The latest UN climate report warned in March that there is ‘a rapidly closing window of opportunity to secure a liveable and sustainable future for all.’ Scientists say that the critical warming threshold of 1.5C is likely to be breached before 2030.

In recent years, countries have ramped up their commitment to tackling the climate crisis, by announcing 2050 net-zero pledges and setting ambitious interim targets to reduce their greenhouse gas emissions. But the raised ambition has not been matched with increased funding.

In 2009, wealthy nations committed to collectively mobilise $100bn a year to help vulnerable countries cope with mounting climate threats. The pledge has never been met. In 2020, countries mobilised $83.3bn. According to the Overseas Development Institute, the US provided just $2bn in 2020, when their fair share is estimated at $43bn. UN chief Antonio Guterres has said delivery of the $100bn finance goal is essential to ‘rebuild trust’ among developing countries that are extremely vulnerable to climate impacts.

Can philanthropic institutions help narrow this climate finance gap? Historically they have allocated small sums to addressing climate change. Less than 2 percent of global philanthropy was dedicated to climate change mitigation in 2021, according to a report by ClimateWorks. Just 0.1 percent of climate finance comes from philanthropic funding.

This trend is now starting to change. Philanthropies are moving to support climate action. Between 2020 and 2021, funding for climate mitigation increased by more than 40 percent, due to the arrival of major new donors such as the Bezos Earth Fund and commitments from ​​Bloomberg Philanthropies, the IKEA Foundation and the Rockefeller Foundation, according to ClimateWorks.

 A recent report by Imperial College’s Grantham Institute on Climate Change and the Environment found that philanthropic foundations are well positioned ‘to be a powerful voice for change and collective action.’

‘They can explore [issues] that people don’t want to explore and challenge the status quo or the consensus of conventional business,’ says Mark Campanale, founder of Carbon Tracker, a non-profit think tank researching the impact of climate change on financial markets.

Philanthropists are in a position to do this as ‘they have a lot of flexibility with their capital,’ says Campanale. ‘Pension funds don’t have that same flexibility as they have to generate a return for their pensioners.’

Between 2020 and 2021, funding for climate mitigation increased by more than 40 percent, due to the arrival of major new donors

Beyond the funding that they’re able to mobilise, ‘philanthropists can use their voice to raise climate on the public agenda,’ says Patricia Cremona, programme and research coordinator at the UK-based Environmental Funders’ Network. This can help create a ‘snowball effect’ which drives governments and companies to increase their climate ambition, she explains.

Many bigger philanthropies, such as the European Climate Foundation and the Hewlett Foundation, are funneling funds into climate communications and advocacy work, says Cremona.

‘Philanthropies see that in order to get governments and the private sector to take action, you need to get the broader public on your side,’ she says, adding that if you convince voters and consumers of the importance of climate ‘that’s the most powerful tool there is.’

According to the Grantham Institute report, philanthropies can ‘leverage their finance to expand the volume of climate finance and meet shortfalls in priority needs such as for just transitions and energy access in poor countries.’

Just transition programmes aim to retrain workers from fossil fuel sectors as the countries look to shift away from coal, oil and gas and invest more in renewable energy. At COP27 in Sharm el-Sheikh, Egypt, last year, a coalition of climate philanthropies announced $500 million over the next three years to accelerate the just energy transition in low and middle-income countries. The coalition includes the Children’s Investment Fund Foundation (CIFF) and the Sequoia Climate Foundation.

The arrival of these two foundations, along with other major organisations such as the Quadrature Climate Foundation (QCF) in the UK, has led to a ‘real shift’ in the last five years, says Campanale.

‘Ten years ago, foundations would say ‘we don’t do climate, we don’t do finance’,’ Campanale recalls. ‘Each of these big foundations now has a finance specialist who you can go and talk to who understands the role of banks and funding the fossil fuel industry.’

‘They have very sophisticated programmes, mobilising investors around climate risk and the energy transition,’ he says.

Philanthropists have also played a pivotal role in the fossil fuel divestment movement, which calls on institutions to move their money out of coal, oil and gas, says Campanale.

The campaign has led to universities, the Church of England and large charities all pulling funding out of fossil fuel projects.

‘Philanthropists funded all the original work which led to the fossil fuel divestment movement,’ says Campanale. ‘Without the original philanthropic funding, this movement, which has spread around the world, wouldn’t have gathered as much steam.’

Isabelle Gerretsen is a journalist based in London who covers climate and environmental issues