In late January, Divest-Invest Philanthropy, a coalition of seventeen foundations with nearly $2 billion in assets, introduced itself to the world with the announcement that its members have agreed to divest their portfolios of investments in fossil-fuel companies and invest a portion of those resources in climate change solutions instead. Arguing that continued investment in the fossil fuel industry carries both ethical and financial risks, coalition members are calling on other foundations to realign their portfolios away from investments in coal, gas, and oil companies and to join them in supporting and sustaining the clean energy economy.
PND recently spoke with Ellen Dorsey, executive director of the Wallace Global Fund, a leading member of the coalition, about the genesis of the divestment movement and the need to act now.
Philanthropy News Digest: What was the catalyst for the creation of the Divest-Invest Philanthropy coalition? And what is at stake here?
Ellen Dorsey: The catalyst was the climate crisis itself — a serious threat that affects all of us — and the need to divest from fossil fuels and invest in climate change solutions. As a responsive philanthropy, we want to support that shift and encourage the philanthropic sector as a whole to take this movement seriously.
So the goal of the initiative is not just to announce the commitment by seventeen foundations to divest from fossil fuels and invest in clean energy; it's also to call on the philanthropic sector more broadly to engage in the climate debate and encourage other institutions to both divest from coal, oil, and gas companies that are driving the problem and actually use their investments creatively to identify and fund climate solutions in ways that help move us toward the kind of new energy economy that the world needs.
PND: It's clear that members of the coalition see divestment from fossil fuels as a moral issue. The letter you released in January says, "Mission-based institutions whose goals and constituencies are threatened by the extraction and combustion of fossil fuels should not also seek to profit from them." When did your foundation, the Wallace Global Fund, decide it has a moral obligation to address the threat posed by our continued reliance on fossil fuels?
ED: In 2009, we began analyzing our grantmaking and our investments. We quickly realized there were real inconsistencies. One striking example was investing in fossil fuels at the same time as we were working to combat climate change and all its environmental and human rights impacts. How could we be invested in the very industries driving the crisis we were asking our grantees to solve? Not only was our investment strategy potentially undercutting our grantmaking, we were foregoing the opportunity to use our investments as a tool to achieve our mission and goals. We could be helping create the clean energy economy the world requires.
Additionally, we don't believe there is only an ethical risk to investing in fossil fuels. We also believe there are serious financial risks. Prudent investors are listening to the warnings that fossil fuel stocks are overvalued, as we cannot possibly burn the reserves coal, oil, and gas companies currently hold without cooking the planet. It is clear that a tectonic shift is required in the way we produce and consume energy, and smart investors will put their assets in the energy sources of the future.
PND: Given both the moral and financial risks you've identified, do you see the initiative gaining traction within the philanthropic sector? And have you identified concrete short- and long-term goals in that regard?
ED: I do see this gaining traction, and fairly rapidly. In fact, in the days following our announcement, ten or so additional foundations told us that they were ready to commit to the coalition, though not yet publicly. In addition, I know and have spoken with several foundations that are in the process of finalizing the decision to divest with their trustees, so I fully anticipate growing philanthropic support for the movement — and not just in the United States. I've spoken with several groups of foundations in Europe, Africa, and Latin America that are also looking at how they can more closely align their investment portfolios with their program goals.
The success of the initiative will rest on a couple of things: one, whether the philanthropic sector decides to take seriously the role our investments play in supporting or undermining our respective missions; two, how rapidly we begin to address the climate crisis programmatically and through our investment strategies; and three, whether the sector leads the way with respect to the "clean trillion" — the estimated $1 trillion in investments we need annually over the next twenty-some years to grow the renewable and clean tech sectors to scale. Personally, I think philanthropy really could play an important role in innovating investment strategies that contribute to that clean trillion.
PND: Do you see divestment by endowed institutions as a replacement for policy action, both at the national and international level?
ED: There is absolutely no substitute for policy at the national and global levels. We see the movement as both complementary to and potentially driving the opportunity for policy change. By and large, the policy process has been shut down; that's certainly been the case in the United States. We haven't seen any significant movement on national climate policy in this country, and we know that the international community also has failed. Part of the significance of the divestment movement is the fact that it is changing the debate. It's exposing the fundamental vulnerabilities in the fossil fuel industry, both ethically and financially, and we believe this will contribute to opening up the policy space.
PND: So there's a divestment-investment component to this, a policy component, and perhaps an industry component? I'm thinking of the paper published by the Rockefeller Foundation which found, among other things, that creating green jobs for low-skilled workers would require a significant transformation of the energy industry itself. Do private foundations and other endowed institutions have enough influence or financial clout to catalyze such a change in the industry? And can that be done without buy-in from the broader public?
ED: First, I would say that endowments alone are not going to drive this energy transition. And it's not our objective to operate in isolation; it's going to require real public engagement and the active involvement of a broad constituency, which is beginning to happen. The divest-invest movement is probably the most significant movement in the history of this country to address the climate crisis. And it's spreading rapidly, both in the U.S. and globally.
Second, endowments can play a very important role, as I noted previously, in innovating on the investment side of the equation. They could even be partnering in creative ways to build projects that reduce energy usage, create markets and projects for renewable energy, and grow local and community-based jobs. Imagine what would happen if philanthropic institutions partnered with local governments, universities, and faith groups and aligned their resources to support the development of community-based energy projects.
Third, none of this is sufficient without vigorous political leadership. We need leadership at the state and local levels to get started, and we need leadership at the national and international levels to pull all the pieces together. Again, the divest-invest movement is contributing to the opening of a political space in which we hope action on climate change will occur, and occur rapidly, because the window, as we all know, is closing.
That said, I think our movement is unique, for two reasons: One, there is a powerful alignment between the moral and financial risks of investing in fossil fuels in the face of climate change. The fact that the World Economic Forum openly debated the notion of the "carbon bubble" is an example of how seriously the issue is being taken by the global community. And two, the movement is not just calling for divestment from something that is going to harm us; it's also showing the way forward in terms of investing in solutions that will make the world a safer, healthier place for all its inhabitants.
You know, just a few years ago, I — and most of the environmental community — was despondent about the prospects for addressing this crisis head on. But I've had the opportunity to meet with student leaders at the forefront of this movement — and it's gone way beyond students — and I am just blown away by their passion for the issue, their sophistication, and their clarity of focus. These days I am truly filled with hope.
— Kyoko Uchida