“If environmental concerns aren’t reason enough to divest from the dirty energy sector,” proselytized Sierra Club Executive Director Michael Brune recently, “do it out of selfishness, because companies that depend on their fossil fuel reserves for future earnings are simply a bad investment these days.”
Not bad enough for the Sierra Club, however. Despite its strident divestment advice and general blustering against conventional energy, its pension holds $22.1 million in index funds that include major fossil fuel companies, according to an audit of the Club’s 2012 financial statements by the accounting firm Grant Thornton.
For example, the biggest holding in the Russell 1000 Value is Exxon Mobil and the fifth biggest is Chevron. The S&P 500 includes 43 conventional energy companies. The fourth biggest holding in the MSCI EAFE is BP and sixth biggest is Royal Dutch Shell. And, the Russell 2000 Indexes have dozens of big name oil and gas companies in their portfolios. These indexes all figure prominently in the Sierra Club’s pension plan portfolio according to the audit.
Based on a back-of-the-envelope calculation, the monetary value of these energy investments is around $1.4 million.* Talk about not putting your money where your mouth is.
How can this be? The Sierra Club seems to exploiting a loophole in its own policy of not investing in conventional energy. True, the Club does not own any direct individual or hedge fund investments in conventional energy, and its foundation is “actively divesting” from fossil fuel companies. But the Club’s pension fund still earns value off of energy investments that are indirectly owned in broad index funds that include multiple companies. (When the popular environmental news program Living on Earth raised this issue last year, the Club responded that it was in the process of divesting. We’ll have to wait for 2013 financial statements to see to what extent this is true.)
Whether owned directly or indirectly, the hypocrisy remains the same. The Sierra Club is betting that fossil fuel companies will succeed in the future, while at the same time castigating them on all fronts in its day-to-day operations. Before the Sierra Club asks another foundation or university to risk its financial security and divest from conventional energy, it should put its money where its mouth is and do the same thing for its pension fund.
*Methodology:
Index |
Percent of Pension Plan |
Dollar Amount |
Energy as Percent of Index^ |
Dollar Amount |
Russell 1000 Value |
17% |
$ 3,760,196 |
15.1% |
$ 567,038 |
S&P 500 |
16% |
$ 3,539,008 |
10.7% |
$ 376,904 |
Russell 2000 Value |
8% |
$ 1,769,504 |
6.9% |
$ 121,211 |
MSCI EAFE Value |
8% |
$ 1,769,504 |
11.1% |
$ 196,238 |
Russell 2000 |
7% |
$ 1,548,316 |
5.9% |
$ 91,041 |
MSCI EAFE Small Cap |
4% |
$ 884,752 |
3.9% |
$ 34,328 |
U.S. 20-Day Treasury Bill |
2% |
$ 442,376 |
0.0% |
$ – |
Lehman Bros Govt/Corp Bond |
38% |
$ 8,405,144 |
0.0% |
$ – |
Total |
100% |
$ 22,118,800 |
$ 1,386,760 |
^Will vary slightly based on the specific exchange traded fund (ETF)