How To Divest From Fossil Fuels
I'd heard that the biggest influence you have personally to fight climate change is to switch your savings out of fossil fuels. By owning shares in fossil-fuel companies, I effectively lend them money and assist them in destroying our future.
Here's what I'm doing. This is a personal story and should not be taken as investment advice!
For how to divest your pension, please scroll down to Pensions.
SIPPs and ISAs
I have savings invested in a SIPP and in ISAs. I invest predominantly in ETFs tracking the main share indices (eg FTSE-100, S&P500), because the annual charges for ETFs (about 0.1%) are much lower than for managed funds. I wondered: was it possible to withdraw my investments from fossil fuels? so as not to fund the destruction of the world as we know it, and because these assets look like a bad bet as society moves towards net-zero.
My friend Neil directed me to The best Climate Change ETFs. I avoided funds flagged merely "ESG", as I believe they permit investment in natural-gas extraction. I also avoided funds denominated in currencies other than GBP, because I discovered either it wasn't possible to invest in them from a UK platform or I would have to pay foreign-exchange fees of over 1% to do so.
HL included the following choice:
I contacted them requesting they add more Paris-aligned funds to their possible investments, and they since replied to say they had added:
- HSBC ETFs plc MSCI World Climate Paris UCITS ETF (HPAO)
- HSBC MSCI Europe Climate Paris Aligned UCITS ETF (HPAE)
- Franklin STOXX Europe 600 Paris Aligned Climate UCITS ETF (EUPA)
I am switching my investments held through HL to these funds. The effect is that my investments change from tracking the price of all the shares in the FTSE-100 or the S&P500 to track the price of a different set of shares, not involved in fossil fuels. I'm not kidding myself that I'm now invested in virtuous corporations but I have divested from the worst climate destroyers.
Spring 2022 looks like good time to act, dumping energy stocks while they're currently overvalued and switching into non-energy stocks which are probably undervalued due to the high cost of energy inputs.
I can find no ETFs titled "Paris-aligned" or "Net Zero" within the Fidelity system. When I contacted them to query this, they replied that funds were added on a demand-led basis. I have sent a letter to Fidelity to request that suitable funds be added to their system and to inform them that otherwise I will transfer my investments away from Fidelity.
Eight weeks later their reply ignored the ETFs I had requested and simply highlighted other (higher cost) net-zero and Paris-aligned funds. So I will be moving my ISAs away from Fidelity.
Greener ETF/ISA Platforms
I contacted 12 companies offering ISAs to ask what "net zero" or "Paris-aligned" funds were available if I transferred my ISA to them. Only two appeared to understand the question and replied positively:
If you find any other investment platform, to which I could move my ISAs and invest in "net zero" or "Paris-aligned" ETFs, please let me know!
Charles Stanley Direct
The following search results find some relevant funds (and some less relevant):
Scrolling to the right, the J/ISA column flags various ETFs which, their customer support assure me, can be purchased within my ISA.
I will try Charles Stanley Direct for my next ISA.
AJ Bell / Youinvest.co.uk
AJ Bell told me:
"As long as the ETF has a KID/KIID document and settles via our custodian CREST then you will be able to trade it."
Searching for "paris" or "zero" on https://www.youinvest.co.uk/research-tools/quickrank/etf returns the largest selection of suitable funds that I've found on any platform. However, I've been advised by their customer support that I might need to place trades in these ETFs over the phone rather than through their website, which will cost £30 per trade intead of £10. They were unable to explain how to work out which funds this applied to.
Maybe I need to pursue this with AJ Bell management.
Other Non-Fossil Investment Options
If I didn't mind paying a 0.55%/year ongoing charge, I could invest in a managed fund eg M&G European Sustain Paris Aligned Class I - Accumulation (GBP).
If I'm feeling more adventurous I could invest directly in green energy companies through the ETFs listed on The best Clean Energy ETFs. By doing this, I would directly fund the technologies required for a greener future, but I imagine these investments will be more volatile than the more general investments mentioned above.
If you're locked into an occupational pension scheme, there's not much you can do to divest, apart from contacting the fund directors/managers to hassle them, and asking other members to do so. Some members of the Universities Superannuation Scheme have launched a crowd-funded court action claiming that the directors are in breach of their duties by not divesting.
If you're able to move your pension, you can switch to PensionBee's Fossil-Fuel-Free Plan. Even better, write to your pension fund to raise an official complaint explaining why you're taking away your money.
Thank you, Neil Wilson, Jon Woolf and Alex Zeffertt!
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