauty of Jim’s message is its simplicity and as such its become a favorite among the Financial Independence Retire Early (FIRE) community.

The backbone of Jim’s philosophy is index investing through Vanguard and the fund he focuses most attention on is VTSAX, their total stock market index fund with a super low .04 expense ratio (ER).

The challenge for me is VTSAX and other funds like it are index funds of the top companies in the United States. For example, VTSAX holds over 3,500 companies, as an impact investor some of those I don’t want to invest in. Among those companies are more than 150 in the oil/gas industry, 13 in the coal industry, 5 manufacturers of civilian firearms, 16 manufacturers of nuclear armaments and 31 major military contractors according to screening tools outlined in my first post.

Simply put I don’t want my investments supporting any of those areas. In reality, completely divesting from all areas you personally deem problematic and still having a relatively simple investment strategy is a challenge and may not be possible. The good news is with minimal effort you can significantly reduce or eliminate exposure to some problematic areas and keep costs lows, sticking to the approach outlined on JL Collins.

VFTAX the Impact Investing ESG Alternative to VTSAX

My core holding is Vanguard’s FTSE Social Index Fund (VFTAX). VFTAX, like VSTAX is an index fund that holds US-based companies and has a low ER of .14. VFTAX has almost 500 companies in its fund and tracks an index modified for certain environmental, social and governance criteria. Looking at its stocks, VFTAX has 25 holdings in the oil/gas industry, none in coal, zero gun manufacturers and 1 major military contractor. Is it perfect? No. But it is a hell of a lot better than VTSAX in areas I care about and it allows me to do all the things that are key to following JL Collins like: high savings, automatic investing and low costs.

Supplements

VTFAX is my core holding. Of all the impact investing ESG mutual fund options out there, this fund has the lowest costs and best balance. I intend to supplement VFTAX with either another fund to pick up some international exposure and/or some ETFs in areas I am personally interested to invest in. Those endeavors will be the focus of future posts.

Vanguard vs. Schwab

As I said in my intro post, I have accounts at both Vanguard and Charles Schwab each has benefits and weaknesses here is my two cents.

Vanguard

Without question Vanguard is the leader in low cost mutual funds both index and actively managed. Vanguard also allows commission free trading of a wide range of ETFs both their own and also from many other firms (1,800 ETFs and counting).

Vanguard’s automatic investing settings are the best I’ve used. They allow for automatic deposits and investments any day of the week, whereas Schwab allows for automatic deposits any day of the week into your account, but only allows for automatic buys on the 5th or 20th of the month – a major limitation in my mind if your setting up automatic withdrawals that coincide with your pay check for instance.

Access to independent research is non existent at Vanguard which is a limitation for sure. Vanguard does not offer the option to have checks or a credit/debit card linked to your account. Customer service at Vanguard is also not their strength, unless you are a high dollar customer your pretty much on your own.

ESG Impact Investing Options

Vanguard currently has 2 ESG mutual funds and 2 ETFs in their own line up. I own one of them, VFTAX, their other mutual fund is a new ESG world fund, managed by Wellington. There is also access to a number of impact investing suitable ESG ETFs through their commission free list which currently has over 1,800 ETFs.

Charles Schwab

Endless options await you in your Schwab account, its a bit overwhelming actually. Customer Service at Schwab is amazing. I use their chat customer service all the time it is incredibly helpful. You have access to a wide portfolio of mutual funds and ETFs many of which trade for no commission if they are part of the Schwab One Source or other lists. If a fund you are interested in is not on the list, the trading commission is steep.

Schwab has an excellent Visa debit card you can link to your individual investor high yield checking account. The card is amazing it refunds ATM transaction charges anywhere in the world and also has no foreign transaction fee. The card is considered one of the best cards for travel, many open Schwab accounts just to get the card. I’ve recommended the card to numerous people.

Moving money around accounts is super easy. Schwab also has a relationship with American Express and offers two Schwab American Express cards that both have great benefits and signon bonuses that deposit into your account. I use the Schwab Investor Amex card which has a $200 signon bonus and 1.5X cash back into your Schwab account on all purchases.

ESG Impact Investing Options

Schwab produces a lengthy list quarterly of socially conscious ESG mutual funds and ETFs that trade with no commission.

If you find this information useful and signup for a Schwab account please consider using my referral link.

Impact Investing, how did we end up here?

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.