Here Are Some Investing Options for 2021 — With Climate Change in Mind

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  • If you’re like most Americans, you worry about global warming.
  • But it can be hard to know how to channel that anxiety into action that will help the planet.
  • One fairly simple way to make a difference is to be more selective about the companies you invest in.

If you’re like most Americans, you worry about global warming. Yet it can be hard to know how to channel that anxiety into action that will help the planet.

One fairly simple way to make a difference is to be more selective about the companies you invest in. Brokerage firms such as Fidelity, as well as robo advisors Betterment and Earthfolio, are now making that easier to do.

What’s more, research shows you don’t necessarily have to take a hit to your bottom line to make an impact. So-called sustainable funds outperformed their conventional fund peers in 2019, according to Morningstar.

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“Historically, there’s been a notion that investors seeking to integrate their values into their investments need to sacrifice returns,” said Boris Khentov, senior vice president of operations and legal counsel at Betterment.

“But more recent research continues to demonstrate that such assumptions are questionable, at best.”

In 2021, you may want to allocate some of your money toward funds with a focus on addressing climate change. Below are some of the options.

(For a number of reasons, 401(k) plans — which hold nearly a third of all U.S. retirement assets — lag in their environmentally-focused funds. Yet employees’ demand for these choices is slowly changing that.)

Betterment

In October, Betterment launched its Climate Impact Portfolio.

“Values-driven investing has steadily gained in popularity in recent years, and surged amid the Covid-19 pandemic,” said Boris Khentov, senior vice president of operations and legal counsel at the robo advisor.

Half the stocks in Betterment’s climate portfolio screen out companies holding fossil-fuel reserves and the other half invests in companies with the lowest carbon footprint, Khentov said. The bonds, meanwhile, are linked to environmentally-beneficial projects, such as pollution prevention and energy efficiency.

Like with all of Betterment’s portfolios, you can decide on the right allocation for you between stocks and bonds, depending on your risk tolerance and time horizon. They charge a management fee of 0.25%.

Earthfolio

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Blue Marble, which owns the robo advisor Earthfolio, has been around for 20 years, but Art Tabuenca, its founder, said he’s “seen a dramatic increase in interest over the past two years as climate change and social equality issues have become a major concern, financially and politically, for a majority of Americans.”

Clients can choose portfolios that are low-carbon or fully divested of oil, coal and gas. Its bonds invest in a range of climate-related projects, including habitat restoration, zero-emission public transport and solar farms.

The annual management fee is 0.5%. You can rollover a retirement account to Earthfolio, or open an investment account, but you need at least $25,000 to do so.

Fidelity

Brokerage firm Fidelity has a number of funds that address climate change, said Pam Holding, co-head of equity at Fidelity Investments.

For example, the Fidelity Water Sustainability Fund is invested in companies that are developing new technologies to improve the availability of safe and affordable water.

“Climate issues are exacerbating the risks of reduced access to fresh water,” Holding said.

“We view climate change as not only a risk to be managed, but a business opportunity for companies to address new markets as the economy decarbonizes,” she added.

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