First Ever Fossil-Free Index Fund Launches in U.S.

Sphere and Reflection Asset Management introduce mutual fund that excludes fossil fuels from 401k plans
November 16, 2021
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Sphere is partnering with Reflection Asset Management to launch the Sphere 500 Fossil-Free Index Fund (SPFFX), a mutual fund designed to “remove the barriers that have historically kept fossil-free options out of 401k retirement plans.” The California-based startup and the investment firm are touting the fund as the first U.S.-based option of its kind and comes on the heels of a Pew Research report that says 80 percent of Americans see climate change as a threat. Conversely, 99% of Americans with 401k retirement savings are not invested in climate funds, or funds that avoid owning fossil fuel companies.

While environmental, social and governance (ESG) funds are not new, the companies say that SPFFX is expected to “allow investors to make an impact, without giving up the expected returns on retirement savings.”

The fund is available on brokerage platforms, including Interactive Brokers, with Vanguard and Vestwell in the process of onboarding, and is also on 401k platforms such as Matrix and Mid Atlantic Capital Group. The announcement says that additional platforms are being added. Initially, financial firms Green Retirement and Carbon Collective plan to offer the fund to 401(k) clients.

SPFFX secured launching investments from Eliot Horowitz, co-founder of technology company MongoDB, and Clay Rockefeller, a member of the storied family–the latter’s foundation has committed to divest its $5 billion endowment from fossil fuel interests

The Sphere 500 Fossil-Free Index Fund (SPFFX) tracks the Sphere 500 Fossil-Free Index (SPFFXI), which comprises the largest 500 US companies by market capitalization, minus approximately 40 companies whose primary lines of business are in the fossil fuel industry, as noted by the Fossil Free Funds website, run by non-profit As You Sow.

The SPFFXI index was calculated by independent third-party index calculation agent BITA. The 40 or so companies that are excluded make up about five% of the total market capitalization of the top 500 group.

Sphere’s stated focus is to amplify a social movement to get 401k money out of fossil fuel companies. The company provides financial products that are 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. Reflection Asset Management is an SEC-registered investment advisor specializing in creating ESG strategies and registered funds that allow asset owners to align their values with their portfolios.