This article was written by David Sand, Chief Investment Strategist at Community Capital Management.
Divestment from fossil fuel companies is a hot topic and may be a good long-term investment strategy. Many initially think of equities and fossil fuel stocks, specifically risks of the coal, oil, and gas sector. However, investors may also own corporate bonds issued by these companies in their fixed income portfolios. Divestment includes getting rid of stocks, bonds, investment funds, or any investment for that matter that is unethical or morally ambiguous. It is important to look across all of your investments to see what kind of holdings may be linked to fossil fuel companies. Today, there are many funds that focus on reinvestment, renewable energy and climate mitigation, among other environmentally-friendly initiatives. There are also a number of financial planners that have experience with fossil fuel free investing and are getting more questions about the issue.
At Community Capital Management, Inc. (CCM), we have been managing a fossil fuel free bond portfolio — the CRA Qualified Investment Fund (Tickers: CRAIX/CRANX/CRATX) — since 1999. The Fund primarily invests in agency mortgage-backed securities, taxable municipals, and the government-guaranteed portion of small business loans — all which support community and economic development in the United States (e.g., affordable housing, environmental sustainability, neighborhood revitalization and job creation). The Fund does not hold debt of corporations. A focus on re-investment and support for local communities is an important part of the growing movement for fossil-fuel free investments. The Fund has been recognized by greenamerica.org, gofossilfree.org and others as an option for investors looking to put the proceeds of divestment to work in positive ways.
As more investors begin examining their investment accounts toward eliminating their exposure to fossil fuel companies, the number of fossil free funds will likely continue to grow. For those looking to shift to a fossil fuel free portfolio, it is important to look at holdings across all asset classes.
Rob Thomas is a member of the DailyWorth Connect program. Read more about the program here.