Your Money Has a Carbon Footprint (Even If You Don’t)

Most of us focus on reusable water bottles, composting,, and avoiding $9 crop tops (yes, that’s the reason I quit crop tops). But here’s the kicker: For many Americans, the carbon footprint of their investments is larger than their footprint from flying, driving, eating meat, and fast fashion combined.

If you have:

• A 401(k)
• An IRA
• A brokerage account
• A college savings plan
• Or even just a bank account

Your money is likely invested in funds that include fossil fuels, industrial agriculture, deforestation, private prisons, weapons manufacturers, and the whole cast of characters. Frustratingly, this isn’t because we’re bad people, it’s because the financial system defaults to “maximum return” and not “maximum responsibility.” Here’s what we can do to help it. 

Look Under the Hood of Your 401(k)

According to As You Sow, US workers collectively own one-fifth of all US fossil fuel stocks through their 401(k)s. One fifth. The S&P 500 - which is likely what your default target-date fund tracks - has historically had significant exposure to oil and gas companies. I’m sorry to report that you’ve been an involuntary fossil fuel investor, and nobody told you. Here’s what to do, and I promise this is less scary than it sounds.

Log into your retirement account and look at the funds you’re invested in. Most people are in a Target Date Fund (like “Retirement 2055”), which bundles together hundreds or thousands of companies.

Some questions to ask:

• Does this fund hold fossil fuel companies?
• Does it include major deforesters?
• What’s the exposure to coal?

You can use tools like:

As You Sow’s Fossil Free Funds tool

Morningstar’s sustainability ratings

You don’t have to go full activist overnight. Even shifting from a traditional S&P 500 index fund to an ESG-screened or fossil-free version can meaningfully reduce financed emissions.Only about 15% of 401(k) plans currently offer an ESG-screened fund, but if yours does, it may be buried in the menu. 

Will it tank your returns? Research says: not necessarily. In many cases, performance is comparable.

Pro tip: Ask your HR department why your plan doesn’t offer any sustainability options. Plan administrators are fiduciaries - they pay attention to what participants want. A petition of even a handful of employees at Google resulted in a full review of their plans’ fossil fuel exposure, and if it can work at Google, it can work at your small business. 

The IRA Advantage

Unlike your 401(k), which is limited to whatever your employer has negotiated, an IRA gives you full control over where your money goes. Traditional IRAs and Roth IRAs both let you choose from thousands of funds — which means you can be as intentional (or unintentional) as you want with your sustainability choices.

A few of our favorite sustainable IRA options:

• Green Century Funds IRA: One of the oldest fossil-free mutual fund families in the US, dating back over 30 years. They screen out fossil fuels, nuclear weapons, tobacco, and GMOs. You can open a Traditional or Roth IRA directly with them at greencentury.com. ($15/year recordkeeping fee.)
• Sphere 500 Fossil-Free Index (SPFFX): Available through Fidelity, Vanguard, and other major brokerages, so you don't have to open a new account. Just buy it like any other fund within your existing IRA.
• Parnassus Core Equity Fund (PRBLX): A well-established ESG mutual fund that's been around since 1984 and screens for environmental and social criteria. One of the most widely available ESG options on major platforms.
• Ellevest: If you want a robo-advisor experience with ESG portfolios built in, Ellevest lets you open an IRA with sustainable funds already selected. Lower minimums, hands-off management.

Green Investments — But Make It Smart

Let’s talk “green investing.”

This can mean a few things:

1. ESG Funds

These screen companies based on Environmental, Social, and Governance metrics. Not perfect. Sometimes watered down. But better than blind indexing. Here's the honest context: the Trump administration is actively working to roll back the Biden-era rule that allowed 401(k) plan managers to consider ESG factors when selecting funds. As of early 2025, the DOL has signaled its intention to replace that rule entirely. This doesn't mean ESG funds will disappear from 401(k) plans, but it does mean less regulatory pressure from above to include them.

For your IRA and brokerage account, none of this matters. You're making your own decisions there, and no administration can tell you what to buy. For your 401(k), the argument for asking your HR team to add sustainable options becomes even more important when the top-down pressure is gone. The bottom-up pressure — from employees who care — is all that's left.

2. Fossil-Free Funds

These explicitly exclude coal, oil, and gas companies.

3. Impact Investing

Investing directly in climate solutions — renewable energy, regenerative agriculture, clean tech, circular economy companies. This is where it gets exciting. The global transition to clean energy isn’t a niche side project anymore. It’s one of the largest capital shifts in history.

You can align your money with the future you want to see — without lighting it on fire.

Brokerage Accounts: The Wild West (In A Good Way)

If you have a taxable brokerage account — meaning money you've invested beyond your retirement accounts — you have the most flexibility of all. No contribution limits, no employer gatekeeping. The tradeoff is that you'll owe taxes on gains, but that's a problem for future you.

Here's what you can do with a standard brokerage account that you can't always do with a 401(k):

• Buy fossil-free ETFs directly. Charles Schwab, Fidelity, and Vanguard all offer ESG-screened ETFs at low expense ratios. Schwab alone lists over 200 ESG ETFs. Search for terms like "ESG," "clean energy," or "fossil-free" in your brokerage's fund screener.
• Invest in clean energy directly. If you want to go beyond funds and pick individual stocks or sectors, companies like NextEra Energy (NEE) — the largest renewable energy producer in the US — or Hannon Armstrong (HASI), the first US public company solely focused on climate-solution investments, are worth researching. Individual stocks carry more risk; just know what you're buying.
• Use the As You Sow screener. At investyourvalues.org, you can screen funds not just for fossil fuels but for deforestation, weapons, gender equality, and more. It's genuinely a remarkable free tool that will make you a better informed investor in about ten minutes.

Consider green bonds or CDFIs. Community Development Financial Institutions are mission-driven lenders that finance clean energy projects, affordable housing, and small businesses in underserved communities. Some platforms like Calvert Impact allow individuals to invest directly in CDFIs with relatively low minimums.

Where You Bank Matters Too

Your checking account isn’t just sitting there looking pretty.

Traditional big banks are some of the largest financiers of fossil fuel expansion globally.

There are alternatives:

• Credit unions
• Community development banks
• Climate-focused financial institutions

Some banks now explicitly avoid funding new fossil fuel projects and invest heavily in renewable infrastructure. In the interest of transparency, it’s extremely frustrating to switch banks, and my customer experience at Alpine Bank pales in comparison to JPMorgan Chase, but it’s also wildly empowering to know your money isn’t funding Arctic drilling. 

Spend Less on Stuff, More on Longevity

We’ve talked about fast fashion math before . The same applies here:Cheaper upfront often means more waste (financially and environmentally) long term.

TL;DR Tax Season Checklist

1. Log into your 401(k)
2. Check your fund holdings
3. Consider fossil-free or ESG alternatives
4. Evaluate your bank
5. Allocate part of any refund toward climate-positive upgrades

Even one step matters.