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Your retirement account could be financing problems for your future — but a green 401(k) could help

"It's okay to continue with business as usual."

"It's okay to continue with business as usual."

Photo Credit: iStock

If you are fortunate enough to have a job that offers a 401(k) — an employer-sponsored, tax-advantaged retirement account — it could go a long way toward helping you plan for the future. But, at the same time, that same 401(k) could also go a long way toward harming our planet's future due to investments in dirty energy and environmentally harmful businesses. 

For that reason, more and more people are becoming interested in green 401(k)s.

What is a green 401(k)?

To put it simply, a green 401(k) is a normal 401(k) that does not invest in dirty energy such as coal, oil, and gas.

Unfortunately, finding one of these plans is much easier said than done. According to a Plan Sponsor Council of America survey, less than 5% of 401(k) plans offer funds dedicated to environmental, social, and governance issues, with a large number of them directly investing in oil and gas extraction and deforestation.

How do I find a green 401(k)?

You can first ask your company if it offers a green investment plan. You can also make use of resources like corporate accountability nonprofit As You Sow's Fossil Free Funds search tool, as your company may be motivated to paint its investments as being more eco-friendly than they actually are.

What are the alternatives?

If your company is one of the many that does not offer a green 401(k), or if you are self-employed or a contractor, you have the option of opening up a self-directed brokerage account, which allows you to have input in where your money is invested. That's going to be more work — and potentially more risk — than a 401(k) that a company offers, but it's definitely worth it if it means that your retirement fund isn't directly financing the destruction of our planet.

You can also lobby your employer, as an increasing number of people are doing, to divest from dirty energy and offer more environmentally responsible choices for employees. 

"In terms of accelerating climate change, a key impact of continuing to invest in high-carbon industries [or] greenhouse gas emissions is signaling to markets and governments that it's okay to continue with business as usual," Andrew Behar, CEO of As You Sow, told CNBC.

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