Contributed by a volunteer in The Carbon Almanac Community
This Daily Difference is part of a series in which we follow the author, a U.S. federal employee, who is taking advantage of a new rule which allows members of the U.S. Federal Thrift Savings Plan (TSP) to invest 25% of their retirement portfolio into green mutual funds. This article is not to be taken as investment advice! Instead use this as inspiration to spread the word about how members of one of the world’s largest retirement funds can help move capital into green energy and sustainability.
That word, sustainability, actually means something different in the investment world. It is now plainly clear that in the world of investing I am a novice, but bear with me seasoned investors. This article is for newbies like myself.
After a few phone calls to TSP customer service, I had my mutual fund window up and running. There before my eyes, I saw many mutual fund options with a 5 out of 5 star “sustainability” rating. “This will be easy,” I thought, but upon reading the TSP’s definition of sustainability, I realized that in this investment world “sustainability” is an evaluation of how well the fund is expected to perform over time. The TSP’s explanation of sustainability also seemed to be warning me that some “Environmental and Social Governance” (ESG) fund holdings are newer, less time-tested, and purposefully, risk-mitigated by fund managers who balance the risk with other holdings, that sometimes include companies involved in burning or extracting fossil fuels.
Some seasoned investors are probably shouting “well duh” in exasperation at me, but despite being a newbie, I know that mutual funds are designed to disperse risk. I wasn’t born yesterday, that’s just when I started investing. At this moment I stopped and gazed out the window at the smoke haze blocking my usual view of the Washington D.C. skyline and wondered aloud, shouldn’t fossil fuel companies be considered high risk now?
Everyone around me is coughing on the smoke. I can’t believe I am the only one who wants to give green energy a boost. I learned what I want is an “impact fund” which is a fund that is intentional about directing investor capital towards a particular industry, like renewable energy, or plastic alternatives. I know those funds have got to be in my mutual fund window. It’s a matter of looking at the fund info sheets and scrutinizing the portfolios.
Help other U.S. Federal Employees, or new investors like me by forwarding this article. Help them learn the lingo that will help us move capital into companies working for a sustainable planet. Help them learn the lingo to communicate what they want to a financial advisor because finding the right fund for me is a full-time job.