Drawing on a core innovation of the anti-Apartheid era, Divest-Invest calls on foundations to fight climate change by divesting their portfolios of planet-heating fossil fuels and investing in climate solutions, such as renewable energy, energy efficiency, clean tech, sustainable agriculture, water conservation, energy access and climate justice initiatives. By shifting institutional capital from brown to green choices, Divest-Invest is modeling the system change needed now. About 140 foundations globally, with assets in excess of $12 billion, have joined the campaign since its launch in January 2014. Philanthropy is just one arm of a broader movement that includes pension funds, universities, insurance companies, cities, faith groups and individuals. In Paris, Divest-Invest announced the movement now counts assets in excess of $3.4 trillion. In 2016, the campaign focus will be on driving investment towards energy access, a just transition and sustainable power for the world's majority
Divest-Invest Philanthropy has five main objectives.
First, to challenge mainstream philanthropy's firewall between investments and grants - an implicit endorsement of a capitalist system that works for a few, while so many suffer.
Second, to accelerate the clean energy transition. Third, to revoke the social license of the fossil fuel industry to continue business as usual.
Fourth, to educate financial regulators on climate risk concepts, such as "stranded assets" (most fossil fuels must remain in the ground to save the planet and its people), and the "carbon bubble" (investors are exposed to loss because the value of stranded assets cannot be realized).
Fifth, to support the people's climate movement calling for a just transition.
HOW THE OBJECTIVES WERE ACHIEVED
Divest-Invest began with a letter to all U.S. foundations, challenging them to assess whether their investments were consistent with their values: No foundation's mission can survive climate change. So if you are invested in fossil fuels, you are driving the same problems you ask your grantees to solve. This was a major wake-up call to mainstream philanthropy, prompting dozens of foundations - including the Rockefeller Brothers Fund - to take the pledge.
Now the campaign is global and growing, accomplishing its objectives through a range of tactics: Press conferences and panels to highlight the rapid growth of the movement, clean investment opportunities, and the catastrophic business plan of the fossil fuel industry; meetings with policymakers and financial regulators to reorient their thinking on climate risk; and, most vitally, support for and partnership with grassroots organizations pursuing divestment campaigns across diverse sectors like government, academia, and faith groups.
As an activist living and working in South Africa during Apartheid, Divest-Invest founder Ellen Dorsey saw how divestment could bring about massive social change. Her application of divestment to the climate fight was a bold move that breathed new life into a grassroots movement defeated after the failures of Copenhagen and of climate legislation in the U.S.
Divest-Invest is also revolutionary because it is breaking down the firewall between a foundation's grantmaking on the one hand, and its investments on the other. The firewall has led philanthropy to feed enormous wealth to a global financial machine, while delivering a relative pittance to the social good initiatives it claims to support.
Divest-Invest has inspired pledges from over 500 institutional investors around the world with assets of $3.4 trillion.
These include commitments from the Rockefeller Brothers Fund, the Norwegian sovereign wealth fund, global insurance companies Axa and Allianz, the Church of England, Glasgow University, the British Medical Association, nearly 100 cities and local governments, the California pension funds, Stanford University and many more.
These iconic commitments have captured the collective imagination and instilled a sense of hope that we might still solve this urgent crisis in time.
Further, by educating policymakers, media and the public about the carbon bubble and stranded assets, the campaign is helping to reform a broken financial system that ignores long-term risk for short-term profit. Finally, Divest-Invest has cracked open a vital debate in philanthropy and inspired a new wave of mission-related investing - even among those not yet bold enough to divest.
Status quo thinking is the biggest challenge to the campaign. Many financial advisors to foundations remain under the false impression that financial performance will be undercut by divestment.
However, with coal stocks in terminal decline and oil and gas prices plagued by volatility, the real risk is to remain invested in fossil fuels. Moreover, multiple analyses, from a range of credible sources including MSCI, Carbon Tracker and Impax, show that fossil-free portfolios outperform their counterparts time after time.
Another obstacle is the faction of climate advocates who believe shareholder engagement with fossil fuel companies is a superior tactic to divestment. Yet, decades of shareholder resolutions have done little to shift the industry's dangerous business model. Divest-Invest allows its members to retain de minimus holdings in fossil fuel companies for purposes of shareholder engagement. But that is not a bar to divesting the rest, and aligning investments with values.
CHALLENGES FACED BY THE DONOR
Philanthropy is an insular and risk-averse community, slow to adopt new ideas. In founding Divest-Invest, Ellen had to fight the skepticism of her peers, who said the firewall between grant-making and investments could never be breached.
Unyielding in her conviction that it was wrong to profit from companies wrecking the planet, Ellen fought the old-guard and began convincing foundations, one by one, that they could successfully wield both their grants and their investments to tackle the biggest challenge of our time.
Today, both the ethical and financial case for Divest-Invest are aligned, with members reporting no downside to their portfolios.
As Divest-Invest launches into its third year, we are guided by four primary lessons learnt. First, make the moral case for divestment but come armed with the financial case: So many foundations and money managers still insist that divestment will undermine financial performance despite all evidence to the contrary.
Second, in working to recruit foundations, always opt for "name and fame" rather than "name and shame" approach: no one wants to be the bad guy. Indeed, we have seen activist campaigns against the Wellcome Trust in the UK backfire, as the Trust actually doubled down on fossil fuel investments.
Third, lead with hope and not despair: climate change is going to devastate many parts of the world but there is still time to avoid the worst impacts and prevent runaway climate change.
Fourth, build bridges to other sectors working on divestment: partnerships with the faith community, student activists, city divestment leaders and climate justice allies have been invaluable.
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WHY IS THIS BRAVE PHILANTHROPY
The members of Divest-Invest Philanthropy took a leap of faith and excluded an entire sector from their portfolios. This contravenes modern portfolio theory, which insists that diversification is the only sound approach. Yet Divest-Invest members decided that mission-alignment took precedence over maximizing returns (no trade-off proved necessary). Two years later, this courage has inspired a global divestment movement with trillions in assets. Divestment activists and institutions are now a potent advocacy block, relentlessly pushing policymakers to increased ambition and modeling the transition the world needs now. The campaign has even led foundations that will not divest to reform their investment policies & invest in climate solutions.