Climate Town recently did a fantastic video detailing how banks use our money just sitting around in our account to invest in fossil fuels. Wanting to avoid this, I figured it'd be better to direct my money in an investment that's at least a little less planet destroying, which lead me down this ecological rabbit hole that I thought might be worth sharing.
I know there's a lot of controversy around ESG funds, and after checking a lot of common index funds and money markets with this fund checker, that controversy is unfortunately pretty well earned. A lot of ESG funds are still heavily invested into fossil fuels, or industries and banks that support fossil fuels.
However, there are a few amount of funds that really do seem to divest fossil fuels. Unfortunately most index funds will often still be invested in unethical companies like Amazon and Google, but it's nearly impossible to truly ethically invest unless you pick individual companies, which if done in isolation is probably a recipe to lose a good chunk of your money. So I settled for at least doing better, even if it's not perfect.
I also want to note that most ESG funds tend to have pretty damn high expense ratios (the yearly fee you'll pay on your investment for them to 'manage' it), though I have found a couple that buck that trend.
The most promising fund that has a low expense ratio that was the Sphere 500 Climate Fund, which is basically a copy of the S&P 500 minus all fossil fuel investments. The only downside with it is that it's fairly limited on what investment brokers host it, with the main one being Vanguard. It has an expense ratio of 0.07%.
The other low-cost option was Vanguard's ESGV ETF, which unlike every other mainstream Total US Stock Market ESG Index from Fidelity, Shwab, or Blackrock, actually does seem to limit their fossil fuel investments. It's not perfect, as a small percentage of the portfolio is still invested in the fossil fuel industry, but it's significantly better than its peers, which gets it consideration from me, purely due to its low expense ratio and the fact that it's an ETF, so you can get it from any brokerage. It has an expense ratio of 0.09%.
Vanguard also has an ESG Total International Market Index fund (for those of you who follow the Boglehead 3-fund strategy), VSGX, with an expense ration of 0.12%.
Alternatively, if you're willing to accept a higher expense ratio (0.91%) to divest from ALL fossil fuels, the Amana Mutual Fund seems like a decent one. It has a solid performance track record, and I believe (though I may be wrong!) this is equivalent to a Total Stock Market Index Fund.
Anyway, I hope some of you found that website useful! If you have any other suggestions on climate friendy-er investing, I'd be interested to hear it. :)