99% Of Americans' Retirement Funds Are Going Towards Fossil Fuels; This Startup Is Changing That

I scour the globe for stories worth reading about ventures that are a true force for good for humanity and our planet. 

That’s why I’m THRILLED to introduce Alexandra Wright-Gladstein, Founder and CEO of Sphere.

Alex and Sphere’s mission is to take billions of dollars away from fossil fuel companies and get them to come to the climate change negotiation table. 

Their impact to date?

Despite launching within the past month, they already have line of sight to getting $3B moved out of fossil fuel industry investments. Their immediate focus is on 401(k) and other defined contribution retirement plans, where employees typically have not had the option to avoid investing in fossil fuel companies until now. They are working with employees, employers, and advisors to get their fossil-free fund option added to 401(k) lineups, so that employees can make a choice to avoid investing in the planet’s biggest polluters. 

Let’s dive into the deep end.

Diana Tsai: What’s the problem you’re solving?

Wright-Gladstein: Over 80% of Americans are worried about climate change, but 99% of Americans with retirement savings are invested in the fossil fuel industry. Most people – over 80% – don’t realize that they are invested in fossil fuels, and the majority are not happy when they find out. I learned first-hand about the systemic reasons for this disconnect when I was running my last company Ayar Labs, which makes data centers more energy efficient by using light to move data between chips: I wanted to give employees an option to not invest in fossil fuel companies via our employer-sponsored 401(k) plan, if they didn’t want to. That turned out to be much harder to accomplish than I anticipated – it took three years for us to get a single fossil-free option in our 401(k) lineup. I now realize I wasn’t alone – lots of companies have been struggling with the same issue. When I dug into it and spoke with experts in the 401(k) industry, it became clear that there are some real structural reasons that it is hard to include fossil-free options in 401(k)s. But it also became clear that none of those obstacles are insurmountable. It just seemed that no one had tried to make it easy before. We created Sphere to make it easy for everyone to have the option to avoid investing in fossil fuels.

Tsai: How are you solving it?

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Wright-Gladstein: It turns out that a few very simple issues were preventing fossil free options from showing up in 401(k) plans: (1) the fact that most fossil free funds are expensive, and employers are oftentimes sued by their employees for having funds that are too expensive in their 401(k) plans, (2) for some reason many of the big 401(k) platforms don’t allow exchange traded funds (ETFs), and (3) Washington has given mixed policy guidance to employers on whether they can put values-aligned investment options in 401(k)s. We set out to address all three issues with our first product.

Our first product, the Sphere 500 Fossil Free Index Fund is a low-cost fund priced in line with similar funds that track the top 500 US companies (we don’t charge a markup for removing fossil fuel companies). It’s a mutual fund, not an ETF, so it’s allowed on 401(k) platforms. And it’s simple strategy of investing in the top 500 US companies and just removing the 40 or so fossil fuel companies in that list. This means that we’re not introducing an inappropriate amount of risk to a fund where, in the retirement space, you really want to avoid risk and diversify your investments. Those 40 fossil fuel companies only make up about 5% of the market capitalization of the top 500 group, and removing them has historically actually improved performance, because the fossil fuel industry has been underperforming the market at large for decades. This is key to getting employers comfortable given the mixed policy guidance on values-aligned funds in 401(k)s over the past few years: they can justify adding this fund to a lineup based on performance alone, without having to lean on values- or ethics-based reasoning.

In addition to offering products that make it possible for HR managers, CFOs, and 401(k) advisors to maintain their commitment to fiduciary duty while meeting their client’s needs, we are also amplifying a social movement that already exists within companies in which employees are asking for fossil free options. We are arming those employees with data they can bring to their HR managers about fossil free investment options, and we’re equipping them with tools that can help them be successful in bringing fossil-free investment options to themselves and their colleagues. The average person has invested $6,000 in fossil fuel companies, which is meaningful to remove, but when you scale that impact to an employee’s sphere of influence at their company, they can move $100Ms and even billions of dollars out of the fossil fuel industry just by helping their employers offer this option to their companies.

Tsai: Paint a future state picture for us of what the world looks like when you solve this problem.

Wright-Gladstein: The fundamental problem with all of us automatically investing our money in fossil fuel companies is that we are sending them a message that we are ok with their behavior, and we want them to continue on their current path. For the fossil fuel industry, that means funding the most influential lobbyists in the world, who fight tooth and nail against climate legislation that would keep us safe. We are sending a message to fossil fuel companies: come to the climate change negotiation table, and help us craft a framework that keeps us safe. Scientists have made it clear: if we heat the globe more than 1.5 degrees Celsius, that is when things start to get catastrophic. On our current path, we will blast through that limit in seven years. We don’t have time to waste, and we need the planet’s biggest polluters to be at the table helping us create the legislation that will keep us safe. Once that framework is in place, we will invest in fossil fuel companies again, because we will know that we can burn fossil fuels without creating a very scary planet to live on.

Tsai: What motivated you personally to start this company?

Wright-Gladstein: I’ve spent my whole career trying to reverse climate change, first through deep technology entrepreneurship, and now with Sphere. I decided to shift into the fintech space with Sphere because living through five summers in a row of wildfires in California, I realized that we’re running out of time, and I don’t have my whole career ahead of me to keep pushing for climate tech innovation – I need to make as much of an impact as I can within the next seven years. We’re at a moment in time when a vast majority of Americans are worried about climate change, but the systems and structures we live in don’t reflect our values. For example: someone may be worried about climate change, but have to drive a gas-powered car to get to work each day, because there’s no good alternative. Our society needs to shift quickly to change the status quo, and when I was thinking about how to influence that status quo, I kept coming back to the idea that money talks. There might be no single lever that is more powerful in changing the systems we live in than money. That’s why I started Sphere – so that we can all use our own money – and the money within our spheres of influence, our companies – to make a difference.

Tsai: A little vulnerability – how do you take care of you so that you can be the best version of yourself for the world?

Wright-Gladstein: Self-care is so important, especially when we’re working on such enormous and impactful issues as climate change – we have to take care of ourselves to be able to keep doing the work we’re doing. Self-care looks different to everyone, but for me it means prioritizing spending time with family and friends, as well as getting regular exercise and getting out into nature. I’ve really found that taking time away from work can help me see what I’m working on from a fresh perspective and be more effective when I get back.

Tsai: How can readers get involved / support / help?

Wright-Gladstein: They can go to oursphere.org to learn more about our first product, use our email template to email their own HR and ask for a fossil-free investment option in their company 401(k)s, and join our Atmosphere of people leading the movement to get their money to make a statement for the planet.

Learn more & take action:

OursphereSphere – Get fossil fuels out of 401(k)s