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💸 "Moving Billions through 401(k)s"

Invested In Climate

Photo by Tech Daily / Unsplash

Table of Contents

Host: Jason Rissman
Guest: Alex Wright-Gladstein | Founder & CEO | Sphere
Category: 💸 Investing | Green 401(k)s

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Podcast’s Essential Bites:

[7:08] “Why is it so hard to offer a climate friendly investment option in a 401(k)? It turns out, there are a few reasons. One big one is that climate friendly funds, mutual funds, or ETFs (exchange-traded funds) that are out there […] are pretty much all pretty expensive. They tend to be actively managed, there are people making really thoughtful decisions about what companies we invest in, which stocks we pick, and they do all kinds of complicated analysis to make sure that they're good for the climate. […] Employers can be sued by their employees for having funds that are too expensive and 401(k)s and those types of lawsuits happen all the time.”

[7:57] “There are some structural reasons. For example, a lot of the big 401(k) platforms don't allow ETFs in them. […] And most funds that have been built in the past 10 years have been in the format of an ETF, not a mutual fund. […] Climate focused funds tend to have been created in the past 10 years, they tend to be ETFs and that means they're just not allowed on the big 401k platforms. […] And it eventually led me to realize, someone needs to fix this problem. […] And that's why we started Sphere.”

[8:40] “Our goal is to make it […] easy for employers to offer climate friendly investment options to their employees. […] Oftentimes you don't think about where we're putting our money. What that means is that there are billions of dollars, even trillions of dollars that are just by default, getting invested in fossil fuel companies, because there's been this amazing increase in popularity of index funds. And those index funds […] just allocate a portion, typically 5% of their investments, to the fossil fuel industry. […] So the biggest impact that we intend to have with this approach is by sending a message loud and clear to the fossil fuel industry and to the world that this is a problem.”

[13:09] “Part of the reason for the name Sphere is because we're referring to the planet as a sphere and a sphere that we want to protect. But the other part is that you can use your own personal sphere of influence to make a really big impact. The average person has about $6,000 invested in the fossil fuel industry via their 401(k). But when you look at their sphere of influence, […] especially if [you] work at a big company, […] [there are] tens of billions of invested in 401(k)s, which means that there could be a billion dollars just from your own company 401(k) directly invested in the fossil fuel industry. So if you are part of that movement, and convincing your company leadership and your company benefits team to add a climate friendly option to your 401(k), […] you have a massive impact in actually removing billions of dollars from the fossil fuel industry.”

[16:39] “[The] first product that Sphere has sponsored is called this Sphere 500 Fossil Free Index Fund. And because it's an index fund, its rules based, it's not actively managed like the expensive climate funds […], it can be much more affordable. And so we're offering it at a fee of 0.07%. And that's really in line with S&P 500 index funds, which tend to be under 0.1% fees. […] This first product is meant to offer an S&P 500 index fund type portfolio. So you're investing in the top 500 US companies, and we're just removing the fossil fuel companies from that list.”

Rating: ☁️☁️☁️

🎙️ Full Episode: Spotify | Google
🕰️ 48 min | 🗓️ 06/13/2022
✅ Time saved: 46 min

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