In early June, three months into the pandemic, I could no longer ignore my conscience. The COVID-19 virus had already killed 100,000 people in the United States and was on an uncontrolled spike in my home state of California. Over 40 million people were unemployed, myself included. In the wake of the Minneapolis police’s murder of George Floyd, millions of people took to the streets of America simply to declare that Black lives matter. 

Yet through it all, the stock market continued to rise. While thousands per day were dying in overcrowded hospitals, the Dow, Nasdaq, and S&P 500 were all merrily en route to their best quarter in the past 20 years. While millions suffered around the world, billionaires in the United States increased their wealth by $600 billion. It made no sense, and it felt wrong in every way possible. 

And through a few small retirement accounts, I was one of those people profiting—a disturbing reality that gnawed at my conscience. How could I stand against inequality while invested in a system that exacerbates it? How could I be a climate activist when I could be financing fossil fuels through my 401(k)? It was time, I finally decided, to get out. 

Of course, our economic system has long been an anathema to our planet. Inadequately pricing “market externalities” like pollution and climate risk, under-valuing ecosystem services and their benefits, massively discounting the future, pursuing the myth of limitless growth in a world of finite resources—there are a wealth of ways in which pure economic growth at best fails to adequately value the environment and at worst hastens its destruction. But it was the Occupy Wall Street protests a decade ago that first provoked my disgust with the stock market. As millions of Americans lost hard-earned savings, jobs, and houses as a result of predatory lending and fraud, it fueled my antipathy toward a system that indiscriminately spreads risk to everyone while ensuring most profit flows up to just a few already-wealthy people. Over the past decade, financial inequality has only worsened: Today almost 90 percent of the wealth in the stock market is owned by just 10 percent of extremely wealthy investors. 

And that doesn’t even account for the blatant racial inequality in our financial system. Before Wall Street became a capital hub, it was a slave market, and many of our legacy financial institutions participated in, and profited from, the slave trade (looking at you JPMorgan Chase, Bank of America, Citibank, and Wells Fargo). Considering that for its first 150 years, Wall Street gave zero opportunities to women and people of color, it should not surprise anyone that today Black and Latino investors are fewer in number, hold less than 2 percent of the stock market’s total value, and along with women are woefully underrepresented on corporate boards and in executive positions. The stark reality is that throughout its history and still today, the stock market has been a wealth-creation vehicle for already-rich white people—predominantly men. And for those demographics, it is an exceptionally good one.

After the Great Recession and the Occupy Wall Street protests, I became fascinated with socially responsible investing: the idea that funds choosing to screen out or blackball publicly traded companies affiliated with fossil fuels, weapons, terrorism (yes, an actual criteria!) can create both profit and positive change. Sometimes called ESG (environmental, social, and governance) investing, it has rapidly grown from a niche market a decade ago to a nearly $100 billion behemoth that includes a host of renewable energy and fossil-fuel-free investment funds, an index of Black and minority-owned companies curated by the National Association for the Advancement of Colored People, and funds only invested in companies with women and gender-diverse leaders (for the record, Sierra Club Foundation is a participant in Divest Invest, a movement to encourage socially responsible investing). Campaigns by activist groups like 350.org, the Sierra Club, and Fossil Free have led to the divestment of billions of dollars from the world’s largest investor-owned polluters like Chevron, ExxonMobil, and BP—as well as the institutions that finance them. So why not simply divert my money away from these dirty companies instead of leaving the stock market altogether?

For several years, that’s exactly what I did. After finally accruing some retirement money, I invested in two socially responsible funds in 2016 and 2018: a state-sponsored 401(k) with a “socially responsible” option and a well-known green sustainable fund that is highly rated and recommended. I assumed my money was doing some good, the central premise of ESG funding. But when I saw these funds continue to increase through last year’s summer of pandemic and protest, I became curious—what exactly were these funds investing my money in? Could I really feel good about them?

You can probably guess the answer. Upon investigation, I learned that the green fund’s top 10 holdings include a pharmaceutical company that once created a sham medical science journal in order to boost its products and that was fined $1.5 million by the Environmental Protection Agency for pollution at a Pennsylvania manufacturing facility. The company has also paid over $5 billion in settlements for routinely over-billing Medicaid for its medicine and lying about a pain-killer that actually doubled risk of heart attack and stroke. The fund’s other main investments include Apple, Microsoft, and Google, which, interestingly enough, were all top holdings in my other socially responsible fund as well. 

These tech companies have committed to laudable renewable energy and emissions goals but also face accusations of monopolistic behavior, blatant tax evasion, and workplace sexism. Google of course is currently embroiled in a large antitrust case with the United States government, after already losing one in Europe. Microsoft is partnering with one of the world's largest oil and gas companies to use its cloud computing technology for fossil fuel extraction, and it faces a long-running Internal Revenue Service investigation for shielding billions of dollars in profit from taxes. In fact, even though Apple, Amazon, Facebook, and other tech companies are accused of evading over $100 billion in taxes since 2010, they are usually driving returns in many of the so-called socially responsible funds that I researched. Of course, none of that behavior has hurt their stock prices, which hit repeated record highs during the coronavirus pandemic.

Shockingly, there was even less transparency in my state retirement fund. After working several years as a state environmental scientist, I was invested in CalPERS, California’s massive state pension system. Unlike my other 401(k) funds, which were required to at least disclose their current top 10 investments, the most recent investment report available for CalPERS is from 2018 to 2019. Once at a routine CalPERS presentation in my office, I asked about green retirement fund options and if there was a way to make sure my money (my mandatory contribution was 8 percent of my paycheck) wasn’t supporting fossil fuels or weapons—and I was kindly told I could write the $400 billion fund a letter with my concerns. 

However, there are clues to how CalPERS allocates its money, scattered like a trail of breadcrumbs through a dark, impenetrable forest: The fund reportedly lost $1.5 billion investing in tar sands and fracking last year, and remains heavily invested in fossil fuels despite the fact that 20 percent of their investments are highly exposed to climate change. In the past, CalPERS has rejected pressure to divest in guns and has a current director advocating to end what is apparently one of their only investment screenings: tobacco. CalPERS owned 288,000 homes and lots in 2008, and by 2011 had lost $11 billion on its real estate gambles. The pension fund has faced past bias and corruption on its powerful board, and its chief investment officer abruptly resigned last year. Again, all this information comes second-hand from reports and public notices, since it appears—incredibly—that one of the largest public pension systems in the world can invest in whatever it wants with minimal accountability to its 2 million members. This despite the fact that “openness” and “integrity” are listed as some of the CalPERS’ core values.

It became clear to me that CalPERS and my so-called green and socially responsible funds fell far short of my expectations. But what was the alternative? Two years ago when I first began to consider getting out of the stock market, a friend sent me a podcast about a lawyer who invested his retirement money into a koa tree farm in Hawaii—and that was how I fell into the world of self-directed retirement accounts. Essentially an administered checking account, it gives investors the flexibility to use their retirement savings to buy real estate, invest in local community businesses like farms or solar projects, or even buy mineral rights or cryptocurrencies. It sounds simple, but when I finally got serious about opening one last June, neither my credit union nor any of my local banks had heard of such an account, let alone knew how to set one up. I finally resorted to a bank specializing in self-directed retirement accounts and had mine up and running in a day. But that was the easy part. As I quickly learned, investment companies make it very, very difficult to extract your retirement money.

On the phone with my financial institution’s customer service representative, I asked how to transfer my retirement money to my own personally managed account. There came a hesitant pause. “OK,” the representative finally said. “I need to consult with my supervisor. Can I put you on hold?” After a long intermission, he brightly informed me all I needed to do was send five separate documents about my self-directed account—though, he cautioned me, he couldn’t guarantee his institution would accept them. And no, they could not electronically transfer my funds; they could only mail me a check that I had to deposit within 30 days. As I scribbled down notes and question marks on what to send, I asked for an email address to send the documents. Unfortunately, that wasn’t possible, the rep told me, regretful sympathy in his voice. This financial company, which proudly claims to be one of the largest in the world, somehow can only accept documents via fax or snail mail. But all was not lost. “Can I read you your change of address confirmation code?” he chirped, and proceeded to rattle off a 12-digit sequence.

In the end, extracting my retirement money took hours of digging through investment firm websites to find nonexistent account closure forms, countless hair-pulling phone calls and back-and-forth with opaque financial institution bureaucracies, and mailing envelopes stuffed with pages of information about my new account for them to review. At one point I found myself in line at the local FedEx store, incredulously asking about their rates to send a fax. Finally in December, after over six months of trying, I extricated the last cent of my money from a financial system that set new records even as Trump supporters rioted and stormed the capitol on January 6.

How much of a difference does pulling my retirement chump change out of a $100-trillion-dollar system actually make? The answer, of course, is not much. At least not to the stock market, anyway. But my money can actually make a difference somewhere else. Instead of an unethical pharmaceutical company, I’m now invested in a California community development institution that provides loans and services to low-income and minority farmers. Instead of Google, I’m directly invested in a local company developing electric tractors. 

To be clear, this approach to local, “slow money” investing definitely takes more time and effort. As I spent hours researching community funds and talking to people, I learned the full definition of the word investment. And yes, generally there is a lower financial gain—a concern that for me is balanced out by the security of being insulated from the next inevitable stock market crash. In return, I am free of inadvertently investing in fossil fuels and greedy corporate tech monopolies and free of a racially unjust system that exacerbates inequality by shunting 90 percent of the wealth it creates to those who need it the least. And that’s worth more than money to me.

The Sierra Club is working to raise awareness of sustainable investment strategies, but the Sierra Club is not an investment adviser or a securities broker. It has no expertise in the evaluation of investments and is not qualified to make (and is not making) recommendations to any person regarding investments. You should evaluate a potential investment with any provider based on your personal financial situation and goals, in consultation with your own advisers.