The Fossil Free Index tracks the stock market’s performance, minus the oil, gas, and coal industries.
Given the link between burning fossil fuels and global climate change, financial professionals are increasingly searching for investment opportunities that exclude oil, gas, and coal companies. Fossil-Free Indexes LLC (FFI), an environmental, social, and governance index and research company released its first broad American market fossil-free index last week. The announcement of the new index is a timely contribution to the growing fossil fuel company divestment movement across the country. Market indices represent the value of an entire stock market at a single moment, and may be used to track changes over time. The Fossil-Free Index is based on the Standard & Poor’s 500 index, omitting any fossil fuel companies identified by FFI’s “The Carbon Underground 200,” a proprietary list cataloguing some of the most carbon-intensive investment options.
The release of the index, coming in the same week as the Rhodium Group’s “Risky Business” report on the broad economic effects of climate change, strengthens the message that a warming globe is most certainly not good for businesses. As rising temperatures and more intense weather events become commonplace, so do the risks of damage to critical infrastructure and natural resources. By seeking out opportunities for economic growth while minimizing the negative effects of greenhouse gas emissions (by decentivizing them altogether), investors can help shift focus away from climate- damaging fossil fuels, and towards efficient, clean, and renewable sources of energy.
The release of the index supports the growing fossil fuel divestment movement, with concerned investors of all ages urging the managers of pension funds, university endowments, and other large institutions to cease investment in companies that continue to burn fossil fuels as if there were no negative consequences. Divestment has been a powerful agent of change in the past – in the mid-1980s, enough global pressure was applied to South African companies that the government was compelled to end its policy of racial apartheid. Advocates tout the effectiveness of withholding investment from companies that support harmful practices and building a broad movement for change.
The founder and CEO of FFI, Stuart Braman, states that “Our products will be common-sense, accessible, low-risk options for institutions and individuals to help protect the planet along with their investments.” A reliable fossil-free index is a crucial step in today’s divestment movement. It comes at a critical moment for renewable energy in our country – in the first third of 2014, the US produced 14% of its electricity from renewable sources. The FFI will ensure that protecting your money and your planet are not mutually exclusive, and that we continue on a path with fewer fossil fuels, and more clean energy. To learn more about fossil-free investing, visit www.greenamerica.org/fossilfree