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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

By

Lynn Brackpool Giles

November 16, 2021

Image credit: © Andrew Parfenov | Dreamstime.com

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.

As with all investments, there are risks involved with investing in SPFFX. Risks include, but are not limited to, sustainability considerations, general market or market event, common stock risks, climate investing considerations risk, sector risk, and third-party data risks as it relates to the composition of the Index. For a detailed explanation of the risks associated with SPFFX and the underlying Index, please read the prospectus.

The Sphere 500 Climate Fund tracks the Sphere 500 Fossil-Free Index. The Sphere 500 Fossil-Free Index starts with the top 500 US companies by market capitalization and then excludes those companies designated as participants in the fossil fuel industry. The Sphere 500 Fossil-Free Index will not invest in companies whose main lines of business include producing, distributing, or refining fossil fuels, holding reserves of fossil fuels, utilities that are primarily fossil fuel-powered, and producers of equipment for any of the above. However, the fund may invest in companies that use fossil fuels as a part of their business or have used fossil fuels in the past. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Index returns do not reflect the effects of fees or expenses. It is not possible to invest directly in an index.

The performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. For the most recent month-end performance, please call 844-2-SPHERE or visit the fund’s website at https://www.oursphere.org/fund.

Index performance is discussed for illustrative purposes only as a benchmark for each strategy’s performance and does not predict or depict performance of that strategy. While index comparisons may be useful to provide a benchmark for a strategy’s performance, it must be noted that investments are not limited to the investments comprising the indices. Each of the strategy benchmark indices are unmanaged and cannot be purchased directly by investors. Past performance does not guarantee future results. No portion of the content should be considered a solicitation to buy or an offer to sell shares of the fund in any jurisdiction where the solicitation or offer would be deemed unlawful under the securities laws of such jurisdiction. The Sphere 500 Climate Fund is distributed by Ultimus Fund Distributors, LLC, member of FINRA and SIPC, which is not affiliated with Sphere or SPFFX. NOT FDIC INSURED NOT BANK GUARANTEED. MAY LOSE VALUE.