There is no green in growth…period.
DISCLAMER
Owning fossil fuel stock as part of a broad index fund isn’t an “endorsement”. Not owning fossil fuel stocks does nothing to hurt fossil companies. They made their money from the stock in the IPO. Any trading afterwards doesn’t effect their bottom line at all.
Even if they have similar performance, the eco-friendly funds charge you much more every year. The article mentions VTSAX (Vanguards total stock market index) fund. It has an expense ratio of 0.04%. That’s how much they charge you each year to own it. AMAGX (Amana Growth Investor) fund on the other hand has an expense ratio of 0.87%. They charge you more than 20x as much; Which more than erases the slightly better performance they’ve had.
If it helps you sleep at night, that’s fine. That’s great! It’s well worth it for that alone. But don’t for a moment think this is helping the environment at all. The only functional outcome it will have is putting a 0.5% or more drag on your portfolio.
It actually does hurt them though. First of all companies offer shares after IPOs all the time. Things like stock options for employees and acquisitions with new stock are common. High share prices help a company that way. Then the next part is lending. Companies with high values get better lending options from banks and the market in form of bonds. This is already a problem for them in Europe, which has a lot of ESG. It is not going to kill them, but it will make life harder for them.
You’ve gone from a passive fund to an active fund there I think, with the associated far higher expenses. You can get close to divested from the fossil fuels industry via the Vanguard FTSE Social Index Fund would get you an expense ratio of 0.14%, which is about where index funds were charging when they didn’t have the same economies of scale they do today.
True. That was just the first fund (That doesn’t require 100K) on the first link in the article.
There’s Vanguard’s passive ESG index fund, ESGV, which while not perfect, does eliminate 99% of fossil fuel investments according to fossilfreefunds.org, while only having an expense ratio of 0.09%
Any trading afterwards doesn’t effect their bottom line at all.
I’m no expert, but I think this really depends on the company. They often retain a significant percent of shares, and once public they are governed by a board of shareholders who can and do direct policy with the company. Not to mention a widely held belief that public companies are legally bound to protect their stock price, which affects decision-making throughout the company.
Hey Siri, what are stock buybacks and how do they help a company profit off of increases in stock price?
I don’t do Apple unless I’m paid to. What did she say?
