From paycheck to planet: How to make your retirement fund climate-safe

Retirement savings may be funding the climate crisis, often without people realizing or agreeing to it. To offer solutions to make 401(k) plans climate-safe, Stand.earth and Carbon Collective hosted a teach-in on Earth Day that outlined workers’ rights within retirement plans and provided practical steps people can take to push for better options from employers.

“Americans hold $48 trillion in retirement assets, and $10 trillion of that is sitting in 401(k) plans alone,” said Amy Gray, Associate Director of Climate Finance at Stand. “These are not just abstract investment vehicles – these are our deferred wages of working class people; money we earned and set aside for our future and they are among the most powerful tools of capital in the world.” 

Most workers don’t actively choose how these resources are invested. Instead, they are placed into default options, often target-date funds designed to manage risk over time. These portfolios frequently include significant exposure to fossil fuel companies, linking workers’ long-term financial security to an industry facing growing volatility as the global economy shifts toward clean energy. 

“That means that retirement savings may be funding this industry and contributing to the climate crisis without workers’ knowledge or consent,” Gray said.

Making climate-smart investing the new default

Fossil fuel assets are increasingly risky in a world that is rapidly scaling renewable energy, and investment portfolios must keep pace with these changes. 

“Renewable energy is becoming the dominant form of energy in the world,” said Breene Murphy, President of Carbon Collective. “Over 90% of added energy is supposed to come from renewables in 2026. But our portfolios are not reflective of where the world is going.”

This gap between market reality and investment strategy represents a growing financial risk. Calling for climate-safe retirement funds is not a political issue, but a matter of risk management. Under U.S. federal law Employee Retirement Income Security Act (ERISA), retirement plans managers have a fiduciary duty to act in workers’ financial best interest. That includes managing material risks, such as climate risks. As legal scrutiny grows, employers and asset managers must be able to fulfil this duty.

The good news is that change is possible and often straightforward, as adding climate-safer options to a retirement plan is technically simple. 

“We came up with an investment philosophy that we’ve been calling climate smart,” Murphy explained. “It consists in aligning portfolios with what climate scientists and economists say about where the economy is heading: away from fossil fuels and toward climate solutions like renewable energy.”

How to request a climate-safe investment option

Stand has developed a Climate Safe Retirement Advocacy Toolkit to support workers in taking action for climate-safe investment options in their retirement plans. The toolkit outlines a three-step process:

1. Learn and gather information – Start by reviewing the retirement plan and the available investment options through the plan provider’s website. Identify whether climate-safe options exist and assess current exposure to fossil fuels. If needed, request key documents (such as Summary Plan Descriptions, Investment Option Brochures, and performance reports) from the plan administrator or the employer’s Human Resources department.
2. Evaluate and ask for change – If no climate-safe option is available, submit a formal written request asking for sustainable investment alternatives. This request should outline concerns about financial risk and the need for better-aligned options. Stand provides a template letter in the Advocacy Toolkit. Submissions can be made via email, online portals, or certified mail, with copies retained for documentation.
3. Report back – After submitting the request, outcomes should be documented and shared through this form. Each submission helps demonstrate growing demand for climate-safe retirement options. Whether the request is approved or denied, contact the Stand team. 

 

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