Personal Divestment and 401k Retirement Funds

“Divesting from fossil fuels” is a growing movement of individuals, universities, philanthropic organizations, faith groups, health organizations, municipalities and pension funds. These are people and institutions making ethical decisions not to profit from harm-causing fossil fuel industries. More importantly, there are ways you can join them.

First some background

Fossil fuels created “nearly three-fourths of human-caused emissions” in the past 20 years (Energy.gov). Those emissions will threaten human health over generations and drastically alter our ecosystem at an increased speed. Such alterations, the World Bank reported in 2015, “hits the poorest people the hardest, those living in vulnerable areas with the fewest resources to help them adapt or recover quickly from shocks.”

A global need and recognition of divestment was discussed this past December 2015 in Paris at the COP 21 (Conference of Parties 21). The fossil fuel divestment campaign, coordinated by 350.org, announced at the summit that, “more than 500 institutions representing over $3.4 trillion in assets have made some form of divestment commitment” (350. org). The movement for divestment has been accelerating rapidly over the last few years, especially with the long-term investing of pension funds for future generations.

In January of 2016, Pittsburgh City Council President, Bruce Kraus, proposed a bill to direct Pittsburgh’s pension fund to divest from fossil-fuel industries. The motives behind the legislation touch on both ethical and financial reasons. If the damage to the planet continues at the same rate, the global impact on generations to come will be staggering and irreversible. As a long-term investment, divesting from fossil fuels companies is a good financial move because holding devalued carbon assets in the future will harm your financial return.

What can an individual do?

As divestment accelerates globally and nationally, it is important for people to realize that divestment is possible on an individual level. Divesting allows individuals to align values with investments and reallocate funds that aid in the transition to a sustainable economy, one that does not rely on toxic emissions for energy. One possible way individuals can divest is through retirement funds.

Lucyna de Barbaro, resident of Squirrel Hill and volunteer for 350.org, coordinates the personal divestment campaign for 350.org since its inception almost two years ago. In her article, “One Person’s Journey Through the 401k/403b Retirement Fund Divestment from Fossil Fuels” (available at http://world.350.org/pittsburgh/), de Barbaro shares the information about new tools, like fossilfreefunds.org which find the fossil fuels hidden within the mutual funds, and addresses major questions anyone considering divesting from fossil fuel companies may have. In her personal story, de Barbaro applied for a Self-Brokerage Account within her employer retirement fund. Upon approval, she transferred her 401k savings into its money market reserve, allowing her to directly influence where her money went. To avoid the monthly fee of transfer, she made the decision to accumulate several monthly deposits into the original account and transfer her money to Brokerage Link once a year. Every person’s employer is different however and vocally requesting a Brokerage Link may be the first step.

In 2007, de Barbaro invested her money in socially responsible funds. She investigated the funds through several sources. The website http://charts.ussif.org/mfpc/ lists criteria used by fund managers to select companies to invest in. Upon deciding on criteria, she further reviewed the Morningstar ratings and performance of these selected funds before deciding which funds to buy. Her choices provided a respectable return rate. However, she mentions that the past performance does not guarantee good future outcomes.

Since she first invested, there are more fossil-fuel-free funds and options, and the sizable portion of her retirement is now entirely fossil-free. When managing funds, de Barbaro highly suggests to pay attention to fees, both load and management fees. and hopefully choose a good time to make your investment in renewable energy sources.

De Barbaro’s story is an excellent example of divestment on a personal level. There are multiple methods of divesting depending on the employer, the fees, and the amount of retirement funds you have to invest in either fossil-fuel free or renewable energy. Gofossilfree.org shares similar steps to those taken by de Barbaro and provides their own “roadmap to divestment” on how to start this worthwhile plan of personal action for the economy and the environment.

Kathleen Mannard is a third year student at the University of Pittsburgh and a writing intern for the Thomas Merton Center.

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