New York Climate Summit: it’s time foundations used their endowment might to trigger meaningful action

This tipping point is referred to as a”survival reflex” in the largest and most international declaration ever published by environmental leaders, published in the International New York Times today (September 15). In this document, 160 environmental prize winners reminded foundations and philanthropists that the Paris Climate Summit “may be the last chance to agree a treaty capable of saving civilisation.” The foundations could materially help the negotiators of that treaty, the 160 said, if they dig into their endowments now – their hundreds of billions of dollars in investments – and try “to trigger a survival reflex in society”.

Five options

1. Invest in zero or low carbon climate-solution companies and projects, as debt and/or equity, ideally relaxing the interest rates, hurdle rates and exit timeframes usually sought

2. Divest from fossil fuels, and reinvest in clean energy companies

3. Stay invested in fossil-fuel companies, campaign to put shareholder pressure on capex allocation within those companies on exploration for and development of new reserves, and then reinvest any dividend payments to investors freed up by that pressure

4. Accelerate zero or low carbon markets, new and embryonic, by giving grants – on a scale they have never before – to the multiplicity of projects that can make a difference across the greenhouse gas emissions spectrum, including new projects of the foundations’ own design, based on the vast collective and individual experience of they and their networks. If foundations commit to clean energy investment, carbon energy divestment and reinvestment in numbers, there probably wouldn’t be enough clean-energy targets to go round. Grants would be needed to create those targets.

How might this work? Carbon Tracker is an example of a foundation-led initiative that has a chance of impacting the climate negotiations positively.

Last year, as a result of Carbon Tracker’s work, investors started putting pressure on fossil-fuel companies to do other things with their capital expenditures than spend them on expanding their share of reserves that might prove unburnable. This work, and that of other foundation-funded initiatives like 350.org, persuaded financial institutions, cities and universities to withdraw investments from fossil fuels completely in 2013 and 2014. If these trends continue in the rest of 2014 and 2015 – as they look very much like doing – then negotiators may sit down in Paris with a sense that “the markets are already moving” in their direction of travel – i.e. towards significantly less burning of fossil fuels in the future – so making their task of negotiating meaningful targets and timetables easier.

5. Use their investor power to build a new pool of corporate capital in the world. Newly-created and existing companies benefiting from the accelerated flow of grants, debt, and equity investments by foundations could be asked to agree to do two vital things. First they would donate five per cent of their pre-tax profits to social enterprises with climate-stability and – relatedly – development missions. Second they would agree to repay any grants awarded, from profits, over time. This would enable both the creation of a second new, growing and potentially enormous pool of capital, in perpetuity, for social good extending well beyond ensuring climate stability. It would also enable foundations to have a way of rebuilding their endowments, other than from interest and returns on equity from successful companies and projects in the renaissance they would be helping create in the world.