Was 2020 the year that philanthropy recognised the part it had to play in the climate crisis?

Though marked by other crises, it was a year of banner funding pledges for climate: in February 2020, Bill and Melinda Gates revealed, in a letter marking the 20th anniversary of their foundation, that they now considered climate change as one of their top priorities. A few days before that, Jeff Bezos announced a $10 billion gift to combat climate change. Among the first recipients of this gift, we find organizations renowned for their commitment against climate change such as the World Wild Fund, the Energy Foundation or the ClimateWorks Foundation.

These announcements highlight the increasing commitment of philanthropists for climate. A group of young foundations with liberal values, predominantly based in the United States, have been at the core of this dynamic. For many, the goal of the Paris Agreement to keep the increase in global average temperature below 2°C, above pre-industrial levels, is a rallying point. With its long-time horizon, its political independence, and its ability to fund innovation, philanthropy has unquestionable strengths to bring to the table.

Yet, philanthropic resources remain relatively small compared to states or international organisations, and certainly insufficient given the magnitude of the issue and the resources needed to sustain the current mitigation scenarios. If philanthropy is not in a position to bridge the climate financing gap, how can it make the most of its limited resources to maximise its impact in the field of climate?

We have found that there are four main strategies that philanthropists can use to positively influence the climate evolution. They have the ability to shape the political debate on climate. They can act as boundary spanners between different players through field-building actions. They are able to influence market dynamics through well-targeted investments. Finally, they can contribute to build strong civil society movements through grassroots organising.

What role for philanthropy in climate action?

Despite a growing interest, climate is still a minor theme in philanthropy, and philanthropy itself is just a drop in the bucket of funding required to achieve the ecological transition outlined by climate experts. In 2018, the Intergovernmental Panel on Climate Change (IPCC) announced that $1.6 to 3.8 trillion investments in low-carbon energy supply were required annually to stay in line with the 1.5-degree scenario. This calculation is however focused on mitigation: climate adaptation, which consists in adjusting societies and ecosystems to minimise the harm of climate change effects, could end up costing way more. In contrast, in 2015, the members of Environmental Grantmakers Associations (EGA) distributed $1.54 billion of grants, 64 percent of which were distributed in the United-States. Only 2 percent of philanthropic funds target climate action, while it was estimated in 2015 that 0.1 per cent of climate finance comes from philanthropic dollars.

By giving climate defenders the necessary tools to weigh in the political debate, by increasing collaboration through networks, by investing in low-carbon assets and supporting grassroot organising, [philanthropy] can be a powerful tool for change.

However, philanthropy has played a growing role in the fight for climate over the past years. The philanthropic sector has been the source of many reflections and attempts to define the most efficient pathways to tackle climate change since the 1990s. The wide range of possibilities for action can however hold back new donors and existing foundations. Striving to decarbonise the energy supply, and to reduce consumption or increase efficiency in the most energy-consuming sectors are the two main levers to prevent climate change. A number of policies can help reach this goal: cap and trade systems, carbon taxes, setting energy efficiency standards, incentivising private investments in mitigation, reducing subsidies for fossil fuels… On top of technological change, changes in behavior, lifestyle and culture will be key to adjust consumption patterns.

Understanding these topics and their interdependence requires a technical expertise which is often quite distant from philanthropists’ skills, traditionally honed in the fields of education, health, or poverty. In particular, high-tech solutions for energy supply and energy efficiency are fast evolving; the paths to a low-carbon economy are many and they all involve economic, social and geopolitical stakes. While systemic and cross-sectoral mitigation strategies could be the most cost-effective, they are also much harder to achieve than targeted actions.

The strategies of philanthropic actors themselves in this matter have evolved over the past decades. In the United States, a country that was the world largest carbon emitter until it was overtaken by China in 2007, and where philanthropy represents up to 2 percent of the GDP, foundations have been increasingly active in the field of climate change. The creation of the Energy Foundation in 1991 was one of the first attempts by major foundations on the West Coast to gather around a common strategy. The focus was on energy efficiency and market-based solutions by putting a price on carbon emissions to incentivise businesses to reduce their emissions, namely through carbon taxes or cap and trade systems.

In 2007, they commissioned ‘Designed to Win’, a seminal report whose roadmap relied on a strategy focused on influencing policy-making, developing renewable energy, and prioritising the establishment of a carbon market in the U.S. This strategy was however criticised by scholars, activists, and practitioners for concentrating funding on a few selected grantees pushing for policy change through negotiation and coalition building, at the expense of wider grassroots organising. In 2010, the Clean Energy and Security Act failed at establishing a carbon market in the United States. As a result, philanthropic actors started diversifying their strategies; some have focused on influencing climate-friendly policies at the local or state level, as well as supporting grassroots organising and including themes such as climate adaptation and climate justice in their work.

North American foundations seem to have played an instrumental role in shaping climate philanthropy in other regions of the world. This is due to their considerable financial weight. Large American family foundations such as Hewlett, Packard, and Sea Change concentrate most of the philanthropic funding for climate; in 2012, it was estimated that 70 per cent of the philanthropic funding attributed to mitigation came from six foundations: Oak (which comprises a group of philanthropic organisations based in various parts of the world), Packard, Hewlett, Sea Change, Energy and Rockefeller. They also have a strong ideological power, often embedded in liberal values and supported by a strong internationalist tradition, which makes them the most influential philanthropic actors on the topic of climate.

Mapping philanthropic strategies for climate action

Current funders usually favor a systemic approach, which leads them to intertwine these modes of action. The way they resort to each strategy may however vary depending on their specialisation, which can lean towards social issues or towards energy and environmental issues, and their political sensitivity, which can go from moderate reformism to a desire for radical social and environmental change.

1. Shaping the political debate around climate policy

Philanthropy can help induce policy change through advocacy, communication campaigns, or education. This can also include funding think tanks or studies which will themselves contribute to climate-friendly political action. The Carasso Foundation, a family foundation located in Paris and Madrid, has taken upon to change climate policies through its specialisation on sustainable food systems. Shaping politics is only a part of their strategy which builds upon four pillars: research, advocacy, fieldwork, and prospective studies. For Marie-Stéphane Maradeix, Chief Executive of the Carasso Foundation, ‘Even with limited resources, foundations can have an outsized influence on decision-makers by funding relevant expert groups, whose studies and recommendations can translate into policy outcomes. Foundations are very useful on this point because it is risk-taking, it may not lead to any concrete outcome’. Since 2014, the Carasso Foundation has supported and funded the International Panel of Experts on Sustainable Food Systems (IPES Food), whose conclusions were taken up by the European Green Deal.

2. Building networks: structuring and coordinating the field of climate action

In addition to policies, climate action requires the mobilisation of a large web of actors that need to collaborate and coordinate their activities to design the most efficient responses to the climate crisis. Philanthropy can support the development of the field of climate action, where knowledge and best practices can be spread across actors. By providing resources and expertise to backbone environmental organisations and networks, they can help increase collaboration between players from diverse backgrounds or geographical areas. Foundations have played a historical role in this aspect; it is following meetings funded by the Rockefeller Foundation and the Rockefeller Brothers Fund that the International Panel on Climate Change was created in 1988. As an organisation fully dedicated to gathering and assessing the scientific literature on climate change, whose work program is decided by a general assembly gathering 195 states and meant to provide guidelines for experts and decision-makers worldwide, the IPCC illustrates the interest of creating common platforms to share knowledge, establish consensus, and spur action. In addition to funding coalitions of experts and NGOs, new paths would benefit from the intervention of donors. In his letter ‘Why philanthropy must do more on climate change‘, Larry Kramer, president of the Hewlett Foundation, stressed the role that philanthropy has to play in promoting further collaboration in many settings, such as creating global networks at the subnational level, such as a COP of mayors, or networks between businesses which are more and more willing to commit to mitigation strategies.

3. Investing for climate

Along with the creation of the Earth Fund in 2020, Jeff Bezos decided to launch a $2 billion Climate Pledge Fund to invest in start-ups developing decarbonising technologies. The fight against climate change requires the development and adoption of low-carbon energy technologies, eco-designed products, and responsible business models. Foundations can accelerate the emergence of these innovations and practices by using their financial resources to support companies that either provide solutions for the climate crisis or integrate these stakes in their own activities, regardless of their sector. They can pursue two complementary investment strategies. ‘Upstream strategies’ focus on how to best invest endowments to have a positive impact on the climate. They consist in commitments to divest endowment assets from fossil fuels and to invest them in climate solutions or environmentally sound managed companies, through stocks, bonds, or equity; green bonds for instance represent a good option, thanks to their low risk profile and a focus on clean infrastructure. ‘Downstream strategies’, on the other hand, use ‘impact investments’ rather than grants, in the context of their climate-related programs. Such equity investments traditionally prioritise impact over financial returns ; investing or lending at concessionary rates, which implies below-market-rate returns, for instance to facilitate investments from more traditional investors, is a powerful tool that foundations can use alongside with their grantmaking programs.

4. Supporting climate initiatives

The fight against climate change also requires citizens to be aware of climate issues, to change their own behaviors, to invent climate solutions and to push for changes at all levels in society. Philanthropy, with its independence and long-term horizon, can play an important role in supporting climate initiatives that foster awareness and the development of innovative climate solutions by local non-profit organisations. While these organisations typically rely on crowdfunding and membership fees, the additional funding provided by foundations can however be useful and reduce the dependence on public support, which might wither with political change or budget restrictions. The Chorus Foundation is a good example of a foundation focused on empowering communities affected by climate change and its consequences. The Foundation concentrates most of its grantmaking on organisations operating in a few ‘focus communities’. This place-based strategy is meant to help building social movements able to target climate change and its consequences from a systemic point of view, in line with the bottom-up approach according to which the most exposed communities are best able to develop answers to the crisis. This results in unrestricted, long-term funding meant to allow the communities to build economic, politic, and cultural power to address these challenges. But grantees do not necessarily focus directly on climate change; the unrestricted funding is meant to allow them to work holistically on environmental, political, and economic issues which may be connected. The organisations typically act through community organising, electoral work, and encouraging the creation of local businesses and jobs through sustainable projects.

Strategic pathways for climate action

Pathways to change in areas like climate action require many different interventions beyond mere cash giving, such as advocacy and pressure from social movements, bold political reforms, and shifts in investing patterns. In practice, these categories overlap and complement each other: political advocacy requires the establishment of coalitions, regulatory changes are necessary for the private sector to adapt, and the construction of grassroots movements is essential to put pressure on both public and private actors and support overall change.

Foundations aiming to tackle climate change can start their journey by giving to a specialised, renowned climate initiative raising donations from multiple sources to redistribute them to selected projects – i.e. a re-granting organisation. Over the years, the field has been populated by intermediaries, affinity groups, and consultants specialising in climate change. Such a low risk approach allows foundations to dip their toes in the field and learn about the issues and the ways in which they can be addressed. Building upon that experience, foundations can decide to go a step further and develop their own climate programs, often with dedicated staff. This more hands-on approach is particularly well suited as a response to external factors, such as a shock in the political or economic realms. But it may also result from internal debates and the perceived need to structure or refresh the foundation’s strategy, for instance, to make its programs more tightly coupled around an overarching mission, to ground its activities in a specific area, or to fill a gap that they have identified in the field.

If philanthropy is not in a position to bridge the climate financing gap, how can it make the most of its limited resources to maximise its impact in the field of climate?

For foundations which are not climate-oriented, starting with what they know best is probably the best way to get involved. Without creating a new dedicated program, they can strive for synergies between their existing programs and climate action. The incentive to do so is two-fold: making the most of their expertise to contribute to tackling a global and complex issue, but also addressing the risks that they face in accomplishing their own mission. As organisations, foundations are exposed to ‘transition risks’ similar to businesses and local governments, but the vulnerable populations that they serve often face greater risks of being deeply affected by climate change.

As organisations, foundations can also have a substantial impact through their investments and their daily operations. Foundations eager to contribute to the fight against climate change should thus align their processes with their climate goals. This requires them to be systematic in developing low-carbon operations, including sustainable procurement, limitation of air travel, overall minimising the emissions of their activities and offsetting the rest. This also involves developing thorough upstream investment strategies, using the investment of their endowment to advance climate mitigation and adaptation. Among these levers, investing the endowment strategically certainly appears as the most impactful option for foundations; in Europe only, these assets amount to €511 billion according to the estimation of the European Foundation Center.

However, the impact that individuals can have may not primarily come from their financial resources. Their most powerful strategy is probably to freely engage as citizens in collective efforts such as voting, signing petitions, sharing data and information, participating in demonstrations, and volunteering for awareness programs. In other words, investing time and energy to build a stronger bottom-up movement able to influence governments and businesses – and even foundations – to engage in ambitious and timely transformations.

Foundations should be part of this momentum. By giving climate defenders the necessary tools to weigh in the political debate, by increasing collaboration through networks, by investing in low-carbon assets and supporting grassroot organising, they can be a powerful tool for change. The launch of ClimatePhilanthropy2030, the 10-year commitment to climate coverage by Alliance Magazine in January 2020, was meant to put climate at the heart of philanthropic concerns. One year later, we have faced one crisis after another; yet the question of climate change has never left the picture. The spread of Covid-19 has made us aware of the powerful, reciprocal effects of human activity and wildlife. During lockdown, consumption and mobility patterns have drastically changed, feeding reflections on alternative ways of living conducive to a healthier relationship between humans and their environment. As the economic crisis kicked in, concerns have shifted to supporting environmental organisations amid budgetary restraints or pushing for climate measures in recovery plans. Keeping the momentum in the philanthropic community seems more necessary than ever.

Eléonore Delanoë is a Research Associat at ESSEC. Arthur Gautier is the Executive Director of the ESSEC Philanthropy Chair, as well as an Assistant Professor at ESSEC Business School in the Public and Private Policy Department. And Anne-Claire Pache is a Chaired Professor in Philanthropy in the Essec Public and Private Policy Department.

What can philanthropy do for the climate? Strategic pathways for climate giving is one of Alliance’s 25 moments looking to the past and future of philanthropy to celebrate 25 years of Alliance magazine being at the heart of global philanthropy.