Julian Spector is a former editorial fellow at CityLab, where he covers climate change, energy, and clean tech.
A new NRDC-backed fund lets casual investors buy stock in green firms.
Negotiators at the COP21 climate conference in Paris are hashing out a deal to rein in the burning of fossil fuels to avoid catastrophic temperature rise. To get there nations need to shift investment away from carbon-based fuels and towards clean-energy sources.
Casual investors can now participate directly in this process by purchasing shares of a new type of equity, the SPDR S&P 500 Fossil Fuel Free ETF (which goes by the ticker name SPYX). The exchange traded fund invests in S&P 500 companies that do not own any fossil fuel reserves—even fuels used to generate power for the company. Investment management firm State Street Global Advisors announced today that the fund has begun trading on the New York Stock Exchange.
Funds specializing in environmentally sustainable investments have been around for years, but they usually come with higher fees to cover the work that goes into selecting and maintaining the investments. For instance, James Fallows recently profiled Al Gore’s eco-capitalist approach at Generation Investment Management, which invests $12 billion in environmentally conscious companies. Gore’s global-equity fund returns soundly beat the global stock market over the past 10 years, but you need at least $3 million to invest there.
The new Fossil Fuel Free ETF, currently trading at $50.54 a share, makes this kind of investment accessible to many more people, both because it’s cheap and because it’s easy—saving investors the hassle of researching and picking stocks themselves. And while other environmentally focused ETFs already exist, this latest appears to be the first combining a strict no fossil fuels policy with the diversity and trust of the S&P 500 index.
Those qualities drew the support and investment of environmental nonprofit Natural Resources Defense Council, which sees the fund as an extension of the broader movement to divest from fossil fuels. At the Paris conference, 350.org and Divest Invest announced that the funds of institutions divesting from fossil fuels now total $3.4 trillion. With the growing possibility that much of the world’s fossil fuel reserves will remain in the ground, divestment is gaining momentum for both ecological and financial reasons.
“Investment is about the future. It’s about what we expect to happen and what we want to happen,” NRDC President Rhea Suh wrote today on Medium. “Fossil fuels have become a reckless gamble we can’t afford. It’s a bet on the very wrong horse.”