Can a foundation with a mission to fight climate change do so in good faith when it has millions in assets invested in oil, gas and coal companies? That’s a big question that’s been kicking around the philanthropy world in recent years, and 17 foundations just answered it by committing to divest their trusts from fossil fuel stocks.
Announced this week, Divest-Invest Philanthropy is an initiative in which foundations with more than $2 billion in combined assets have publicly committed to pulling all investments from fossil fuel companies, and investing at least 5 percent of their funds in clean energy companies. The foundations are joining what’s become known as the Divest Movement, a growing campaign to convince universities, churches, municipalities and now philanthropies that holding investments in fossil fuel companies is immoral and financially unwise. The tactic has been used in the past in opposition to apartheid, genocide and the tobacco industry. College activists and Bill McKibben’s nonprofit 350.org have spearheaded the movement, although a limited number of schools have actually agreed to divest.
Divest-Invest represents a sizable chunk of money, but it also makes a statement, calling out foundations as standing on shaky moral ground. The group doesn’t have any titans such as Ford, Hewlett or MacArthur, but it does have some pretty sizable signatories. The largest is the Park Foundation, the upstate-New York-based funder that supports environmental work, including protecting water supplies from fracking. The foundation boasts a $335 million trust. Social justice funder Wallace Global Fund is also on board with its $155 million endowment. As is the Educational Foundation of America, which leverages its $141 million in assets toward arts, the environment and reproductive health and justice.
The initiative also has some high-profile names. The foundation of Google Executive Chairman Eric Schmidt and his wife Wendy, The Schmidt Family Foundation, is perhaps the most prominent participant. The Sierra Club Foundation and Ben & Jerry’s Foundation are also signatories.
While this is the first coalition of funders to publicly and strategically divest from fossil fuels, it’s the latest in a trend of what’s called Socially Responsible Investment (SRI) or Mission-Related Investment (MRI). The principle behind the movement is that, even if a foundation is giving, say, $10 million a year toward its mission, if it’s assets of $200 million are comfortably resting in the pockets of companies that undercut that mission, we've got a problem. And if that mission is fighting climate change, as Ellen Dorsey of Wallace Global Fund said, “Grant making alone is insufficient to meet this challenge.”
Organizations like Confluence Philanthropy and the Forum for Sustainable and Responsible Investmentare devoted to furthering this idea and helping organizations move their funds to businesses that reflect their values. It's also a popular practice among younger philanthropists, born into wealth and concerned about what their money is up to. The group Resource Generation is attempting to organize such donors to maximize their impact toward social change.
Of course, there is a counterargument. For one, institutions and foundations consider it part of their duty to maintain strong endowments for the future, maximizing funds that can then be used toward their missions. Universities tend to make this argument. And to be fair, many investors (including average 401K holders) spread their funds across hundreds of companies, and who is to say that investors are responsible for those companies’ activities, or which companies are bad enough actors to abandon? There’s also the idea that by cutting ties with the energy industry, you shoot yourself in the foot by losing the opportunity to cooperatively influence these corporate heavyweights’ behaviors.
But for these 17 funders and a growing number of institutions, it’s a matter of putting your money where your mouth is, as well as long-term financial sustainability. As their commitment statement says, “Ethically, our investments shouldn’t contribute to dangerous climate change. Financially, fossil fuel stocks are over-valued as most of their reserves cannot be burned. We can get good, safe returns while helping to build a new energy system.”
And while divestment is somewhat symbolic, if it gains momentum among the deepest pockets in philanthropy, it could start to sting the fossil fuel industry and perhaps more significantly, give a tangible boost to clean energy companies.
The foundations that have signed on to Divest-Invest are:
- Ben & Jerry’s Foundation
- The Chorus Foundation
- Compton Foundation
- The Educational Foundation of America
- Granary Foundation
- Jesse Smith Noyes Foundation
- The John Merck Fund
- The Joseph Rowntree Charitable Trust
- KL Felicitas Foundation
- Nia Community Fund
- Park Foundation
- The Russell Family Foundation
- Schmidt Family Foundation
- The Sierra Club Foundation
- Singing Field Foundation
- Solidago Foundation
- Wallace Global Fund