Google employees are urging the company to divest their 401(k)s from fossil fuels.
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As Google touts lofty promises to help fight climate change, like switching to carbon-free energy for its data centers and offices, frustrated employees are dismayed that the company isn’t doing enough in a less talked about arena: their 401(k)s.
Inside the two trillion-dollar company, workers are urging Google to offer 401(k) options that don’t include investments in fossil fuel companies like ExxonMobile, Shell and Chevron, according to a letter to management viewed by Forbes. In addition to a new fossil-free fund, employees are also asking to make it the default 401(k) option in their benefits packages.
“While Google has made progress towards net zero, Google’s 401(k) retirement plan is not yet climate safe,” reads the letter, which was signed by more than 1,000 employees. “Google has the opportunity to be a climate leader and employees are ready for a retirement plan that aligns with their values, our organizational commitments, manages climate risk, and helps achieve a net zero future.”
The campaign is headed by a small group of employees including Sam Asher, a technical writer who has been at Google for four years. Asher told Forbes that the group went through official channels to raise complaints to the company’s benefits team, after researching the company’s 401(k) options. Feeling dissatisfied with management’s “generic” response (essentially “Thank you for your feedback. We will consider it,” said Asher), the employees decided to rally their coworkers.
“How much is Google directly funding oil companies simply by not doing anything?” Asher said. “It’s easy to turn a blind eye.”
“How much is Google directly funding oil companies simply by not doing anything? It’s easy to turn a blind eye.”
The circulation of the letter comes ahead of Google’s annual shareholder meeting on Friday, where the climate advocacy group As You Sow will present a shareholder proposal that Google be required to release a report outlining how it is protecting plan beneficiaries from the “increased future portfolio risk” of investing in fossil fuels.
Google spokesperson Fiona Lee declined to comment on the letter, but pointed to the company’s response to the proposal in its annual proxy statement, recommending shareholders reject the proposal. “Our Board does not believe that the requested report is an effective means of enhancing the protection of Plan participants,” the proxy says.
Vanguard did not respond to a request for comment.
The letter by employees specifically asks for a “target date” fund that is free of fossil fuels, which sets a target retirement date typically decades away and reduces the risk of investments over time. Currently, Google offers an option called the Parnassus Fund that doesn’t include fossil fuels, but that option is too “volatile” for most employees because it isn’t a target date fund, said Asher.
Divesting from fossil fuels is not just about sustainability. A report published in April suggests that divestment would have a significant financial benefit for Google employees, estimating they have collectively lost out on $1.15 billion over the last decade because of the underperformance of fossil fuel investments. The report, commissioned by As You Sow and co-produced by researchers from the University of Waterloo, examined 401(k) funds from several large tech companies, including Amazon, Apple, Microsoft and Netflix. In total, employees at the 12 companies researchers studied had lost $5.1 billion, the report said. Google, largely because of its workforce size, was the biggest loser—Microsoft came in at No. 2 with $898,000 in estimated losses.
Last year, University of Waterloo researchers released a similar report estimating that U.S. public pension plans lost out on $21 billion by not divesting from fossil fuels a decade ago.
To calculate lost earnings for the 401(k) study, researchers estimated cumulative “risk-adjusted” 10-year returns with and without fossil fuel investments and found a difference of 8.9%. Michael Zonta, the lead researcher from the University of Waterloo, measured the profit or potential profit from an investment compared to the degree of risk associated with it. “It’s not just that they underperformed,” he told Forbes. “Any industry can underperform at any given period. But they’ve shown consistent underperformance relative to the amount of risk that they’re taking.”
“Any industry can underperform at any given period. But they’ve shown consistent underperformance relative to the amount of risk that they’re taking.”
Zonta said the outcome of the study could give portfolio managers like Google “a little bit more power to scrutinize” the investments—especially given Google’s stated commitment to sustainability. As a company, Google has pledged to produce net-zero emissions across its own operations and supply chain, running all of its facilities using carbon-free energy, including wind, solar and nuclear power, by 2030.
The tech giant would not be the first big organization to go fossil free. Two years ago, the University of California divested its Retirement Savings Program (RSP) fund from companies that own fossil fuel reserves. “UC Investments believes that the fossil fuel industry faces considerable long-term financial risk and that removing such companies from the RSP will have a positive financial and risk-reducing impact on fund performance in the long run,” the university system said at the time.
The more than 1,000 signatures from Google employees represent just a small group of the company’s full time workforce of more than 180,000. But in the past, a vocal minority of Google workers has successfully pushed for change at the company. In 2018, more than 3,000 Google workers signed a letter urging the tech giant to drop Project Maven, a contract the company inked with the Pentagon to use Google’s AI to analyze drone footage. Google, further pressured by employee resignations, eventually decided not to renew the contract. And when just over 400 employees formed the Alphabet Worker Union in 2021—a labor organization that doesn’t have collective bargaining power, unlike a typical union—the announcement made a splash across the tech world and started an industry-wide conversation about tech worker unionization.
Employees are pushing Google in part because of the clout it holds in the tech industry. For two decades, Google has been a pioneer in company culture, ushering in perks like free food and fitness classes in the workplace, which became common at tech companies. Asher hopes Google will be a trendsetter when it comes to 401(k)s too.
“Google is absolutely a leader companies look to in terms of all sorts of policy,” Asher said. “It would send a big message, not just to Vanguard, but to other companies: ‘Oh, if Google’s asking for this, we should probably move on it as well.’”