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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

[email protected]

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.


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


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


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.


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.


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


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.


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]

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