O Lord, give me the strength to become a socially responsible investor, but not yet!
Late in 2015 I had the pleasure of participating with Lucy and Jennifer in a Pittsburgh 350 committee to consider ways to divest our personal investments from fossil fuels. Lucy and I agreed to share our stories.
I learned a great deal from Lucy and Jennifer. Their enthusiasm encouraged me to overcome my inertia about making socially responsible changes in my investments. Early in the New Year I “bravely” began to look at my IRA account with Fidelity Investments and at my brokerage account with Vanguard Investments to see how I stood regarding exposure to fossil fuel companies.
At Lucy’s suggestion, I used a project of the organization AS YOU SOW – http://fossilfreefunds.org/ Fossil Free Funds finds the fossil fuels hidden within mutual funds. It applies several criteria from which one can choose any combination to screen a mutual fund. I chose all five screens:
- 1. The Carbon Underground 200™, compiled and maintained by Fossil Free Indexes℠, identifies the top 100 coal and the top 100 oil and gas publicly-traded reserve holders globally, ranked by the potential carbon emissions content of their reported reserves.
- The Filthy 15 are some of the largest, dirtiest coal companies in the U.S. Coal is the largest source of global warming pollution in the U.S.
Seven of the Filthy 15 are located in SW Pennsylvania and adjoining states: American Electric Power, First Energy, Peabody Energy, Arch Coal (bankrupt), Alpha Natural Resources, CONSOL Energy, and Patriot Coal (bankrupt).
- All the coal industry
- All the oil and gas industry
- Fossil-fired utilities
After subjecting my stock mutual funds to all five fossil fuel screens, I discovered that my funds ranged from 18.18% to 3.82% in fossil fuel exposure, with an average exposure of 11.8 %. The total U.S. stock market averages 9% exposure, so I was above average. Not good. I wanted to do better.
First, I took a step to decrease my exposure to fossil fuels in my Fidelity IRA, because I knew I would have some capital gains from selling funds. Capital gains are not taxed in a conventional IRA until they are withdrawn.
So I sold all my shares in Fidelity Spartan Total Market, which holds 10.26 % fossil fuel companies and replaced that fund with the Parnassus Fund, which holds no fossil fuel companies at all. I sacrificed the diversity of the total market by making this exchange, but was impressed with the stability, growth, and reasonable fees of the Parnassus Fund.
Again at Lucy’s prompting, I used http://charts.ussif.org/mfpc/ to discover the Parnassus Fund At this site, The Forum for Sustainable and Responsible Investment publishes a Mutual Fund Performance Chart, which displays all sustainable and responsible mutual funds offered by US SIF’s institutional member firms. This public tool allows individual investors to compare cost, financial performance, screens and voting records of competing funds.
Then I turned to my Vanguard brokerage account, where capital gains are taxed. I knew I would be having some capital gains when I sold funds, so to help offset those gains I looked for a fund where I had suffered a loss. I found it in Vanguard Total International, which has a 10% FF exposure. I sold that and replaced it with Fidelity International with only one-third of one percent exposure to fossil fuels.
I also sold my worst FF ranking mutual fund, Vanguard Value Index (18.18% FF), and bought more of Vanguard Socially Responsible Fund (3.82% FF). This sale of a value fund created an imbalance in my portfolio that I will have to address very soon.
The upshot of these trades was to reduce my investments in fossil fuel companies from 11.8 % to 8.5%, below the U.S. stock average of 9%. Better, but still not good enough.
Fortunately, (or unfortunately) I still have an ace up my sleeve. About 20 years ago my late husband bought 100 shares of NFG, National Fuel Gas. I admit a sentimental attachment to this stock because he chose it. In June, 2014, it was selling for $78.30 a share. Today it is selling for $45.28 a share. How long must I wait for it to recover at least half of its loss? If I sell the NFG shares now, my total portfolio exposure to fossil fuel companies would immediately drop from 8.5% to 5.1%. Hmm.
I think it will take me a while to rid my portfolio of fossil fuel and other toxic investments. I may never be willing to get to zero percent. In the mean time I’ll be talking to friends and advisors and doing a lot more research.
And selling NFG. . . . eventually.
a Quaker investor February, 2016
Any advice and/or information contained in this article are part of a personal story and are not to be considered specific investment advice. Individuals should research on their own and/or seek advice from their investment professional before making any important financial decisions.