NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, September 26, 2014

This has been a big week for climate-change activists. Some 400,000 people marched in New York on Sunday ahead of a United Nations summit on curbing carbon emissions and global warming. And the news coverage brought attention to a new protest tool: Divestment.

In recent years, college students—taking a page from campus anti-apartheid activists in the 1980s—have been pushing their schools to stop investing in fossil fuel-producing companies. The movement has spread to other kinds of nonprofits and investors. This week, the Rockefeller Brothers Fund, a philanthropy built on the Standard Oil family fortune, announced that it was already divested from coal and tar sands and was moving out of other fuels. Earlier, Stanford University said it wouldn’t put money in coal, and several cities have joined the divestment charge.

So let’s say you too want to join this burgeoning movement and get fossil fuels out of your own investment portfolio. How would you do it? It’s not going to be easy. If you have your 401(k) or IRA invested in a diversified U.S. stock fund, there’s a good chance Exxon Mobil and Chevron are among your biggest individual stocks holdings. Those two oil giants alone represent 4% of the S&P 500 index, a standard market benchmark. Most professional fund managers think they simply have to hold energy stocks.