A group of 17 leading foundations has announced a new initiative to encourage fossil fuel divestment by the philanthropic community. Called Divest-Invest Philanthropy, the new effort launched Jan. 30 in support of a growing movement among other nonprofit endowments, including academic, health, pension and religious foundations.
Divest-Invest comes at a time when climate-related events are shining a spotlight on the future risks that fossil fuel investors face, as highlighted by the Jan. 15 Ceres Investor Summit on Climate Risk.
Also of interest to investors is the long-awaited State Department Keystone XL pipeline report, which was finally released on Jan. 30.
The report identified a number of risks and impacts, including several related to environmental justice issues. The next step in the review process promises to be even more interesting, as it includes a public comment period and input from the Environmental Protection Agency and at least seven other federal agencies – the Departments of Defense, Justice, Interior, Commerce, Transportation, Energy and Homeland Security.
The Divest-Invest fossil fuel divestment initiative
Wallace Global Fund has taken the lead in Divest-Invest, joined by 16 other foundations: 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, and Solidago Foundation.
The initiative was launched with an open letter to the philanthropic community, signed by all 17 foundations. The letter is worth a read in full, as it provides a clear, plain-language outline of the risk to investors from business-as-usual investment strategies, so following are just a few samples.
The group makes no bones about the fossil fuel divestment effort’s roots in anti-Apartheid activism, writing that:
…today’s movement argues that 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. It exposes the fossil fuel industry’s efforts to block progress to a clean, renewable energy future, and argues for new investments that will advance climate solutions rather than drive the crisis.
The letter also brings up an area that emerged as a central concern of the Ceres Investor Summit on Climate Risk. With climate-related crises increasing to the point where urgent global action becomes imperative, fossil fuel companies and their investors will almost literally be left holding the bag in the form of “stranded assets.”
The financial consequences will be devastating:
There is growing recognition that if we hope to maintain a livable climate, the majority of fossil fuel reserves now on the world’s books will become stranded, unusable assets…Fossil-fuel stocks, whose valuations are linked to reserves, are thus vastly over-valued, with conservative estimates pointing to a multi-trillion dollar ‘Carbon Bubble,’ many times the recent $2 trillion housing bust.
Anticipating pushback from political conservatives, particularly those who have been ginning up distrust of the UN Intergovernmental Panel on Climate Change, Divest-Invest cites similar warnings from economic conservatives such as Price Waterhouse Cooper, the London School of Economics, Financial Times and The Economist.
The way forward for climate-ethical investing by foundations
Outlining the urgent need for divestment is only half of Divest-Invest’s mission, as its name implies. The organization also seeks to serve like-minded foundations as an information clearinghouse and best-practices model for climate-ethical investing.
As part of that mission, the Divest-Invest website (here’s that link again) offers a variety of educational and informational resources, including white papers on divestment risk management, fiduciary responsibility issues, and investment opportunities and guidance.
Image (cropped) by doctor wonder