Five years after 17 foundations pledged to stop investing in fossil-fuel companies and increase their stake in climate-friendlier investments like renewable fuels, almost 200 foundations and family offices have signed on to the divest/invest movement.
When the effort began, in 2014, the foundations that signed the DivestInvest Philanthropy pledge controlled assets of $1.8 billion. Now the member philanthropies control assets of about $24 billion. They join some 1,100 similarly committed companies and investors that manage more than $11 trillion globally, according to a report issued today by DivestInvest Philanthropy and the Croatan Institute, a nonprofit investment-research group.
Clara Vondrich, DivestInvest’s director, said the growth of the movement has instilled fear into fossil-fuel companies, noting that Shell Oil considers divestment a material threat to its business.
“We are at a place where the idea that this movement is just symbolic has been smashed.”
The pledge calls on foundations to divest from companies listed in the Carbon Underground 200, a list of the top 100 publicly traded coal companies and top 100 oil-and-gas companies.
Today’s report includes results of a survey of 60 signatories of the DivestInvest pledge, more than half of whom signed during its first year. Of those, 97 percent report investments of less than 1 percent of their endowments in Carbon Underground 200 companies; 82 percent report having no such holdings.
When the pledge was drawn up, there was concern among foundations’ endowment managers that there were not enough clean-energy investments across different asset classes, said Ellen Dorsey, executive director of the Wallace Global Fund and founder of DivestInvest Philanthropy.
She had a message for foundations that haven’t signed the pledge: “Come on in, the water’s fine.”
Nearly half of the foundations surveyed have investments spread out among at least eight asset classes, such as publicly traded stocks, hedge funds, and private equity. And 94 percent said the changes in their investment choices had resulted in a “positive or neutral” impact on returns.
Foundations, Dorsey said, need to orient their endowments, not just their grant-making dollars, toward climate-change mitigation.
“If we own fossil fuels, we own climate change,” she says. “It’s your fiduciary duty to look at whether this sector is underperforming. And it’s your ethical duty in a moment of climate emergency to deploy every tool at our disposal. Our investments are a tool. We aren’t just grant-making institutions.”
Vondrich spoke of the “irrationality” of major foundations, including Ford, Hewlett, MacArthur, and Packard, that support climate-change mitigation but haven’t signed the pledge. “They still have a chance to be on the right side of the street,” she said.
Larry Kramer, president of the William and Flora Hewlett Foundation, wrote in an email that it is committed to helping move the world to net-zero carbon emissions and has ended its own investments in private partnerships in oil and gas extraction and coal. But the best way to respond to climate change, he said, is through the foundation’s grant making, not the allocation of endowment investments. (The Hewlett Foundation is a financial supporter of the Chronicle of Philanthropy.)
Similarly, the David and Lucile Packard Foundation argues that its grant making demonstrates a commitment to reducing carbon emissions. In a statement, the foundation said that it had awarded more than $1 billion in such grants. But its current investment approach forbids direct investments in producers of thermal coal, coal-fired power plants, and offshore drilling, according to the statement.
The Ford Foundation issued a statement that said it was “grateful for those who are leading the way” on divestment and noted that it had committed to placing $1 billion of its endowment in investments that support its grant-making mission.
A spokesman for the John D. and Catherine T. MacArthur Foundation referred to a position paper on the topic released several years ago by its board. The paper said much of the endowment was invested in intermediary funds rather than directly in companies. “Therefore, it is not practical or possible for the foundation to avoid making certain investments by requiring managers to use specific investment screens. In addition, exiting from intermediary funds can result in immediate investment losses to the foundation and, as with imposing screens, also could limit access to high-performing managers in the future.”
Alex Daniels covers foundations, donor-advised funds, fundraising research, and tax issues for the Chronicle. He recently conducted interviews with theMacArthur Foundation’s Julia Stasch, who stepped down after five years as president, and Unicef’s Caryl Stern, who has been tapped to lead theWalton Family Foundation. Email Alex orfollow him on Twitter.
Correction: A previous version of this article said that more than 200 foundations and individuals, instead of nearly 200 foundations and family offices, had signed on to the divest/invest movement.
