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Deforestation Free 401(k)s: A How-To Guide
To help build a cleaner, more socially responsible world
for the people | for the planet | for the futureHOW-TO GUIDE | July 2016
2 | Deforestation Free 401(k)s: A How-To Guide
Friends of the Earth US
Washington, D.C.
1101 15th Street NW 11th
Floor
Washington DC 20005
Phone: 202-783-7400
www.foe.org
Friends of the Earth US
California
2150 Allston Way Suite 360
Berkeley, CA 94704
Phone: 510-900-3150
©Copyright July 2016 by Friends of the Earth U.S.
Please visit us at
www.foe.org
For questions or comments,
please contact
for the people | for the planet | for the future
Many thanks to As You Sow for inspiration and feedback in
the development of this How-To Guide, (www.asyousow.org)
Deforestation Free 401(k)s: A How-To Guide | 3
How forest friendly are your 401(k) fund choices?
Your 401(k) portfolio could be
an engine for more positive
impact. Learn how you can help
move your employer-sponsored
retirement plan to offer a palm
oil-safe and socially responsible
fund, allowing you to invest
your retirement to help
build a cleaner, more socially
responsible world.
4 | Deforestation Free 401(k)s: A How-To Guide
Photo: Jason Taylor/FoE International
Retirement
Consumer brands
Deforestation & Labor exploitation
Indonesia • Malaysia • Uganda • Nigeria • Guatemala • Peru
Palm oil producers and traders
• College Professors• Government employees• Non-profits• Unions
Responsible personsaving for retirement
401K Investment
Retirement Investment
Investment firms
and more...
How your money may be tied to dirty palm oil
Deforestation Free 401(k)s: A How-To Guide | 5
If your investments are in your employer-sponsored plan at work
If you don’t have an IRA or a personal investment
that you control, one of the best ways to make
sure you’re not invested in problematic palm oil
companies is to work with your employer to add
one or more palm oil-safe and socially responsible
funds to the list of your employer-offered 401(k)
options.
You will need to engage the plan administrator,
point them to the right list of funds, and make
the case as to why offering such fund options is
important. This may take time and possibly some
coordination with your co-plan participants. We
outline steps below that will help you work with
employer to make this happen.
A partial list of companies that have pledged to go ‘deforestation free’ as of September, 2015
6 | Deforestation Free 401(k)s: A How-To Guide
1Talk to your colleagues and build a coalition
To effectively advocate for palm oil-safe offerings
through your employer-sponsored plan, first build
a coalition of peers and interested co-workers
inside your company. Your voice will be much
stronger as a group. If you’re writing to someone
in power, advocating on behalf of 10 or even
20 people carries a lot more weight than just
one. One way to spur interest would be sharing
results from Deforestation Free Funds with
fellow employees. This can be done using social
media available on each page of the site. All
plan participants are offered the same basket of
mutual funds as you are, so they are probably
asking the same questions right now. It will
certainly make interesting conversation over the
water-cooler.
Some companies have “green teams,” or there
may be other employee sponsored affinity groups
you could approach. If there isn’t one already, it
may be time to create one that can address palm
oil investments and deforestation. Communicate
with your co-workers through a company intranet,
employee portal, a company newsletter, corporate
chats, or social media. The herd is heard! So,
create a petition or letter to the HR manager,
the CEO, or your company’s 401(k) manager as
a first step. Also, engage those employees most
interested in supporting this quest to be allies
who will call or write individually, at crucial points
in the process, as you move forward.
Deforestation Free 401(k)s: A How-To Guide | 7
2Identify the best people in the company to speak with
The 401(k)/403(b) plan administrator, manager, or coordinator
should be known to you if you are a plan participant. This
is the person that will ultimately have to agree to make the
requested change. But, to make sure you have the best chance
of success when approaching such managers, in addition to
building a coalition of supportive employees, consider building
a coalition of support, or a few key allies, within the company.
Your company might have a chief sustainability officer
or employee engagement manager, which could be good
resources in supporting your effort. One effective place to
start building allies is to go to LinkedIn pages and find those
persons who might have some sympathy for the cause. Do
any of them volunteer or have connections with organizations
concerned with climate change? Look for indicators that
they’re friendly to sustainability and start contacting them in
order of their friendliness. In a publicly listed company with
more structure, a coalition is vital to signal to managers that
it’s an important issue for many employees. If it’s a smaller
company, the CFO or CEO could be approached directly. In a
mid-size or family company, a family member could be more
influential.
8 | Deforestation Free 401(k)s: A How-To Guide
3Bring a solution to the table
The usual starting point in these conversations is: “We want to avoid investing in companies that contribute to deforestation. We also want to reduce the future risk of our 401(k) fund choices. Adding funds to our 401(k) choices that are rated as both palm oil-safe and socially responsible on the Deforestation Free Funds tool is an easy way to do so.”
Note that getting three fund choices added to the existing 15-30 is a formal process, and could take up to a year. Larger companies often have some form of investment committee, which engages an investment advisor.
If the investment advisor and plan administrator refuse to help in swapping out funds invested in deforestation and dirty palm oil (or fossil fuels, for that matter), you may need to pull out your employee petition, or organize letters or calls from your management supporters to the investment committee. If you are told, “But you’ll make less money if you’re not invested in palm oil or fossil fuels,” you can say, “Actually, investing in companies that destroy forests and cause social conflicts is a risky bet. In fact, the Department of Labor recently affirmed that environmental and social factors may have a direct impact on the value of an investment, and can be considered as part of a 401(k) administrator’s fiduciary duty.”
To find out if your money may be invested in palm oil-related deforestation, and to find clean funds, look at DeforestationFreeFunds.org
Deforestation Free 401(k)s: A How-To Guide | 9
If you’re an individual investor
It is fairly easy to reinvest the investments
you have in dirty palm oil. You can trade
your own portfolio, or tell your manager
to do it. It’s your money, and your financial
advisor works for you. You just need to
have a meeting to discuss what you have
learned about your holdings and how
you would like your holdings changed
to align with your values. An investment
professional will advise you of potential
risk and you can make your decisions.
They may push back and tell you that
you’ll make less money. Again, you can
reply, “Maybe, but it’s my money, I want
less risk, and dirty palm oil companies
are risky business – look at fossil fuels
and conflict diamonds.” Your financial
advisor wants, and it’s their job, to make
you money, so you should drive home the
point in no uncertain terms. You should
also let them know that their fiduciary
duty to you includes consideration of your
appetite for environmental and social
risk. Ask for help finding the best choices.
The advisor may say no if you tell them to
invest in a specific fund because it has a
short or rocky history, so you may need to
be patient as they find a better alternative.
The goal is to focus on and remove the risk,
especially future risk, as well as returns,
not a specific fund. If your manager is
being lazy or unwilling to help you with
this transition, find a new advisor. If your
broker is tied to a big-name brand, they
may only be able to offer products that the
particular company has approved. If you
want innovation, you might need a new
advisor.
10 | Deforestation Free 401(k)s: A How-To Guide
Sample petition letter to Retirement Plan manager
Dear Plan Administrator,
I am an employee of [Company Name], and I participate in our company 401(k) plan. I am writing to raise concerns about tropical deforestation and human rights abuses that may be supported by our current investment policy and about my desire to have options for socially responsible funds.
Palm oil is used in over half the food and cosmetics on our shelves and is the single fastest- growing driver of deforestation, displacement of forest-dwelling indigenous communities across the tropics, and is a major driver of climate change. As the palm oil sector’s environmental and social effects become more widely recognized, investments in these destructive palm oil companies are becoming increasingly risky.
I [and the attached list of employees] would like to be able to invest in a fund that does not harm forests for purposes of palm oil production or sales. Through use of an online tool at deforestationfreefunds.org I was able to analyze many commonly available mutual funds and identify ones that earn a top score regarding the global palm oil trade. Importantly, this tool also provides information on funds that are also socially responsible. I note that none of the funds offered in our 401(k) fund are currently palm oil-safe and socially responsible.
In addition to palm oil-safe, I [we] seek a fund that is socially responsible. Socially responsible investing is no longer just an ethical issue, it is a key factor in reducing investment risk and impacting financial well-being. New guidelines from the Department of Labor state that “environmental, social, and governance factors may have a direct relationship to the economic and financial value of an investment” and can be used when making decisions related to fiduciary duty.
Since none of our current plan options are both socially responsible and earn a top rating as palm oil-safe, I request that our 401(k) fund plan begin offering one or more such funds in which interested employees can invest. The deforestationfreefunds.org tool is a good option for finding suitable mutual funds that could be included in our plan.
Thank you in advance for looking into this. I appreciate your time and look forward to hearing from you.
Best,
[Your Name]
[Your contact information (company department, email, phone)]
[Attachment: Employee/manager letter of support]