‘Helped make their nest egg a little bit safer’

Google’s latest 401(k) offering has been a big hit with its employees, and is already proving it can make a big difference to our planet.

Earlier this year, the tech conglomerate added a fossil-free fund to its employees’ 401(k) options. Already, an analysis from Fossil Free Funds found, the Parnassus Core Equity fund has more than $710 million invested in it.

A basic index fund may commonly have 9% or so invested in fossil fuels. As this new Google offering has zero fossil-fuel investments, that means the fund has kept more than $63 million in possible investments away from companies that peddle in dirty energy.

Even better, when compared to a standard S&P 500 index fund, Google’s fossil-free fund has resulted in a 70% drop in financed emissions — the indirect emissions that are a result of associated lending and investing.

“Reducing financed emissions is not the same as reducing real-world emissions,” the analysis says. “But capital allocation signals market demand, and systemic change happens through aggregation.

“By choosing the sustainable option and moving money out of fossil fuel investments, these Googlers helped make their nest egg a little bit safer.”

The investments aren’t just safer for the environment, but also seemingly for investors’ accounts. This eco-friendly decision by Google was largely financially driven, as the company wanted to replace a fund that was underperforming financially.

The analysis found that the fossil-fuel sector has underperformed the S&P 500 in seven of the past 10 years, something backed up by the climate-focused investment organization Sphere, which helped spark a massive campaign by A-list actors to get their retirement fund to divest from fossil fuels.

In fact, had Google switched away from dirty-energy investments a decade ago, the analysis found, the company’s retirement funds would have performed 9.15% better, and its employees could have had a combined $1.15 billion in additional returns.

The early success of Google’s new retirement offering could serve as a template for other companies and individual investors going forward.

“Your 401(k) doesn’t have a fossil-free sustainable option, don’t give up,” Fossil Free Funds writes. “If you work together with your colleagues and ask the plan administrators to satisfy their fiduciary duty by offering investment options that mitigate climate-related financial risk, you could be cutting your financed emissions soon enough.”