Earth to Asset Managers – Your Retirement Plans are Ruining Our Future

We need a staggering amount of money to finance solutions to climate change. The World Economic Forum has said that we’ll need to collectively invest at least $5.7 trillion per year for things like renewable energy, efficient buildings, transit, sustainable agriculture, and water-saving technologies. Where are we at now? $360 billion per year, or 6% of where we need to be.

Retirement funds are one tool we could use to tackle the problem. In the US alone, about $30 trillion is sitting in retirement accounts. Millennials like myself are showing greater interest in Environmental, Social, and Governance (ESG) and Socially Responsible Investing (SRI) than other age groups, but the crippling status quo is preventing us from putting our portfolios to work.

In fact, workplaces are forcing young employees in particular to bank on their own destruction. My 57th birthday in 2040 will happen in “a world of worsening food shortages, wildfires, mass die-off of coral reefs… inundating coastlines and intensifying droughts and poverty,” according to the IPCC. By 2040, climate-related disasters will cost society $54 trillion. Faced with this future, what are the largest mutual fund managers doing? They’re throwing hundreds of billions at fossil fuel companies.

We have to demand more of the people we’ve entrusted to steward our investments. After all, what does financial security mean if we’re retiring into a world that’s falling apart?

If you have a standard brokerage account or IRA, it’s relatively easy to move your money to fossil free investments. Just use As You Sow’s fund screener to find fossil free (or deforestation-free, or gender equality) funds. Each fund in As You Sow’s database is linked to its profile on Morningstar where you can research its performance and fees.

To really make a difference though, we need increase the amount of ESG funds available in workplace accounts (at present, only 10% of plans offer them). There’s no excuse for employers not to offer these funds – they’re plentiful, they perform well, and they improve employee engagement. If you want to start where you work, As You Sow has a tool for that too.

We can also use our interactions with finance professionals to talk about climate change. I’ve emailed brokers and fintech companies to ask why they didn’t carry funds I was looking for, or what they were doing to anticipate climate risk on their real estate investments. As a customer, you can demand companies build climate risk into their business models.

Planning ahead isn’t a trivial exercise for today’s young people, whether it’s deciding how to save and invest money, whether to have kids, or where to live. These choices were relatively straightforward for those in my parent’s generation, but climate change is scrambling the script for us. Fund managers should allow us to exercise our vision for a better world by offering funds that can help get us there.

Photo by Sharon McCutcheon on Unsplash

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