If you’re like most people, when you think of retirement investing you don’t also think of deforestation. When I was younger, I heard those who cared about deforestation referred to as “tree huggers.” That concern was often associated with being “bad for the economy.”
Fortunately, organizations like As You Sow think deeply about these issues, and about how companies that are aligned with deforestation values can wind up in your mutual fund or exchange traded fund. They also include evaluations of investing performance, not just deforestation issues.
Deforestation Free Fund Results
There are two ways to approach these filtering tools. Either evaluating your existing investments or selecting investments to include in your portfolio. You may use the first approach to evaluate the choices you have in your existing 401(k), 403(b), or 457 plan.
I’ll start with looking for investments to include in your own portfolio.
An initial search of the Top Funds in the As You Sow’s Deforestation Free Funds tool provides a list of 10 funds. The list above is the result of my initial search. You will notice grades of an A or a Shield. The shield indicates that the fund has been identified as a “sustainability engagers.” That means that according to As You Sow has “taken actions such as filing shareholder resolutions asking for policy changes.
Those asset managers deserve special acknowledgement – often, they are using their investments to make sure they have a voice at the table to call for real improvements in company behavior.” If you click on the row of the highlighted fund it will take you to a page with more information on that fund. I encourage you to select the Get More Funds button to see even more funds.
Notice the “Category” column on the far right —it shows International Equity Funds, World Small/Mid Stock, Sector Equity Funds Global Real Estate, U.S. Equity Fund Large Growth, International Equity Funds, Diversified Emerging Markets, etc. This article does not advise on the use of any of these categories for your portfolio. These categories do suggest, however, that there are several options for inclusion.
The “Fund name” column offers some other investing insights. The New Alternatives fund is listed twice. In one instance, it has A listed at the end, and the other is identified as Investor. The Calvert Equity fund lists I and A. These indicate different share classes for the funds. I’ll discuss this later when we examine fund performance.
If you are already invested, I recommend entering your existing investments into the search. You will get a score of a Shield to a F for your fund, as well as the same Deforestation informational breakdown.
Earlier I highlighted that two of the funds were listed multiple times: New Alternatives and Calvert Equity. These indicate different share classes for the funds.
Share classes are the way mutual funds assess fees to their mutual funds depending on the intended distribution channel. The lower the “Expense ratio,” — the assessed fee — the higher the return for the same investment. The Institutional (or I) share is intended for large purchasers of the fund. Minimums can be in the millions. Each fund has their own reasoning for its pricing structure.
If you’re interested in share classes, you should check out a company’s website or give them a call if you don’t have an advisor to do that research for you.
Calvert’s A share indicates that the distribution channel is a Registered Representative who works for a broker dealer. Institutional shares may also be available to you through investment advisor representatives that work for registered investment advisors. Investment advisor representatives, or financial consultants, will add a fee for their work on top of the expense ratio.
The “Expense ratio” column shows the difference in the share classes indicated in the “Fund name.” The New Alternatives A has an expense ratio of .96% and the Investor, 1.21%. The performance is roughly .25% difference between the share classes. The Calvert Equity I is .66% and the A is .91%. The difference in their 20-year results is .52%.
You can see that there aren’t many funds with 15+ year track records for this list, if longevity of a fund is a concern for you.
Assuming that you care about more than one issue, As You Sow makes it easy to look at their other ratings. As seen above, funds with multiple share classes will have the same score, as they contain the same investments. Maybe surprisingly, the New Alternatives fund scores an F for its “Fossil fuel grade.” Several other funds score an F in one of the categories: Calvert Equity, Calvert Emerging Markets Equity, Calvert Small Cap.
Your values are your values, so F scores in some areas may not be an issue for you. If it’s of concern to you, download the complete list using the download spreadsheet button,, which will allow you to look across all the funds.
I’ve highlighted As You Sow’s Deforestation Free Funds tool in this article, as it is publicly available. There are other tools which may have different ratings on the same fund. Two of note are MorningStar’s Sustainability Ratings and YourStake. You would need to find an advisor that has access to these tools to provide those alternative evaluations.
Can you retire comfortably while investing Deforestation Free? The answer is yes, although it may not be a straightforward answer. You’ll need to determine how much money you’ll need, how much you’ll need to save, for what time horizon, and at what target rate of return before and during retirement.
You can then go about developing the portfolio mix you need of the various categories of investments and in what percentages.
Alternatively, you can find an independent Certified Financial Planner, with expertise in values-integrated investing. Either way, you should be well on your way when armed with this resource.