Sustainable Investing 101

Why is sustainable investing important? Why does your retirement fund matter for issues like climate change? Does voting on company shareholder resolutions have an impact?

Intro:

There are multiple pragmatic reasons why this is important, but let’s get a couple of the personal reasons out of the way first:

At least for us, it feels better. Watching our global climate change as you earn dividends from fossil fuel companies can be deeply unsettling. Aligning your investments with building the world we want to see get built in our lifetimes just feels better.

It feels (and likely is) smarter. As the world accelerates to a decarbonized, zero-carbon society, the companies who staked their future on fossil fuels will suffer. By divesting from these companies (and their financiers), you could generate market-beating returns.

Beyond these, here’s how switching to a green-focused investment strategy can solve climate change:


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Why Divesting from Fossil Fuels Matters

Fossil fuel stocks have historically benefited from being seen as "smart investments"

Historically, fossil fuel companies and dirty utilities have been considered an important part of a diversified portfolio. The argument went that they offer high dividends and have lower correlations with the rest of the market.

Turns out fossil fuels aren't actually a great investment

This narrative is false. If you divested the S&P 500 from fossil fuels in 1925, it would have delivered essentially the same performance. From 2010 - 2020, renewable energy stocks significantly outperformed fossil fuels around the world.

This narrative is false. If you divested the S&P 500 from fossil fuels in 1925, it would have delivered essentially the same performance. From 2010 - 2020, renewable energy stocks significantly outperformed fossil fuels around the world.

This narrative has historically helped fossil fuel co's expand faster

This narrative is also dangerous. By being seen as a smart long-term investment, with high taxable dividends, fossil fuel companies often get overrepresented in retirement funds and other long-term portfolios. With long-term investment goals, these portfolios tend to take a “buy and hold” approach with less active trading. When you buy and hold a stock, you effectively remove it from circulation in the market. Which helps that stock increase its price over time, and can lower the cost of capital for the company and help it expand faster.

Luckily, this narrative is changing

This narrative is pervasive, but changing. Read our full thoughts on why divestment (and reinvestment) matters for climate change.

This narrative is also dangerous. By being seen as a smart long-term investment, with high taxable dividends, fossil fuel companies often get overrepresented in retirement funds and other long-term portfolios. With long-term investment goals, these portfolios tend to take a “buy and hold” approach with less active trading. When you buy and hold a stock, you effectively remove it from circulation in the market. Which helps that stock increase its price over time, and can lower the cost of capital for the company and help it expand faster.

This narrative is pervasive, but changing. Read our full thoughts on why divestment (and reinvestment) matters for climate change.

Why Re-investing in Green Companies Matters

Fossil fuel stocks have historically benefited from being seen as "smart investments"

Historically, fossil fuel companies and dirty utilities have been considered an important part of a diversified portfolio. The argument went that they offer high dividends and have lower correlations with the rest of the market.

Turns out fossil fuels aren't actually a great investment

This narrative is false. If you divested the S&P 500 from fossil fuels in 1925, it would have delivered essentially the same performance. From 2010 - 2020, renewable energy stocks significantly outperformed fossil fuels around the world.

This narrative is false. If you divested the S&P 500 from fossil fuels in 1925, it would have delivered essentially the same performance. From 2010 - 2020, renewable energy stocks significantly outperformed fossil fuels around the world.

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