Roughly 35 million retirement plan participants with Vanguard and Ascensus can now invest in the first “climate-friendly fund made for 401ks,” Sphere announced today.
The Sphere 500 Fossil-Free Fund (SPFFX) from Walnut, Calif.-based Sphere invests in the Top 500 U.S. companies (by market capitalization) minus fossil fuel companies and votes its shares in the companies it owns to promote climate action.
“Adding SPFFX to Vanguard and Ascensus makes climate-friendly investing available to millions more investors across the country”
Sphere’s Alex Wright-Gladstein
Over 80% of Americans see climate change as a threat, but climate-friendly funds hold less than 1% of 401k money, the company said in a news release announcing the new availability. Sphere said it launched SPFFX to make it easy for every employer to offer climate-friendly investment options via their 401ks.
Regarding voting the shares in the companies the fund does own in a “planet-friendly” way, Sphere uses the As You Vote proxy voting service from non-profit organization As You Sow, which it says gives investors a voice by encouraging the companies it invests in to take climate action.
In noting that 401k plan sponsors have a fiduciary responsibility to ensure that investment options offered in plan lineups do not compromise on performance—even when aligning with the climate values of employees—the Sphere approach relies on research showing that excluding fossil fuel companies has improved returns across 1, 3, and 5 year time frames. Over a 40-year period, the investment performance of portfolios that exclude fossil fuel production companies does not significantly differ in terms of risk and return from those that include them.
Sphere index’s 10-year back test validates the academic findings, the company says. “This simple approach makes it possible for plan sponsors to add SPFFX to a plan with confidence that there is documented reasoning for doing so from a fiduciary perspective,” the release states.
SPFFX is offered at an expense ratio of 0.07%, avoiding a 10-30x pricing premium that is often added to environmentally focused funds. This pricing is intended to make it appropriate for 401k plans, where excessive fee lawsuits are common.
“Adding SPFFX to Vanguard and Ascensus makes climate-friendly investing available to millions more investors across the country,” said Alex Wright-Gladstein, founder and CEO of Sphere. “We could not be more pleased to be working with these world-class investment platforms to make climate-friendly investing available and affordable for all.”
Sphere partnered with Reflection Asset Management to launch the index fund in Nov. 2021. The company’s stated focus is to amplify a social movement to get 401k money out of fossil fuel companies by providing financial products designed for 401k plans, and allows human resources managers and their advisors to maintain their commitment to fiduciary duty without having to compromise on climate.
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