5 Best Low-Carbon Mutual Funds Focused On Clean Energy

Companies that have significantly lower exposure to fossil fuels are considered a good investment proposition. In fact, many regulating bodies, investors and consumers play an important role in guiding the companies to lower their carbon emission levels. Moving away from fossil fuels could be a costly affair for companies in the short term, but, will ensure its long-term sustainability.

In this context, it is essential to pick those mutual funds that have invested a considerable amount of their assets in low carbon mutual funds. These are basically mutual funds with low carbon risk courtesy of investment in low or no fossil fuel stocks. These funds are strong investment choices for those seeking stable gains and at the same time maintaining social responsibility.

Why Buy Low Carbon Over Fossil Fuel Funds?

Fossil fuel funds or low carbon funds invest in companies investing in fossil fuels or have high climate risk. Actually, in the past few years, investors divested at least $6 trillion of assets from fossil fuel funds. Fossil-free funds, on the other hand, bear minimal climate risk. The best possible way to identify a company that is focused on reducing its carbon footprint on the earth is through assessing its total carbon emissions derived from the company’s operations.

One more thing that is assessed is that whether a company’s management is taking necessary actions to reduce carbon emissions and produce products that are less carbon intensive. Companies with low carbon emission risk will be at an advantage to adapt to stricter carbon standards in the coming days. In this context, we have analyzed some of the key fund families that have lower exposure to fossil fuel stocks.

Fund Families Less Vulnerable to Fossil Fuel Funds

According to Fossil Free Funds and Morningstar, the top three fund families, American Funds (10%), Vanguard (9%) and Fidelity (7%), in terms of assets under management have exposure of not more than 10% in fossil fuel stocks. The total number of Vanguard mutual funds and exchange-traded funds that have no fossil fuels stocks are nine.

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