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Divesting Steps

The Major Fossil Fuel Companies

Starting at the beginning, what companies should divestors focus on? A smart place to focus are the major fossil fuel companies. These companies lie at ground zero since they supply the fuels that are the driving source of global warming.

Who are we talking about here? You've certainly heard the names - Exxon Mobil, BP and Royal Dutch Shell are just a few. With total annual revenues in the neighborhood of $5T, the companies in this group are each staggeringly large. (BTW - it would be very naive to expect these companies to shift away from the sale of fossil fuels. Any argument to the contrary ignores the lessons of history and how businesses operate.)

A few years ago a group of concerned people from the financial community got together and started thinking about this. They created a list of the largest companies in the industry (and then demonstrated why having investments in these stocks will become an increasingly risky propoistion).

Armed with a focus on the major fossil fuel players, what's the next step in the personal divestment process? For people who hold stocks in individual companies, that's not a hard question. If you hold these stocks, sell them.

In the US, at any given time 40-50% of households have investments in mutual funds. If your mutual fund or ETF (Exchange Traded Fund) fund focuses on very big companies ("large cap" companies), it's very likely that the fund holds investments in the big fossil fuel companies. If instead the fund only invests in smallish companies ("small cap" companies) or in a specific sector (e.g., real estate) or in money markets, its unlikely that you are invested in these companies. For more on that, read more here.

Mutual funds move money in and out of investments all the time. Every fund (at least in US) has to report out its investments ("holdings") four times a year. While we might not be able to see every investment a fund holds today, we can easily find out what the fund held in the recent past. The fastest and easiest approach is to use this powerful tool (created by the non-profit As You Sow). If your fund is not there, head here for help.

An issue for many people is that they have investments in an employer based retirement account (e.g., a 401k), and that account may only allow money to be invested in a limited set of mutual funds. Despite that, it's still very likely that there are mutual fund options that are consistent with divesting from fossil fuels. Some of the most common options will work just fine.

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