How long will foundations continue to invest in companies whose business models threaten civilization as we know it? That's a good question. Once upon a time, foundations thought nothing of investing in tobacco stocks, and then norms changed. What kind of time frame are we looking at on the fossil fuel front?
Maybe sooner than you'd think. When Divest-Invest Philanthropy launched in the beginning of 2014, an effort incubated by the Wallace Global Fund and modeled after the anti-apartheid divestment push, there were just 17 brave foundations on board.
Now, almost three years later, that number has grown to 155, and the greater divestment movement, which started on college campuses about five years ago, has become impossible to shrug off.
A new report by Arabella Advisors found the total funds controlled by individuals and institutions that have committed to divest from fossil fuels is now $5.2 trillion (note that this is not total investments in fossil fuels, but signatories' overall holdings), doubling over the past 15 months. The report cites 688 institutions that have signed on, and nearly 60,000 individuals, the latter number skyrocketing in the past year.
While it’s spreading well beyond mission-driven institutions, foundations, faith-based organizations and universities continue to play a large role, representing more than half of the new commitments in the past 15 months.
The reasoning behind the divestment movement has a few components. For one, it attempts to stigmatize the fossil fuel industry as unethical and call out its business model as one that only succeeds by causing unacceptable global harm. It’s also a movement-building strategy that seeks to align a broad base of entities and individuals demonstrating tangible support for climate action. Finally, there’s the concrete impact of moving money away from these companies.
Critics have dismissed divestment as a mere symbolic gesture, but the latest report suggests that, especially as the coal and oil industries have faltered in recent years, the financial argument and potential impact may have been underestimated.
Initially led as a moral campaign by mission-driven entities, the latest report shows that divestment has accelerated globally among individual investors and private asset holders that include insurers, pension funds and banks. That’s precisely the kind of snowball effect organizers were hoping for, demonstrating that divestment is more than an ideological crusade on liberal campuses.
Philanthropy remains an important part of the mix, as 23 percent of institutional commitments come from foundations, tied in the lead with faith-based organizations, and even ahead of educational institutions at 16 percent.
Funder signatories are mostly small- and medium-sized foundations, but they’re nothing to scoff at. Several hold hundreds of millions in assets each, and form a growing who’s who of environmental and progressive funders. There was, of course, the movement’s big financial and symbolic win of picking up the Rockefeller Brothers Fund, and its more than $800 million in wealth with historic roots in the oil industry. And the 140 funders who signed up in spring of 2016 were awarded the Nelson Mandela-Graça Machel Award for Brave Philanthropy. Foundations were also celebrated in the report for bold moves to invest in climate solutions and communities vulnerable to climate change.
It’s also worth noting that under a Trump administration, foundations leveraging power as investors will be even more important as the climate movement pursues non-policy-related inroads to progress.
- "Everything We Care For." The Future of Progressive Philanthropy Under Trump
- How Funders Are Using the Power of Their Investments to Impact Climate Change
- Are Huge Outfits Like Gates Silently Buying the Case for Divestment?
Still, there are a lot of disappointing absences on the list of those ditching fossil fuels—some of the largest foundations in the world that also happen to cite climate change as a top priority. Packard, Hewlett and MacArthur foundations are huge climate funders that have not committed to divestment. Weird, right? Especially since Hewlett and Packard both like to boast about their uber-green headquarters. And while we've come to think of MacArthur as a bold player in the climate space, clearly they're not that bold. The Gates Foundation isn’t explicitly a climate funder, but its public health work is closely connected, and it has not committed to divest.
The Rockefeller Foundation, which is much larger than signatory Rockefeller Brothers Fund, and has even been a pioneer in impact investing, is also not onboard. The foundation divested from tobacco, and only limits investments in areas like coal and tar sands. What's the hold up over there?
There were some partial wins here, however—Gates did quietly drop a bunch of its fossil fuel holdings, and Hewlett committed in 2015 to avoiding future investments in private partnerships involved in oil and gas drilling, with a similar lack of fanfare.
It’s not too surprising that these giants haven’t signed on. Institutions that sit atop billions of dollars tend to be very protective of those assets, citing the important work their endowments allow. Just look at the stubbornness of another top target for the divest movement—Harvard University. Regardless of their principles, large institutions still bristle at change.
But remember, Divest-Invest is an organizing strategy, and that means organizing within philanthropy too. We predicted those 17 foundations would steadily build momentum until the bigger players had no choice but to join in, and it’s only going to get harder for them to ignore.
All this reminds us of an old saying: "If you where you'll end up, it's better to get there gracefully."