Bloomberg BNA – A coalition of 17 foundations, representing almost $1.8 billion in investment, plans to divest from fossil fuel companies in its portfolios and invest more in clean energy, leaders of the effort said Jan. 30.
The Wallace Global Fund, the Ben & Jerry's Foundation, the Educational Foundation of America and others hope their “historic step,” the first divestment campaign led by a group of foundations, will encourage other philanthropies to follow suit.
The foundations involved in the Divest-Invest Philanthropy initiative say they have a fiduciary duty to protect their endowments from risks posed by climate change.
“It is clear, if we own fossil fuels, we own climate change,” Ellen Dorsey, executive director of the Wallace Global Fund (WGF), which is leading the effort, said Jan. 30 during a call with reporters. “We cannot be invested in the industry that is driving the climate crisis and we certainly can't have investments undercutting our grant making.”
Many of the foundations, including the WGF, offer grants focused on combatting climate change.
The WGF started its divestment effort four years ago, Dorsey said. She said the fund is now almost entirely divested from fossil fuels and has about 10 percent of its assets invested in clean energy.
Growing Movement to Divest
The foundations join a growing fossil fuel divestment campaign that gained footing among colleges and universities in the U.S.
The grass roots campaign has expanded to include cities, pension funds, religious institutions and other investors across the globe.
The divestment movement is based on the idea that fossil fuel companies could face a “carbon bubble” in the future.
About two-thirds of proven coal, oil and gas reserves must stay in the ground to meet an international goal of limiting global warming to 2 degrees Celsius (3.6 degrees Fahrenheit), according to the International Energy Agency. These reserves, however, are currently recognized in the accounts of listed fossil fuel companies and contribute to their stock market valuations.
If fossil fuel reserves are suddenly revalued under future government policies for climate change or greenhouse gas emissions, that could lead to stranded assets, known as a carbon bubble.
The carbon bubble is not just about protecting shareholder value, Tom Van Dyck, investment consultant to the Educational Foundation of America and the Park Foundation Inc., said during the media call.
“It's about valuation and the risk that you're taking as a shareholder owning these companies,” Van Dyck said.
Foundations ‘Out Front.'
Each foundation involved in the campaign will determine its own approach for divesting and investing, Dorsey said.
She said most of the foundations have focused their divestment efforts on companies that are among the “Filthy 15” coal utilities and mining companies identified by the Energy Action Coalition or the top 200 companies that own the vast majority of the world's coal, oil and gas reserves according to the Carbon Tracker Institute.
When it comes to reinvesting, the foundations are shifting their money toward renewable energy, cleantech and other areas of sustainability, including green bonds.
Limiting global warming to 2 degrees will require investing in clean energy an average of $1 trillion per year for the next 36 years, known as the “Clean Trillion,” according to sustainable investor group Ceres.
“If foundations put 5-10 percent of their assets into renewables or cleantech , that's a significant chunk of money. It will not make up the Clean Trillion alone,” Dorsey said. “But foundations can be out front” in investing in green bonds, loans and banks to “take some of the risks out of investments for other sectors,” she said.
“That's what philanthropy can and should do,” Dorsey said. “Be out front.”
The foundations also are motivated to use their investments to fund the transition to a clean energy economy because “it is clear that we can't rely on federal and state policies to create change,” Olivia Farr, chairwoman of The John Merck Fund board of trustees, said.
“We need to move faster than that,” Farr said. “So voting with our dollars in the marketplace has become an increasingly important tool.”