Green Up Your Pension

This is the second in our series of articles on the power of personal finance as a vital tool to fight climate change.

(Photo – taxresearch.org)

US pension funds had $33.8 TRILLION of retirement funds invested on our behalf in 2022, of which almost $100 BILLION was invested in fossil fuel companies or projects.

By Katherine Markova

Employer-sponsored pension plans can be either defined benefit (DB) or defined contribution (401(k)) plans.

Defined Benefit Plan

It is extremely difficult to change the investment portfolio of a defined benefit plan. I am a participant in my former employer’s DB scheme which invests in Big Oil, companies charged with tax evasion, and bonds to governments famous for human rights abuses. When I complained, I was presented with a set of predictable excuses, including “fiduciary duties” of the fund manager, as if keeping the planet livable is misaligned with those duties. The only way to move that behemoth would have been with persistent campaigning involving many of the plan’s beneficiaries and replacing the fund manager.

Defined Contribution (401(k) Plan

It tends to be easier to take action over a defined contribution pension plan, as many employers allow participants to have a range of plan options. And if they do not, you can always ask. See this article for a great example of someone who asked and got! Invest Your Values tracker shows how dirty 401(k) plans are for several well-known companies. Sphere and Carbon Collective provide alternative 401(k) option plans.

Note that investing in an ESG fund is not the same as investing in a company with a good environmental record. Most companies with a high ESG rating are good at managing the impact of climate on them, not the other way round. Do your research on the underlying portfolio of stocks before switching over to an ESG fund.

Katherine Markova is a climate consultant and is an Instructor for UCLA Extension’s Sustainability Certificate Program.  

> Read Part 1 and Part 3.