How 401(k) funds are invested, what companies they own, and what those companies are doing to address pressing global risks like climate change. Did you know? Like almost half of employees, there's a good chance you don't either. You hand over your contributions to the plan, which funnels them into whatever investments your employer and its fund manager choose.
Then, calm down and wait for your balance to improve. Whether that happens, and to what extent, depends on where fund managers put their money. Default allocations and target date funds are how most people invest their 401(k) funds, so it's essential that they reflect the economic interests of employee investors like you.
Big Tech companies invest tens of billions in employee 401(k) funds. One of the simplest things you can do to grow your employee funds faster is to switch your default option to sustainable funds and stop putting money into fossil fuel companies, which will help protect the climate. is also helpful.
A new study conducted at the University of Waterloo (Canada) in collaboration with As You Sow, the shareholder organization I lead, finds that Amazon, Apple, Google, Meta, Microsoft, and Netflix. The study found that 2 million tech workers could have earned an estimated $5.1 billion in additional earnings if their employers eliminated fossil fuel retirement plans 10 years ago. . Google employees alone lost an estimated $1.1 billion in profits. On average, investing in a fossil-free portfolio improved by 8.9% over his 10 years. Multiply this over an employee's entire career and the amount is huge.
That's because fossil fuels are objectively a riskier investment compared to the market as a whole, as the global economy rapidly transitions to renewable energy. And that risk is accelerating. Half of the world's fossil fuel assets could lose value by 2036, according to one study.
The amount of employee money that Big Tech 401(k) plans have invested in fossil fuels, especially through target date funds, is staggering. Google employees are thought to own around $2 billion in fossil fuels. Apple employees will receive an additional $1 billion. Most of this money is invested through target date funds by default, not by choice. Shifting investments from risky fossil fuel investments to safer, future-proof assets is the best choice for employees and aligns with these companies' sustainability goals.
As You Sow presented these findings to 12 companies prior to the study's public release. No substantive responses were received from any of the companies. But this isn't the first time they've learned their 401(k) plans are out of step with their publicly stated commitments to tackling climate change. In fact, As You Sow has previously met with senior executives and filed shareholder resolutions over the years, raising the issue at several companies including Amazon, Google, Microsoft, and Netflix.
So why aren't big tech companies solving the problem? This is especially puzzling, given that they're all implementing climate goals in their operations. Google touts “30 years of climate action” on its main landing page, and its sustainability landing page “tracks our progress and is transparent about what we've accomplished and where we're headed next.” clearly states that this is important. Amazon encourages consumers to “discover and buy more sustainable products” as part of its “Climate Pledge Friendly” program. Apple's 2030 plan promises to use “recycled and renewable materials, clean electricity, and low-carbon transportation” to achieve net zero emissions. However, the company's employee retirement plan negates these efforts, leading to lower profits.
Addressing systemic risk by investing in high-carbon companies is a proven win-win strategy for companies that want to reduce emissions while protecting their employees from climate-related financial risks. Big tech companies could do that by simply making a phone call to Vanguard or BlackRock and telling them to provide fossil fuel-free default investment funds for their employees.
That one phone call changed the face of 401(k) investing. This would be a substantive step towards climate change mitigation and improve investment returns for employees' retirement. It would send a message to the global business community that fulfilling its fiduciary responsibility to select funds with the highest potential for long-term sustainable growth is not difficult. This protects employees from climate-related financial risks, demonstrates that companies are applying sustainability goals holistically, and creates a positive culture that attracts and retains the best employees. create and build customer loyalty.
Andrew Behar is the CEO of As You Sow.
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