Getting carbon out of your portfolio is tricky

Published on NewsOK Modified: January 24, 2014 at 3:05 pm •  Published: January 24, 2014
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NEW YORK (AP) — If you are like millions of Americans and own a broad stock index fund, you own parts of Exxon Mobil, Peabody Energy and other companies that earn money selling oil, coal and other fossil fuels.

For some, that's great. Fossil fuels give us light, keep us warm, help grow our food, deliver our products and jet us around the planet. And companies such as Exxon, Chevron and Southern Co. are stable and profitable and offer consistent dividends that pad retirement accounts nicely.

For others, however, profiting from companies that produce or burn fuels that pollute and contribute to climate change — and lobby against laws and regulations that would reduce emissions — is something they want no part of. Still others fear the share prices of fossil fuel companies are sure to plummet when society decides we can no longer burn the troves of hydrocarbons they own.

But while student groups around the country are calling for college endowments to stop investing in fossil fuel companies, and some religious groups have done already so, it's much trickier for individual investors.

Matt Patsky, chief executive of Trillium Asset Management, an investment adviser in Boston that has long helped endowments, religious organizations and wealthy families invest in socially-responsible ways, says that about a decade ago clients started asking the firm to create investment strategies that left out fossil fuel companies.

The firm, which manages $1.4 billion, now strips out investments in oil and gas companies, coal companies and utilities that generate electricity with mostly fossil fuels for these clients. The firm then adds shares of other companies that attempt to mirror the performance of these traditional energy companies. He says the firm has been able to generate returns as good or better than the broad market, though he says it is not possible to generate dividends quite as high as the total market.

"The fear of there being a huge sacrifice in return has been unfounded," he says. "It is doable and it will not have a meaningful impact on returns over a full market cycle."

But it's much harder for individuals to copy this strategy. There are a limited number of funds available that do this, they are not commonly offered through company retirement plans, and they don't mimic the broad U.S. stock market.

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