Need advice for building a 100% fossil-fuel stock free portfolio

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stan1
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by stan1 »

I would research an "environmental offset" strategy and see if you could merge that in with your goals. For example estimating how much gain (dividends and capital gains) were obtained from the companies you wish to exclude and donating that amount to a charity of your choosing. I don't think it could be done precisely, but precision is not needed since you are the only one who needs to be convinced you are doing the right thing.
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snackdog
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by snackdog »

I agree with the idea that 95% of stocks will have you investing in producers or consumers of fossil fuels and 100% may have you investing in producers or consumers of fossil fuels or other mined materials which may be in many cases more destructive to extract than oil and gas.

To be as pure as possible, you should invest in a single stock or two that is very focused on alternate energies but uses environmentally friendly recycled materials (as opposed to precious metals, steel, silicon, concrete, etc) for all their components. I think that rules out solar, wind, hydro, tidal and most other energy sources. I'm stumped.
sd323232
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by sd323232 »

Ramjet wrote: Mon Nov 23, 2020 8:17 am When politics crosses over to investing :oops:
im sitting this one out, this getting out of control lolololl
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galawdawg
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by galawdawg »

There's the Bogleheads approach (buy the "entire haystack" by investing in low-cost index funds and hold them forever). Then there are all of the other approaches.

Since you wish to eschew the Bogleheads approach, just pick individual stocks that meet your criteria and buy them. Done.
barnaclebob
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by barnaclebob »

OP the reason you are getting a bit of push back or flack is that trying to be a "responsible investor" in this manner is akin to a vegan still wearing fur coats. Examine whether you want to feel like you are making a difference or if you actually want to make a difference.

Also buy buying oil company stock, you are not directly funding oil companies. Their stock is bought and sold on the secondary market unless there is some kind of dilution event.
burritoLover
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by burritoLover »

Executives are often evaluated based on the relative performance of the company's stock. So, holding a stock whose environmental positions disgust you, is like a vote for those policies. Like a vote for president, your individual vote doesn't matter (akin to the average investor), but that isn't a reason not to vote if you believe strongly in the principal of democracy. Just like it isn't a reason to ignore ESG in investing if that is important to you as long as you accept that you will likely be giving up some return as a result.

Being a good environmental steward in your personal life is a continuum from being a hermit living off the woods with a home built from only things found in the forest to the dude that occasionally recycles when its convenient. The same holds for investing. If you care about such things, then it could be just picking a fund that mostly avoids oil company stocks to managing your own portfolio of individual stocks that meet your strict criteria.
"Your money is like a bar of soap. The more you handle it, the less you’ll have." - Gene Fama
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knockknock
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by knockknock »

galawdawg wrote: Mon Nov 23, 2020 12:13 pm There's the Bogleheads approach (buy the "entire haystack" by investing in low-cost index funds and hold them forever). Then there are all of the other approaches.

Since you wish to eschew the Bogleheads approach, just pick individual stocks that meet your criteria and buy them. Done.
Surely, there's some middleground between the bogleheads approach and just buying individual stocks?
Wricha
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by Wricha »

humblecoder wrote: Mon Nov 23, 2020 9:45 am
Wricha wrote: Mon Nov 23, 2020 9:14 am
humblecoder wrote: Mon Nov 23, 2020 9:00 am WIth all due respect to many of the people who have replied, the OP did not ask for opinions about whether not investing in fossil fuel stocks is a good idea. He/she asked HOW to do it. :oops:

OP: IShares has a number of ETF's which excludes certain companies (https://www.ishares.com/us/strategies/s ... -investing). Other investment companies have similar funds as well. They are usually referred to as "ESG" funds, so I would recommend doing a google search using that keyword to get other options.

These funds, however, not only exclude companies that invest in fossil fuels, but those that make money from weapons, tobacco, and other "controversial" industries. You'll have to decide for yourself whether that matters to you or not.
I think people are just pointing out that defining these “green” pristine companies is difficult making the “how” impossible.
The OP poster was very clear what his/her definition was. He/she wants a portfolio that is 100% free of oil company stocks. I don't think there was much ambiguity.
The ambiguity is a 100% fossil fuel free company no company is 100% fossil fuel free.
financial.freedom
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by financial.freedom »

knockknock wrote: Mon Nov 23, 2020 7:05 am
austin757 wrote: Mon Nov 23, 2020 7:00 am Just curious, but why are you doing this?
Trying to be a bit more socially responsible that's all...

There's a lot of ways to reduce pollution, and it's nice that you're thinking about the environment. The single best thing you can do to reduce carbon foot print is plant-based diet.

Maybe try investing in Beyond Meat Inc or similar companies?

Not eating meat and dairy products can reduce a person’s carbon footprint by up to 73% [Poore J., Nemecek T. Reducing food’s environmental impacts through producers and consumers. Science. 2018;360:987–992.]

https://science.sciencemag.org/content/ ... 2/987.long
Old Sage(brush)
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by Old Sage(brush) »

I've not read all this thread in detail. However, I think there is a lot of merit to using your financial investments to advance your values. Kudos to the OP, as someone younger than many on this forum, to be forward thinking in that way.
humblecoder
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by humblecoder »

Wricha wrote: Mon Nov 23, 2020 1:18 pm
humblecoder wrote: Mon Nov 23, 2020 9:45 am
Wricha wrote: Mon Nov 23, 2020 9:14 am
humblecoder wrote: Mon Nov 23, 2020 9:00 am WIth all due respect to many of the people who have replied, the OP did not ask for opinions about whether not investing in fossil fuel stocks is a good idea. He/she asked HOW to do it. :oops:

OP: IShares has a number of ETF's which excludes certain companies (https://www.ishares.com/us/strategies/s ... -investing). Other investment companies have similar funds as well. They are usually referred to as "ESG" funds, so I would recommend doing a google search using that keyword to get other options.

These funds, however, not only exclude companies that invest in fossil fuels, but those that make money from weapons, tobacco, and other "controversial" industries. You'll have to decide for yourself whether that matters to you or not.
I think people are just pointing out that defining these “green” pristine companies is difficult making the “how” impossible.
The OP poster was very clear what his/her definition was. He/she wants a portfolio that is 100% free of oil company stocks. I don't think there was much ambiguity.
The ambiguity is a 100% fossil fuel free company no company is 100% fossil fuel free.
The request was un-ambiguous to me. The request was to exclude investments specifically from producers of fossil fuel, not consumers. Now you can make the argument that the OP isn't going far enough and SHOULD also consider the consumer side, but that's not what the OP was asking about.
byline0802
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by byline0802 »

Hi KnockKnock,

You have a great plan, one that is focused on where the investing world is quickly heading, thanks to the Paris Agreement and the inevitable policy and business actions flowing from it.

Some ETFs that come to mind are these, but I don't vouch for them personally: SPDR MSCI ACWI Low Carbon Target E.T.F.: iShares MSCI ACWI Low Carbon Target E.T.F.: SPDR S&P 500 fossil fuel reserves free ETF. Blackrock seems to have many ESG investing solutions but I am less sure about climate-specific choices. V

But green labels are not always what they seem. Always check what the ETF/fund contains. Fossil free funds is a tool you may wish to explore: https://fossilfreefunds.org/

MSCI and others have created some great climate-focused indexes that unfortunately haven't been translated into investing products yet, at least not in the U.S. But it would be good to watch these indexes closely - I predict some fast implementation of them quickly in the U.S.: https://www.msci.com/esg-indexes

Also, keep in mind that at the moment the global economy can't run on 100% fossil fuel-free companies, as there is significant decarbonization that needs to take place across utilities, transportation, energy, etc. Some leading companies have adopted science-based emissions targets to ensure that they transition appropriately in line with the Paris targets: BP and Royal Dutch Shell come to mind. Such companies need investors to support them as they make the shift to the low-carbon economy. So you might want to consider one of the indexes that keeps fossil-fuel companies that are smartly making the shift while excluding ExxonMobil and others that are not focused on climate considerations.

Two fossil fuel sources definitely worth excluding are tar sands oil and thermal coal (for power plants), as there are ample replacements already available for these heavily polluting activities.

Many institutional investors are looking to take climate into account in their portfolios - it is a huge transformation in the investing industry. Great that you are already planning on making the shift!
02nz
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by 02nz »

cadreamer2015 wrote: Mon Nov 23, 2020 10:50 am
Of course, I understand that the world runs on oil. I just don't want to directly fund fossil fuel companies by investing in them.
As long as fossil fuel companies are not selling additional stock to the public (I don't think this is at all common these days), you will not be directly funding fossil fuel companies by buying their stock in an index fund like Vanguard's Total Market Index. You will be buying shares of fossil fuel companies from other people who want to sell them. I don't see how buying a share of a fossil fuel company from your neighbor down the street or a pension fund in Austria directly funds a fossil fuel company.

BTW I have this same problem with the divestment drive that many students and faculty at colleges and universities have to pressure their endowment managers. If people sell enough stock in fossil fuel companies to depress the stock price, I'm sure there are enough investors operating with fewer moral or philosophical constraints somewhere in the world to buy the stock because it is a good financial investment at a lower price.

I do think you can make the case that fossil fuel companies profit potential is limited as the world moves away from fossil fuels. But that is picking winners, which is not favored by Bogleheads.
+1. Investing in a company and buying a company's product are very different things. Not doing the former doesn't influence that company's behavior at all; if anything, being a shareholder you have more of a voice in how the company does its business (of course an individual's sway is quite limited). OP can much better achieve the stated goal through the choices he/she makes as a consumer, not as an investor.
pseudoiterative
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by pseudoiterative »

knockknock wrote: Mon Nov 23, 2020 1:18 pm Surely, there's some middleground between the bogleheads approach and just buying individual stocks?
Yes, there is. If you prefer simple index-based investment approaches that don't require you to pick individual stocks, one option is to find a stock market index that has an environmental or low-carbon tilt. For example, MSCI maintains a "low carbon" index, and some companies have launched low-ish cost ETFs designed to track that low carbon index, e.g. CRBN - iShares MSCI ACWI Low Carbon Target ETF (0.20% expense ratio). The top 20 holdings are APPLE INC, MICROSOFT CORP, AMAZON COM INC, FACEBOOK CLASS A INC, ALPHABET INC CLASS C, ALIBABA GROUP, ALPHABET INC CLASS A, TENCENT HOLDINGS LTD, JOHNSON & JOHNSON, TESLA INC, VISA INC CLASS A, PROCTER & GAMBLE, NESTLE SA, JPMORGAN CHASE & CO, NVIDIA CORP, UNITEDHEALTH GROUP INC, MASTERCARD INC CLASS A, HOME DEPOT INC, SAMSUNG ELECTRONICS LTD.
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bottlecap
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by bottlecap »

knockknock wrote: Mon Nov 23, 2020 7:05 am
austin757 wrote: Mon Nov 23, 2020 7:00 am Just curious, but why are you doing this?
Trying to be a bit more socially responsible that's all...
So are you going to exclude only the companies that ”produce” the fossil fuels or also the ones that burn them up?

To me, that very question makes this an exercise in futility. I guess the next question is how doing this hurts anyone other than yourself (through a less diversified portfolio).

But to each his own. For me, it would be too much effort for absolutely no effect on the world.

JT
pseudoiterative
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by pseudoiterative »

02nz wrote: Mon Nov 23, 2020 3:20 pm if anything, being a shareholder you have more of a voice in how the company does its business (of course an individual's sway is quite limited).
This is a good point. If your goal is changing the behaviour of companies to push them in a direction you deem "positive", then it is not obvious that divesting from companies is a better strategy than investing in them and engaging as an activist shareholder. But the key point is that you would have to actually become an activist shareholder, lobbying the company's management and other major shareholders to change direction, raising and voting for shareholder proposals. It is possible to do this as an individual, at some cost of time, attention and money. I've never tried.

It is also possible to become an activist shareholder by investing through a managed fund -- you need to look for a fund that has a strong track record of voting in a way you approve of during corporate proxy voting. There are also some managed funds that are explicitly actively "ethical" or "environmental" and do engage in this way with companies they invest in. Another idea is investigate the proxy voting record of a company that you already use to invest through -- e.g. if you hold passive investments through e.g. blackrock or vanguard, look for an assessment of their voting record from a third-party - such as an activist environmental organisation - to see how they are behaving. If you don't believe they are behaving very well, e.g. they reliably vote against shareholder proposals for environmental issues, write them a complaint, and then churn and take your business elsewhere to invest through another company that has a better proxy voting track record.

Arguably there is less leverage in putting pressure on companies that already already have a brand that is negatively associated with the environment in the mind of the public. There is more leverage targeting companies that sell goods or services direct to consumers and rely on having a squeaky-clean brand that consumers don't have strong negative associations with. Some ideas:
  1. one argument for divesting from fossil fuel companies goes something like this: refusing to invest in fossil fuel extraction companies helps to incrementally lower their share price, which helps to incrementally raise their cost of equity (their ability to cheaply issue new shares to raise capital), which helps to incrementally increase their weighted average cost of capital, which helps make it incrementally more expensive for them to make capital investments, which makes expansionary fossil fuel projects incrementally less profitable, which incrementally reduces future fossil fuel extraction. A similar argument can be made for debt -- many fossil fuel projects are funded by debt -- loans from banks. So, what can you do help raise the cost of that debt? Put pressure on banks to stop lending money to fund fossil fuel projects. Good targets are banks that are large funders of fossil fuel projects and also have a large amount of "retail" business lending to the general public, who might disapprove and take their business elsewhere if they understood this.
  2. 40% of the FAANG companies make the overwhelming majority of their revenue and profit from advertising, and also rely on having a decent brand in the eye of the general public. But, arguably, the purpose of some/most advertising is to convince people to buy goods or services they wouldn't otherwise buy. How much of this advertising revenue and profit is extracted by convincing consumers to buy unnecessary disposable crap, e.g. non-repairable electronics that are meant to be thrown out and replaced with a new model after 3 years? For example, in a typical UK consumer lifestyle -- the largest component -- 25% of per-capita energy consumption -- is due to the consumption of material "stuff" -- the energy required for "stuff" is greater than the energy required for food, or for car transport, or for plane flights, or for housing, or for heating and cooling. Suppose activists or activist investors could push these advertising companies to refuse to advertise goods / services that are particularly environmentally harmful. This could have a huge positive environmental impact, by helping to reduce demand for fossil fuels. These companies also have a lot more to lose from a brand perspective, compared to going after oil companies, since consumers don't directly do business with oil companies.
Note also that companies such as banks and tech advertising megacorps frequently appear in "ESG" investment funds, so assuming there is a preference for some investors to invest in ESG funds (for non-financial reasons, say) then these companies that are superficially perceived as being environmentally responsible have more to lose if subjected to bad press that links their profits to environmentally damaging activity.
Last edited by pseudoiterative on Mon Nov 23, 2020 4:27 pm, edited 1 time in total.
Firemenot
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by Firemenot »

Another thought would be to invest in country-specific index funds in countries that don’t have any meaningful fossil fuel deposits.
humblecoder
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by humblecoder »

barnaclebob wrote: Mon Nov 23, 2020 12:37 pm OP the reason you are getting a bit of push back or flack is that trying to be a "responsible investor" in this manner is akin to a vegan still wearing fur coats. Examine whether you want to feel like you are making a difference or if you actually want to make a difference.

Also buy buying oil company stock, you are not directly funding oil companies. Their stock is bought and sold on the secondary market unless there is some kind of dilution event.
What are you saying is that either one has to be a "vegan" or a "carnivore"? Why can't there be a middle ground?

I'll use myself as an example. I am certainly concerned with the impact of human behavior on the environment. I take some steps to do my part for the environment. I diligently separate my paper and plastic for recycling. I drive a relatively fuel efficient car that has low emissions. I have a programmable thermostat to regulate my heat and A/C usage. I try to limit food waste. However, I freely admit that I could do more, if I put my mind to it. Does that make me a hypocrite? I suppose it does. However, I figure that doing something is certainly better than doing nothing, so I wear the hypocrite badge and I wear it proudly. :happy

The second point you bring up is interesting: whether not holding oil stocks actually makes a difference. On this point, I agree with you 100%. Not investing in a company does not impact or influence the company in any way. If you assume that the market is efficient, then it won't impact the stock price at all. There will always be somebody who will take advantage of the arbitrage opportunity.

To me, the case for investing in ESG-like funds is because you personally don't want to profit from a company who engages in activities that go against your "principles". So you are willing to forgo those companies, even if it means accepting a lower return.
bugleheadd
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by bugleheadd »

tsla, nio, xpev, Li
hnd
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by hnd »

the stock already exists. you are just buying it from someone else at X price. Oil companies already have the money.

When i was younger (early 20's) I had this philosophy and found it costly, time consuming, and in the end tying your self in moral/logical knots. We had socially conscious options in our 401k plan and I leaned on them without much care into finally looking at them 5 years later and basically ran in place. today is a different world and there may be better returns. I decided at that time to take advantage of the returns of the secondary market and make splashes with those returns in other ways i thought possible.
Firemenot
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by Firemenot »

bugleheadd wrote: Mon Nov 23, 2020 4:29 pm tsla, nio, xpev, Li
TSLA actually isn’t a good choice if someone wants to actually be “green”. Look into how much fossil fuel is consumed in mining and processing all of the inorganics that go into their batteries. But I suppose it fits the OP’s criteria of not being a direct fossil fuel company.
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galawdawg
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by galawdawg »

pseudoiterative wrote: Mon Nov 23, 2020 3:36 pm
knockknock wrote: Mon Nov 23, 2020 1:18 pm Surely, there's some middleground between the bogleheads approach and just buying individual stocks?
Yes, there is. If you prefer simple index-based investment approaches that don't require you to pick individual stocks, one option is to find a stock market index that has an environmental or low-carbon tilt. For example, MSCI maintains a "low carbon" index, and some companies have launched low-ish cost ETFs designed to track that low carbon index, e.g. CRBN - iShares MSCI ACWI Low Carbon Target ETF (0.20% expense ratio). The top 20 holdings are APPLE INC, MICROSOFT CORP, AMAZON COM INC, FACEBOOK CLASS A INC, ALPHABET INC CLASS C, ALIBABA GROUP, ALPHABET INC CLASS A, TENCENT HOLDINGS LTD, JOHNSON & JOHNSON, TESLA INC, VISA INC CLASS A, PROCTER & GAMBLE, NESTLE SA, JPMORGAN CHASE & CO, NVIDIA CORP, UNITEDHEALTH GROUP INC, MASTERCARD INC CLASS A, HOME DEPOT INC, SAMSUNG ELECTRONICS LTD.
Even those ESG funds are NOT 100% fossil-fuel free, which is the criteria OP is now seeking. For example, the fund you linked, CRBN, is NOT 100$ fossil-fuel free. It's holdings include China Gas Holdings (natural gas), ConEd, Dominion Energy, Enegas, Hong Kong and China Gas, UGI Group, etc. Unless of course, OP is okay with companies that refine, distribute or sell fossil-fuels and just doesn't want to invest in companies that mine or extract the fossil-fuels....
rkhusky
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by rkhusky »

Invest in Total Stock and short the Vanguard Energy ETF.

Or invest in all the Vanguard sector ETF’s, except the Energy ETF. You can estimate the relative weightings from TSM.

Note that the company benefitted when the stock was first issued. They don’t benefit by investors trading shares back and forth.
Last edited by rkhusky on Mon Nov 23, 2020 4:45 pm, edited 1 time in total.
pseudoiterative
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by pseudoiterative »

Firemenot wrote: Mon Nov 23, 2020 4:32 pm TSLA actually isn’t a good choice if someone wants to actually be “green”. Look into how much fossil fuel is consumed in mining and processing all of the inorganics that go into their batteries.
I'll gently disagree: the goal isn't investing in something that has zero absolute environmental impact, that's simply not realistic -- a more pragmatic perspective is to push for something that's less damaging than the incumbent alternative. So framing it as "making batteries versus doing nothing" isn't helpful, it is more helpful to frame it as "the environmental impact of making and running electric vehicles versus the impact of making and running internal combustion vehicles".

That said, TSLA & some of its trendy EV manufacturing peers are able to raise capital _incredibly cheaply_ by selling their equity on the public markets, I don't think their economic prospects or the environmental outcomes are materially helped by additional investment, they've already got access to heaps of cheap capital.

... it's even more helpful to include alternatives like "public transport" or "design walkable communities so there's no need for most people to own a car"
Last edited by pseudoiterative on Mon Nov 23, 2020 4:47 pm, edited 1 time in total.
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galawdawg
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by galawdawg »

bottlecap wrote: Mon Nov 23, 2020 3:51 pm
knockknock wrote: Mon Nov 23, 2020 7:05 am
austin757 wrote: Mon Nov 23, 2020 7:00 am Just curious, but why are you doing this?
Trying to be a bit more socially responsible that's all...
So are you going to exclude only the companies that ”produce” the fossil fuels or also the ones that burn them up?

To me, that very question makes this an exercise in futility. I guess the next question is how doing this hurts anyone other than yourself (through a less diversified portfolio).

But to each his own. For me, it would be too much effort for absolutely no effect on the world.

JT
That's why OP would likely need to stick with individual stocks if he wants to be completely divested of any companies involved in fossil-fuels, whether it be extraction, refining or supply chain.

I also find it interesting how some folks seek to invest only in environmentally-conscious stocks or funds but have no objection to investing in certain tech and other companies whose desire for cheaper manufacturing and supply chain sources result in overlooking or even contributing to human rights abuses in China and elsewhere.
Doctor Rhythm
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by Doctor Rhythm »

What OP is proposing may be challenging to execute but isn’t any more financially risky or imprudent than any of the hundreds of tilts Bogleheads maintain. OP wants to exclude perhaps < 10% of the global market cap from their portfolio. I can’t see how that will lead to more risk than those who exclude or (in my case) under-allocate to the 45% of the market made up by international stocks. Does anyone have evidence that excluding fossil fuel energy companies is clearly worse than excluding financial services as part of Sharia compliant investing? We routinely give a pass to those who want to put 5-10% of their portfolio into individual stocks; how does that lead to less idiosyncratic risk than what OP wants?
Last edited by Doctor Rhythm on Mon Nov 23, 2020 4:48 pm, edited 1 time in total.
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SmileyFace
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by SmileyFace »

The problem with ESG investing is how far will you go?
For example: If you don't want to invest in fossil-fuel stocks your should avoid Solar companies as well - a lot of folks don't realize that Oil is required to make Solar Panels. Shipping companies with large freight ships also use a lot of oil so maybe avoid those too. Anyone that ships products is supporting the industry actually. Where does it stop...

There are lots of ESG funds - you are trusting someone to decide what is and isn't acceptable and how far to go in the chain.
Firemenot
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by Firemenot »

pseudoiterative wrote: Mon Nov 23, 2020 4:42 pm
Firemenot wrote: Mon Nov 23, 2020 4:32 pm TSLA actually isn’t a good choice if someone wants to actually be “green”. Look into how much fossil fuel is consumed in mining and processing all of the inorganics that go into their batteries.
I'll gently disagree: the goal isn't investing in something that has zero absolute environmental impact, that's simply not realistic -- a more pragmatic perspective is to push for something that's less damaging than the incumbent alternative. So framing it as "making batteries versus doing nothing" isn't helpful, it is more helpful to frame it as "the environmental impact of making and running electric vehicles versus the impact of making and running internal combustion vehicles".

That said, TSLA & some of its trendy EV manufacturing peers are able to raise capital _incredibly cheaply_ by selling their equity on the public markets, I don't think their economic prospects or the environmental outcomes are materially helped by additional investment, they've already got access to heaps of cheap capital.
There have actually been studies done that report that conventional cars over their entire lifespans (i.e., materials that go into, manufacturing, and lifetime use) have less overall negative impact in terms of resource depletion and carbon release than electric cars. I have no idea how much faith to put in such studies, but the batteries truly are pretty crazy. We’re talking lots of strip mining of rare earth metals in China and very energy intensive processing. And much of the power used to power the electric cars is still fossil fuel based.
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KingRiggs
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by KingRiggs »

Altria (MO) and Reynolds America (RAI) do not produce oil...maybe they'd be a good fit... :sharebeer
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makingmistakes
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by makingmistakes »

finanzfrau wrote: Mon Nov 23, 2020 9:13 am There is a good post from Money Moustache about this topic.
Check it on his blog.

[url][https://www.mrmoneymustache.com/2020/08 ... esting/url]

This is a not a political issue, its about our impact on earth.
It most certainly is political with a lot of misinformation. Disappointing that they let it stay open.
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by Firemenot »

makingmistakes wrote: Mon Nov 23, 2020 5:01 pm
finanzfrau wrote: Mon Nov 23, 2020 9:13 am There is a good post from Money Moustache about this topic.
Check it on his blog.

[url][https://www.mrmoneymustache.com/2020/08 ... esting/url]

This is a not a political issue, its about our impact on earth.
It most certainly is political with a lot of misinformation. Disappointing that they let it stay open.
What’s the harm in discussing? And most people steered clear of talking actual politics. Why root for a thread to be shutdown? I don’t get that thinking, but it is unfortunately quite prevalent.
Doctor Rhythm
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by Doctor Rhythm »

knockknock wrote: Mon Nov 23, 2020 6:00 am Going forward, I would like to have a portfolio that is 100% free of fossil fuel stocks. I am willing to take on the additional risk I am exposed to by not being invested in the whole market. Any boglehead attempt a completely fossil fuel free portfolio or have advice on building one?
I can’t vouch for the accuracy of the information on this site, but it may be a good place to start (along with the Fossil Free Funds site referenced upthread:

https://www.etf.com/sections/features-a ... nopaging=1
Samosa22
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by Samosa22 »

cadreamer2015 wrote: Mon Nov 23, 2020 10:50 am
Of course, I understand that the world runs on oil. I just don't want to directly fund fossil fuel companies by investing in them.
As long as fossil fuel companies are not selling additional stock to the public (I don't think this is at all common these days), you will not be directly funding fossil fuel companies by buying their stock in an index fund like Vanguard's Total Market Index. You will be buying shares of fossil fuel companies from other people who want to sell them. I don't see how buying a share of a fossil fuel company from your neighbor down the street or a pension fund in Austria directly funds a fossil fuel company.

BTW I have this same problem with the divestment drive that many students and faculty at colleges and universities have to pressure their endowment managers. If people sell enough stock in fossil fuel companies to depress the stock price, I'm sure there are enough investors operating with fewer moral or philosophical constraints somewhere in the world to buy the stock because it is a good financial investment at a lower price.

I do think you can make the case that fossil fuel companies profit potential is limited as the world moves away from fossil fuels. But that is picking winners, which is not favored by Bogleheads.
The most logical post I have read in this thread thus far.
Diversification is protection against ignorance - WB.
Firemenot
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by Firemenot »

Samosa22 wrote: Mon Nov 23, 2020 5:20 pm
cadreamer2015 wrote: Mon Nov 23, 2020 10:50 am
Of course, I understand that the world runs on oil. I just don't want to directly fund fossil fuel companies by investing in them.
As long as fossil fuel companies are not selling additional stock to the public (I don't think this is at all common these days), you will not be directly funding fossil fuel companies by buying their stock in an index fund like Vanguard's Total Market Index. You will be buying shares of fossil fuel companies from other people who want to sell them. I don't see how buying a share of a fossil fuel company from your neighbor down the street or a pension fund in Austria directly funds a fossil fuel company.

BTW I have this same problem with the divestment drive that many students and faculty at colleges and universities have to pressure their endowment managers. If people sell enough stock in fossil fuel companies to depress the stock price, I'm sure there are enough investors operating with fewer moral or philosophical constraints somewhere in the world to buy the stock because it is a good financial investment at a lower price.

I do think you can make the case that fossil fuel companies profit potential is limited as the world moves away from fossil fuels. But that is picking winners, which is not favored by Bogleheads.
The most logical post I have read in this thread thus far.
This thread has been actually rather thought-provoking for me. There are some things for myself that I’d rather not be associated with in anyway that are perhaps analogous to fossil fuel based on ones personal values (e.g., pornography), but I have no clue how I’d ever go about doing that being that I’m a hardcore index investor. I’m sure for others it’s tobacco, weapons production, conflict minerals, etc. The thread raises interesting philosophical questions for indexers. And I appreciated some of the insightful responses.
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by familythriftmd »

barnaclebob wrote: Mon Nov 23, 2020 12:37 pm Also buy buying oil company stock, you are not directly funding oil companies. Their stock is bought and sold on the secondary market unless there is some kind of dilution event.
Wow this is a really great way to put it! Even I felt a little "guilty" being in broad index funds with respect to the "anti-ESG" equities therein, but this helps by reframing the issue.
He/him/his
Carguy85
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by Carguy85 »

You are being intellectually dishonest to think that there must be be a boglehead way to not be a boglehead... pretty much along the same lines of WHY you want to do this..You could simply be a good steward of the environment as best you can and try to lead by example?? Otherwise, if you are feeling really lucky, pick some green stocks and roll the dice.
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by angelescrest »

Firemenot wrote: Mon Nov 23, 2020 5:11 pm
makingmistakes wrote: Mon Nov 23, 2020 5:01 pm
finanzfrau wrote: Mon Nov 23, 2020 9:13 am There is a good post from Money Moustache about this topic.
Check it on his blog.

[url][https://www.mrmoneymustache.com/2020/08 ... esting/url]

This is a not a political issue, its about our impact on earth.
It most certainly is political with a lot of misinformation. Disappointing that they let it stay open.
What’s the harm in discussing? And most people steered clear of talking actual politics. Why root for a thread to be shutdown? I don’t get that thinking, but it is unfortunately quite prevalent.
I agee with Firemenot. While I don’t think we share the same perspective, it’s valuable to discuss this in the open, though it’s hard to walk the line these days as so much of everything has been politicized in ways that make civil discussions so much more fleeting.

Some good points have been brought up here. I have also wrestled at some level with index investing, due to the fact that my money goes into every stock whether you want to support them or not. I continue to do so because there aren’t a lot of good alternatives that I’ve found. But I do put extra money into certain funds that I believe strongly in, in ways that go beyond pure investor returns. This is based on a personal conviction and not really anything else, though I look at financials carefully as it is still an investment you’d like to work. Might as well give charity if you don’t think they need to be profitable. Like when I bought Tesla in 2010, also Vestas, and First Solar. We know what happened with Tesla stock, but First Solar dropped something like 3/4 in value at that time if my memory serves right.

Maybe it doesn’t always make financial sense, but social science tells us that a big part of why people buy and own is for purposes of ego expression. So wanting to own certain stocks and not wanting to own others isn’t so unusual.
Last edited by angelescrest on Tue Nov 24, 2020 12:00 pm, edited 1 time in total.
angelescrest
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by angelescrest »

pseudoiterative wrote: Mon Nov 23, 2020 4:42 pm
Firemenot wrote: Mon Nov 23, 2020 4:32 pm TSLA actually isn’t a good choice if someone wants to actually be “green”. Look into how much fossil fuel is consumed in mining and processing all of the inorganics that go into their batteries.
I'll gently disagree: the goal isn't investing in something that has zero absolute environmental impact, that's simply not realistic -- a more pragmatic perspective is to push for something that's less damaging than the incumbent alternative. So framing it as "making batteries versus doing nothing" isn't helpful, it is more helpful to frame it as "the environmental impact of making and running electric vehicles versus the impact of making and running internal combustion vehicles".
+1. Well stated.
runninginvestor
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by runninginvestor »

Firemenot wrote: Mon Nov 23, 2020 4:48 pm
pseudoiterative wrote: Mon Nov 23, 2020 4:42 pm
Firemenot wrote: Mon Nov 23, 2020 4:32 pm TSLA actually isn’t a good choice if someone wants to actually be “green”. Look into how much fossil fuel is consumed in mining and processing all of the inorganics that go into their batteries.
I'll gently disagree: the goal isn't investing in something that has zero absolute environmental impact, that's simply not realistic -- a more pragmatic perspective is to push for something that's less damaging than the incumbent alternative. So framing it as "making batteries versus doing nothing" isn't helpful, it is more helpful to frame it as "the environmental impact of making and running electric vehicles versus the impact of making and running internal combustion vehicles".

That said, TSLA & some of its trendy EV manufacturing peers are able to raise capital _incredibly cheaply_ by selling their equity on the public markets, I don't think their economic prospects or the environmental outcomes are materially helped by additional investment, they've already got access to heaps of cheap capital.
There have actually been studies done that report that conventional cars over their entire lifespans (i.e., materials that go into, manufacturing, and lifetime use) have less overall negative impact in terms of resource depletion and carbon release than electric cars. I have no idea how much faith to put in such studies, but the batteries truly are pretty crazy. We’re talking lots of strip mining of rare earth metals in China and very energy intensive processing. And much of the power used to power the electric cars is still fossil fuel based.
Don't even need to get into these details if making this argument against TSLA. They sell regulatory credits to regular car manufactures that don't meet emissions standards, in effect, supporting that practice. This year alone they've sold nearly $1bln in credits.

In other words, it's tough to go all-in since there's murkiness around every company in this regard. Even if it's nearly impossible to ditch 100%, some of the links provided above with funds that attempt to, can help take steps in that direction. It doesn't necessarily have to be all or nothing (and quite impossible).
Last edited by runninginvestor on Tue Nov 24, 2020 12:09 pm, edited 1 time in total.
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by eye.surgeon »

knockknock wrote: Mon Nov 23, 2020 6:00 am Any boglehead attempt a completely fossil fuel free portfolio or have advice on building one?
My advice would be to reconsider. If you feel passionate about reducing your carbon footprint, do so by changing your consumption habits and lifestyle. Trying to hasten the transition from an oil economy by not investing in oil related stocks is like trying to change the weather by refusing to buy an umbrella. It just doesn't work. Now if results matter less to you than the emotional satisfaction of investing according to your world view, there may be value in that that exceeds the lower returns your portfolio will likely realize. These comments are not meant to disrespect your interest in the environment.
"I would rather be certain of a good return than hopeful of a great one" | Warren Buffett
RetiredCSProf
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by RetiredCSProf »

Here's a link that may help in your search: https://fossilfreefunds.org/
lgs88
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by lgs88 »

knockknock wrote: Mon Nov 23, 2020 6:00 am ... Any boglehead attempt a completely fossil fuel free portfolio or have advice on building one?
...
Lot of folks in this thread knocking this idea, but my portfolio today would be worth more had I not owned shares in Exxon Mobil for the last five years. Same with Occidental Petroleum!
merely an interested amateur
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by killjoy2012 »

I think the OP is kidding himself. Sure, if you don't like the idea of directly investing in the stocks of oil companies, by all means - don't. But I just have to laugh at the reference to Apple as a counter-example. I just ordered a new iPhone 12 Pro. You want to know how many components are made from oil? Or how about the diesel or jet fuel used to fly my phone from China to the USA. Or you really think Tesla is clean in terms of oil dependency?

Just not sure where you'd draw the line.
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by hnd »

killjoy2012 wrote: Wed Nov 25, 2020 12:32 am I think the OP is kidding himself. Sure, if you don't like the idea of directly investing in the stocks of oil companies, by all means - don't. But I just have to laugh at the reference to Apple as a counter-example. I just ordered a new iPhone 12 Pro. You want to know how many components are made from oil? Or how about the diesel or jet fuel used to fly my phone from China to the USA. Or you really think Tesla is clean in terms of oil dependency?

Just not sure where you'd draw the line.
yeah i think thats the big rub in all of this. the farther down the rabbit hole you go the dirtier it gets. add in that you aren't really technically directly investing in the company. and you'll sit there scratching your head.

its akin to one of the head people at PETA using a medicine that can only be manufactured by it being tested on animals. They justify it because you sacrifice a few for the many or some other justification.
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by illumination »

What about all of the people that burn fossil fuel? Like fuel for the car, to heat the home, or the power plants that make the electricity to charge electric cars and power homes? Aren't they equally as culpable?

I've always thought it's funny the people that zero in on the fossil fuel companies, but seem to turn a blind eye to all the people buying and using their products that's technically causing the pollution.
teniralc
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Re: Need advice for building a 100% fossil-fuel stock free portfolio

Post by teniralc »

knockknock wrote: Mon Nov 23, 2020 6:00 am Total market funds, that are central to the bogleheads investing strategy, have some portion invested into fossil fuel stocks. For example, VTSAX has a 6% investment in fossil fuels (e.g: ExxonMobil, Chevron, ConocoPhillips, Dominion etc.,). Going forward, I would like to have a portfolio that is 100% free of fossil fuel stocks. I am willing to take on the additional risk I am exposed to by not being invested in the whole market. Any boglehead attempt a completely fossil fuel free portfolio or have advice on building one?

If it helps: I am 28 yrs old and work at a tech megacorp with a salary of 230k with a net worth of 200k.
My opinion is that it is a bit more complicated than just not buying stocks that seem to be associated with fossil fuels. Believe me, I'm all for what you're seeking to do. I just think that there are so many overlaps that it is not so easy to accomplish. This article references how tax money is allocated, an interesting read: https://www.eesi.org/papers/view/fact-s ... etal-costs

My response is not intended to express any political view, just to point to how so many areas intersect–taxes, business, social issues, investments by the general public. I've had this conversation with my wife a number of times. She wants to do something like this, but I am not so sure it would accomplish what it seeking to do. My hope (in a perfect world) is that companies and boards of directors are pushed by the public to respond to these types of questions by the public.
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