BLOG: A Guide to Fossil-Free 529 College Savings
What is a 529 College Savings Plan?
529 college savings accounts are designed to help families save for their children’s future education. For those fortunate enough to be able to stash money away, 529s can be a great resource. Investments in 529 accounts grow tax-free. Plus, withdrawals are not taxed if used for qualifying educational expenses such as tuition, required fees, books, food, and housing.
Each state offers its own 529 plan, but you are not restricted to your own state’s plan. You can choose from any plan offered by any state across the country. This greatly expands your savings options because many individual state plans are restricted to a handful of portfolios for the saver to choose from. The term portfolio in this context is simply a bundle of one or more mutual funds.
Are your child’s education savings invested in companies fueling the climate crisis?
The unfortunate reality is that, also like retirement plans, most 529 plans invest in high carbon polluting industries (e.g coal, oil and gas companies) responsible for fueling the climate crisis. For example, Connecticut, like many states, currently only offers portfolios that have significant fossil fuel company holdings (with the exception of very conservative treasury bond and money market accounts). Even the Fidelity Sustainable Multi-Asset Fund (FYMRX), which is branded as sustainable and offered within MA, NH, and CT 529 plans, holds oil and gas companies stocks including TotalEnergies SE and Saudi Arabian Oil Co.
For us, the idea of investing in our children’s future by supporting the industries driving climate change is morally objectionable. It is also potentially financially risky. The energy sector has had the lowest returns and highest volatility compared to other sectors across the last 20+ years (learn more in this S&P Global analysis, and follow up analysis).
Fossil Free Options in Current State 529 Savings Plans
Fortunately, there are three fossil fuel free portfolios (or nearly fossil free depending on your definition) available within a handful of state plans. They are the Parnassus Core Equity Fund (PRBLX), the Vanguard FTSE Social Index Fund (VFTAX), and the Fidelity Climate Action Fund (FCAEX), all of which received a B for their fossil fuel exposure by As You Sow, which is vastly better than other common 529 portfolios which often score around Ds. We’ve compiled the state plans offering these three funds.
| Portfolio name as presented in 529 College Savings plan | State | Underlying Fund | Fee (%)(as of Jan 2025) |
| Specialty Portfolios – ESG Core Equity | Virginia | Parnassus Core Equity Fund (PRBLX) | 0.555 |
| Individual Portfolios – Parnassus Core Equity 529 | Illinois | Parnassus Core Equity Fund (PRBLX) | 0.695 |
| Individual Portfolio Options – MA Climate Action Portfolio | Massachusetts | Fidelity Climate Action Fund (FCAEX) | Gross: 1.65 Net: 1.22 |
| Individual Portfolios – Social Index | New York | Vanguard FTSE Social Index Fund (VFTAX) | 0.12 |
| Customized Age-based and Static -FTSE Social Index Fund | Utah | Vanguard FTSE Social Index Fund (VFTAX) | 0.12 |
| Advanced Portfolios-Social Index Fund | Florida | Vanguard FTSE Social Index Fund (VFTAX) | 0.14 |
| Individual-Social Index Portfolio | Pennsylvania | Vanguard FTSE Social Index Fund (VFTAX) | 0.275 |
| Vanguard Plans –FTSE Social Index Portfolio | Nevada | Vanguard FTSE Social Index Fund (VFTAX) | 0.25 |
| Fixed Portfolio Options – Social Index Equity | Maryland | Vanguard FTSE Social Index Fund (VFTAX) | 0.34 |
| Individual Portfolio – Socially Responsible Portfolio | Texas | Vanguard FTSE Social Index Fund (VFTAX) | 0.73 |
Consider State Tax Benefits of 529 College Savings Plans
Some states offer additional tax incentives for state residents using their home state’s plans. This varies by state. For example, New York offers tax deductions for 529 contributions, whereas California currently does not offer state incentives. Ask a financial advisor or accountant about your own tax situation.
Room for Improvement: Why Age-Based (Target Enrollment Date) Funds Matter in 529 College Savings Plans
The three fossil-fuel-free 529 options are a start. However, true choice and portfolio diversification is noticeably lacking. Real freedom of choice for savers means having access to investments that cover both your values and investment style, meaning access to multiple climate-friendly options in every 529 plan that span the range of investment styles from conservative to aggressive and including bond funds.
529 plans often prominently feature age-based, sometimes also called, “enrollment date portfolios”. The investment strategy of these funds shift from more aggressive to more conservative as the beneficiary approaches the time of anticipated educational expenses. This is the most frequently used investment type for 529 savers. Unfortunately, no fossil free age-based 529 plans currently exist. California offers the only 529 age-based ESG fund, but it is composed of several Nuveen mutual funds (TISCX, TSONX, NUEM) that score Bs and Cs for their fossil fuel exposure by As You Sow. They score better than most age-based 529 funds but also illustrate that environmental social and governance (ESG) investment criteria does not necessarily mean fossil fuel free. You can evaluate what’s in a mutual fund or index fund using tools provided by Fossil Free Funds.
Take Action
If you find the lack of climate-friendly 529 options in your state’s plan frustrating, please consider writing to both your state legislators and state 529 fund managers to let them know your state’s plan is not meeting your needs. Also consider signing these petitions in Massachusetts and California.
We all have a duty to leave behind a world that is better than the one we inherited. Fossil-free 529 college savings accounts are a meaningful way to adhere to that duty. It’s an essential investment in our children’s future—a future that is sustainable, equitable, and full of promise.
Disclaimer: Authors are not investment advisers as that term is defined under federal and state (California and Massachusetts) laws and regulations. Authors do not provide financial planning, legal or tax advice. Nothing on this post shall constitute or be construed as an offering of financial instruments, or as investment advice or investment recommendations.