When Americans plan for retirement, they think about their dreams for the future and invest accordingly — often spending their entire careers contributing to 401K plans and other long-term investments.

But the money isn’t just sitting around and waiting. Much of it is invested in mutual funds, in which investors pool money to diversify their portfolios. Mutual funds bundle together shares of companies from different industries. This is supposed to reduce risk and provide a steady return. However, as an individual, it’s hard to know what’s in them.

Andrew Behar, CEO of As You Sow, an environmental nonprofit, was in for a shock when he decided to investigate his own 401K plan. He spent weeks filling in spreadsheets with information on the holdings of various mutual funds. What he discovered was that he was invested in some of the same companies As You Sow was litigating against, including Chevron and Exxon.

Andrew Behar. Source: As You Sow

He told his colleagues about their controversial investments and they sat down together and redesigned their whole 401K plan. In the process, Behar realized that the vast bulk of American wealth is tied up in mutual funds. Consequently, many Americans are invested in companies that don’t represent their interests or values.

“Taking control of how we invest our dollars is empowering,” Behar said. “We vote with our money. If I own even one share in a company, I can go to a meeting and vote. There are so many things you can do to be empowered. It’s about manifesting our values in the real world.”

So Behar showed his research on mutual funds to an unlikely group: nuns. They wrote a check and told him to hire someone to develop a tool that would help others see inside their retirement plans. And so he did.

“People are too embarrassed to talk about it.” Behar lamented. “Financial advisors have us in a state of fear. We’re terrified.”

Source: Fossil Free Funds

With Fossil Free Funds, all one needs to do is type the name of a mutual fund, or its ticker symbol, to see the fund’s carbon footprint. This is calculated using data from companies’ voluntary declarations of fossil fuel use.

The tool generates relative comparisons between funds that go by the same metrics. For example, comparing mutual funds comprised of S&P 500 stocks is different from comparing those in the MSCI All World Index because the overall indexes are different.

Behar showed that the top holdings in the S&P 500 are Apple, Microsoft and Exxon. Without Exxon, the entire index would be a lot cleaner. The tool also contains a calculator that allows someone to enter the amount of money they’ve invested and see the quantity of emissions they are financing.

So what makes carbon footprints bigger? Companies included in the coal, oil and gas industries, fossil fuel-fired utilities and any firm on blacklists like “The Carbon Underground 200”— a list of reserve-holding companies, ranked by their potential carbon emissions — or the “Filthy 15,” a list of the largest coal companies.

Source: Pixabay

In addition to the question of whether a specific investment reflects an individual’s ethical or environmental concerns, there is also an overarching question as to the valuation of fossil fuel assets in general.

Studies have shown that if the nations of the world limit planetary warming to no more that two degrees Celsius — as they have vowed to do — the vast majority of proven fossil fuel reserves need to stay in the ground, and along with them, trillions of dollars in profits.

This phenomenon is known as “the carbon bubble,” and it’s something the divestment movement urges institutions and individuals to consider. The movement’s core directive is to stop financing climate change by selling off fossil fuel investments.

“Fossil fuels are risky investments and pension funds are full of them,” Behar said. “This is about shining a bright light on what we all own.”

Since Fossil Free Funds launched, Behar has received hundreds of thousands of queries about it and the number of fossil fuel-free funds has more than doubled.

“There are good options,” Behar said. “Smart people are really thinking this through. They’re creating good investment possibilities and trying to have a planet in 30 years.”

As for everyone else, the tool serves as a way to look inside a 401K. Behar’s advice is to see if the portfolio aligns with your values. If it does, do nothing. If it doesn’t, choose a different one of your company’s offerings. If none of the funds are good, talk to your employer’s 401K manager.

Source: Pixabay

“There are so many ways to deal with this,” Behar said. “You can have a conversation at lunch and use the tool to figure it out.”

A 401K manager should be open to your concerns. Behar recommends that at least 15 percent of every 401K be fossil free to avoid the risks of the carbon bubble. He believes the SEC should require companies to disclose their carbon and audit them.

“If you have money in a pension fund, you have a team of fiduciaries who should be disclosing, but there’s no transparency,” he said. “If I were a nurse and I was investing in something that sends hundreds of kids to the ER with asthma, I’d be talking about it.”

“I can make more money and align myself with my values,” Behar said. “The notion that you have to give up your values for returns is a myth.”

Laura A. Shepard writes for Nexus Media, a syndicated newswire covering climate, energy, policy, art and culture. You can follow her at @LAShepard221.