Fossil fuel divesting gains strength in philanthropy
A movement to divest from fossil fuel is gaining support among foundations as activists push for funding to be shifted away from coal, oil and natural gas.
The call from activists to the charitable world is simple: Ditch fossil fuels and direct your investments into climate-friendly companies and funds.
The worldwide divestment campaign has sought commitments from universities, corporations and other entities. Now, two of the biggest names in philanthropy — the Ford and MacArthur foundations — are reorienting their investments away from fossil fuels, a move that leaders of the divestment movement hope will prove to be a tipping point for the charitable world.
“We’re calling on governments and corporations to act on climate aggressively and commensurate with the science,” said Ellen Dorsey, executive director of the Wallace Global Fund and a leader in Divest-Invest Philanthropy, which is pushing the philanthropic community to dump its fossil fuel investments. “Why aren’t we asking ourselves if we’re doing that?”
The announcements from Ford and MacArthur came in the lead-up to the United Nations’ climate summit in Glasgow, where activists, policymakers and scientists are pushing for far-reaching action on climate change. Both foundations are joining nearly 200 charitable organizations and firms that manage investments for wealthy families that have committed to divest, according to Divest-Invest Philanthropy.
“I’m glad that we were able to finally reconcile our financial imperative with our moral imperative as a foundation,” Darren Walker, president of The Ford Foundation, told The Associated Press.
About $1 trillion is sitting in endowments of private foundations, which are required to pay out only 5% of their assets annually. The rest is invested for growth. Traditionally, the two sides of their operations have been seen as separate: Grants were given to advance the foundations’ mission. The foundations’ money managers, meantime, sought high investment returns to maintain their organizations’ financial health.
But in recent years, activists have argued that it’s hypocritical for some foundations to fund initiatives that address climate change while potentially investing in fossil fuel-related companies. According to the ClimateWorks Foundation, global philanthropic funding for climate change mitigation totaled $6 billion to $10 billion in 2020, less than 2% of overall giving.
Critics of divestment counter that such changes could hurt investment returns and hinder foundations from maintaining their endowment size — thereby damaging what they set out to achieve. Ivo Welch, a finance professor at the University of California, Los Angeles, argues that foundations that divest won’t have much impact on the market and could even lose whatever leverage they might have with fossil fuel companies.