However, if investing in the usual diversified mutual funds packed with climate science-denying coal and oil companies gives you pause, take heart. The investment industry now offers numerous low-cost ways to salve your conscience without sacrificing performance.

Furthermore, going fossil-free reduces risk. The entire world has agreed to avoid climate catastrophe by holding warming to less than 2 degrees Celsius above pre-industrial levels, which, at present trend, means completely banning the burning of coal, oil and gas in less than 19 years. We may not make that deadline, but we probably won’t miss it by miles, either. Do you really want any of your hard-earned savings invested in products due to be outlawed soon?

For a 66% probability of halting warming at less than 2 degrees Celsius above pre-industrial levels, at least 73% of present known fossil fuels reserves must remain unburned. 

The Social Investing Revolution…and It’s Faults

Let’s begin with the category where many climate-concerned folk already put their savings: in so-called socially responsible investment funds.

These have been around for ages, although until recently they were a very small part of the investing landscape, and limited to a few small, costly, sluggishly performing mutual funds.

That all changed with the introduction of low-cost social index funds—really just plain vanilla S&P 500 index funds minus some of their objectionable industries.

For example, the market-leading Vanguard FTSE Social Index Fund excludes companies in alcohol, tobacco, gambling, weapons, nuclear power, and adult entertainment. Vanguard offers this both as a mutual fund and an exchange-traded fund (ticker VFTSX). Both have low management fees of 0.2%–far less than the 1% or more charged annually by some of the old-school, actively managed social funds.

To be in the index, companies are “ESG scored’; that is, they need to meet Environmental, Social and Governance criteria. For someone worried primarily about climate, this poses challenges. Most of the ESG scoring has nothing to do with climate; instead, it favors industries that score better on things like corporate management transparency and labor policies. Even the environmental scoring section tends to give most of its weight to matters unrelated to climate change. This may explain why the fund also holds so many fossil fuels companies. If you hope to make your savings speak for the climate, this doesn’t do it.

Social index funds also have another flaw: they aren’t very diversified. All those filters rule out so many companies that the remaining few are heavily focused in tech, finance and health care, which together comprise a bit more than two-thirds of the index.

In addition, you may not love the idea of investing heavily in the same too-big-to-fail banks that crashed the global economy 2008, or in Big Pharma companies overcharging the sick, or in health insurers driving up the cost of healthcare for us all.

Fossil-Free Funds

Recently, some major fund players have begun to offer broad index funds that exclude only companies that hold oil, gas or coal reserves. There’s no clearer way to make your money speak for the climate; when you invest in these funds, you loudly and clearly say no to fossil fuels. And the market is beginning to hear that.

Market leaders include three funds from State Street Bank’s huge SPDRs fund family, each focused on different geography: for the U.S. there is the SPDR S&P 500 Fossil Fuel Reserve Free ETF (SPYX); for other developed countries there is the SPDR MSCI EAFE Fossil Fuel Reserve Free ETF (EFAX); and for exposure to developing countries you have the SPDR MSCI Emerging Markets Fossil Fuel Reserve Free ETF (EEMX).

Another fund giant, iShares, offers the MSCI ACWI Low Carbon Target ETF (CRBN), a global fund that essentially combines the territories covered by the three SPDRs funds above, and with a similar portfolio focus and 0.2% management fee. A great choice for a one-stop, broadly diversified core fund.

Yet another choice is the Etho Climate Leadership U.S. ETF (ETHO), which treads the line between social index and fossil-free funds. The fund excludes not only fossil fuels, but also tobacco, weapons and gambling stocks. It scores companies by carbon emissions per dollar invested and selects equities that are 50% more carbon efficient than their industry average. For all that fancy footwork you pay a bit more with 0.49% annual management fees.

These low-cost fossil-free funds offer the broad diversification of regular index funds but with far less exposure to the increasingly risky coal, oil and gas sector, and without the narrow concentration of investments so common in social index funds.

Note: most fossil-free fund portfolios are not altogether free of fossil fuels companies; most exclude only companies with fossil fuels reserves, so non-reserve-holding companies like refinery owner Valero are in the mix. Still, at around 2% of assets, fossil fuels stocks account for less of these funds than either social index funds (3%+ fossil fuels in Vanguard’s fund) or unfiltered indexes like the S&P 500 (6% fossil fuels).

Both social and fossil-free indexes have outperformed the broader market for years, but for different reasons.

For the FTSE social index it’s been primarily the way its filters concentrate the index in a few sectors like tech, finance and healthcare, all of which have been outperforming. The lower proportion of fossil fuels has helped as well, but not as much as with fossil free funds.

With fossil free funds, outperformance is due to one thing alone: cutting exposure to the slowly but steadily failing fossil fuels business.

Since 2008, the S&P 500 (the blue line above) has risen steadily while global fossil fuels stocks (the rough red/green line) have declined.

Sector Funds

One of the easiest ways to maintain some diversification while avoiding fossil fuels altogether is to invest in so-called sector funds; mutual funds or ETFs that focus on a single industry sector that includes no fossil fuels companies, like information technology or consumer goods funds. There are scores of such specialties to choose from.

Many good index ETFs have low management fees, so cost isn’t often an issue.

In order to avoid the risk of investing in just a single sector you may want to invest in multiple sector funds: technology, industrials, insurance and consumer stocks, say.

This is also an area where you can choose funds in climate-related fields like clean energy, railroads, urban real estate, energy efficiency and “cleantech”.

One of the latter is Powershares Cleantech Portfolio (PZD), a global fund diversified among industrial and information technology stocks related to efficiency and clean energy. At 0.68% its expenses are a bit on the high side for an index fund, but still well below most actively managed counterparts.

A solid tech fund is the Technology Select SPDR Select ETF (XLK), whose 0.14% expense ratio is among the lowest in the sector.

Consumer discretionary funds are doing well, and they don’t hold the tobacco or alcohol stocks that consumer staples funds do. Vanguard Consumer Discretionary ETF (VCR) is a solid index performer with a low 0.1% expense ratio.

The low-cost (0.35%) PowerShares KBW Property and Casualty Insurance Portfolio (KBWP) gets you in on an industry with a great business model that will never go out of style; it will also see rising demand as banks and property owners grow to realize the new risks they face from storms, fires and floods. Yes, some insurers will suffer losses from mega-hurricanes, but others will raise rates to cover those risks. Meanwhile, as the world becomes steadily richer the need to insure that growing property will only increase.

There are renewable energy ETFs as well, of course; one such is iShares Global Clean Energy ETF (ICLN). Be careful, however. Narrow fields like renewable energy can swing widely depending on big forces such as changes in government policy, foreign competition, and the price of oil. For example, when China decided to go all-in on solar in 2010 many domestic manufacturers suffered, and then they suffered again when Persian Gulf oil countries slashed the price of oil in 2014. Renewable energy is inevitable, but watch out for dips in the road along the way.

Bonds and Bond Funds

While stocks stole the glory in the past nine years’ bull market for equities, bonds have languished in the shadows. And as central banks struggle to raise interest rates again to balance their books and to give themselves some leeway for easing in the next recession, bonds have receded even further from investor radar.

Yes, rates are low and rising, which hurts bonds. Still, when a hurricane like 2008 smashes stocks, it’s high-quality bond holdings that keep you afloat. They are an indispensable part of most good portfolios, offering modest but steady income.

When you buy stocks, you’re buying a piece of a business that borrows money as nearly all companies do. When you invest in bonds you take the other side of the debt trade; you’re a lender.

Bond volatility is a function of two things: credit quality and maturity. In other words, to whom are you lending your money and how long is the term of the loan? Long-term bonds and riskier “junk bonds” pay higher dividends, while short-term bonds and AAA-rated issues usually pay out less.

For the average fossil-free investor in a state like Washington without an income tax, safe fossil-free bond choices generally mean US Government bond funds invested in Treasuries or mortgage-backed bonds. If you’re wealthy, tax-deductible municipal bonds may also make sense, even with the lack of a state income tax.

You could buy individual “green bonds” as well. In Washington these are usually bonds to fund new infrastructure like rail transit systems, and they typically pay respectable dividends.

Individual Stocks

First, if your savings are modest—as in $50,000 or less—you probably should stick to investing in funds, not individual stocks.

However, if you have the resources and you’re ready to put some study into investing, picking stocks may be for you. You’ll need to develop a sharp eye for company management and basic accounting metrics. Generally, stay with larger companies with solid track records. And don’t put too many eggs in any one basket; spread your money between a dozen or so carefully chosen stocks, reviewing each a couple of times a year to see if its story still holds up.

Don’t put your faith in any single stock pundit; most just follow the herd. Instead, read the classics of investing methodology: Benjamin Graham above all. (Warren Buffett is his best-known disciple.)

Meanwhile, you’ll find climate plays in some unexpected places. Property and casualty insurance for example, as mentioned above. Allstate (ALL) is a well-run major player. An oft-ignored side of the business is reinsurance—the capital companies that insure retail insurers like Allstate, backstopping them against disaster losses (lots of rising demand there in years ahead)—and Everest RE (RE) is one of the better companies in the space.

Railroads are another. You may think of them as coal-hauling villains, but don’t overlook the fact that most of their business is in things like agriculture and container freight, and trains are the most energy-efficient overland transport method we have. Furthermore, due to the difficulty of building new rail lines, most railroads have very high barriers to competition. Look for companies with lower proportions of business in coal and oil, and more in booming fields like intermodal freight from West Coast ports. Union Pacific (UPS) and Canadian National (CN) are excellent examples.

Software will be one of our best tools to solve the climate crisis, and to manage just about every other human task. Software companies now rule the business world, so there are many big, established players to choose from, each dominating a big sector like social media (Facebook) advertising (Alphabet), operating systems (Microsoft), or retail (Amazon).

Semiconductors are in hot demand due to the “Internet of Things”; the need to network everything from industrial equipment to washing machines to dog collars. Some semiconductor companies have subsidiaries in solar panels as well, since these two silicon-based products are so similar; Cypress Semiconductor (CY) is a case in point. Other strong semiconductor makers include giant Texas Instruments (TXN), Boise memory chip specialist Micron (MU) and gaming/visualization chip fireball Nvidia (NVDA). However, note that the chip business is cyclical and some players are volatile, so it can be hard to pick winners. A good ETF alternative is the VanEck Vectors Semiconductor ETF (SMH).

Lightweight materials companies are yet another play, making transportation more energy efficient. US-based Alcoa (AA) and Europe’s ArcelorMittal (MT) are two of the world’s giants in lightweight metals while Allegheny Technologies (ATI) and Alcoa spinoff Arconic (ARNC) provide even more focus on the field’s advances in structural titanium and powdered metals for 3-D printing. Advanced composite maker Hexcel (HXL) is another specialist with a good track record.

Then there are the pure plays in renewable energy: thin-film solar panel maker FirstSolar (FSLR) is one of the few American companies thriving against the Chinese solar juggernaut. Tesla (TSLA) is a sexy manufacturer of solar panels, batteries and high-end electric cars, as well as a leader in solar installation and leasing. However, as noted before, these companies are inextricably linked to the price of fossil fuels,

What About Real Estate?

If you already own a home in Spokane then you are already heavily invested here, so diversifying into other asset classes like stocks can be a smart way to spread your risk. Still, investing in rent al properties provides yet another way to grow your savings without exposure to the fossil fuels business.

A way to invest without tying to one specific geographic area is to buy shares of real estate investment trusts (REITs; rhymes with “sheets”). These are just exchange traded funds for real estate properties, and you have a wide variety of fund styles fto choose from. You could invest in apartments through Avalon Bay Communities (AVB), in campus housing through American Campus Communities (ACC), in technology industry properties with Digital Realty Trust (DLR), and so on. Most of these have lagged stocks in recent years, but they do provide a measure of diversification.

The Coming Shakeout

Investment markets tend to rise slowly and fall quickly with the bursting of economic bubbles. Think 2008 and the collapse of global mortgage industry fraud; 2000’s crash to earth by ridiculously overpriced tech stocks; or 1929’s collapse of stock markets built on mountains of debt.

The coming collapse of the fossil fuels industry will certainly be at least as painful as those, however the speed with which trillions of dollars will be written off by the world’s largest industry remains an open question. I would guess that the size of the crash and its predictability will make it happen in somewhat slower motion, but be prepared for big drops along the way. The coal industry’s collapse is merely the first step down; oil and gas are already following, and you can expect producers to continue cutting prices in order to get what they can before their products are steadily regulated out of existence.

So ignore market columnists and TV investment gurus who urge you to buy oil and gas stocks because prices are down. Trade your total-market mutual funds and even your social index funds for fossil-free alternatives. Invest for the long term; the decline of fossil fuels and the inevitable political reactions from those who love them will occasionally roil both markets and elections.

Of course, you should first ensure that you have a 4-month emergency fund set aside somewhere safe and boring like a savings account, bank CDs or maybe a short-term bond fund. With that in hand, you’re ready to invest any money that you don’t think you’ll need to touch for at least three years.

The global economy will continue growing. Most of that growth will probably continue to focus in a few sectors such as emerging countries and technologies. Invest steadily in those, along with broad-market fossil-free U.S. funds, and you’ll probably do well.

It’s a fossil-free future ahead, so it’s time to start investing as if it’s already here!