From: Green Living: the Newsletter of Climate Change Philanthropy Action Network (CCPAN), No. 2, May 2008
Stephen Viederman
In 1997 William McKeown, a lawyer at a leading New York firm, concluded his article on Being True to Your Mission: Social Investments for Endowments by observing that, “In order to fulfill their responsibility to see that the corporation [non-profits and foundations] meets it charitable purposes, they may have a duty to consider whether their investment decisions will further those charitable purposes, or at least not run counter to them.”
By this standard there are probably very few foundations meeting their fiduciary responsibility. The recent UNEP-sponsored study by Freshfields, one of the worlds largest and most prestigious law firms, confirms that considering the social and environmental issues in institutional investment decisions does not constitute a breach of fiduciary duty.
At a time when the risks associated with climate change are daily becoming more evident, foundations are not responding with their endowment dollars. The report Design to Win, cited in the CCPAN’s Green Giving, April 2008, called for additional grantmaking of $600 million annually but made no mention of the $600 billion of foundation assets that make the grants possible. Foundations still fail to see the value-added that can be achieved by considering their investments as a tool for change, along with grants.
Climate change is not only an environmental issue. It is a social, moral and ethical issue as well. As such it affects all foundations, whether or not they are funding programs or projects on climate risk. Using assets to mitigate and adapt to the effects of climate change does not require a change in program guidelines and giving. While not every foundation will make direct climate change grants, the urgency of the issue does require boards and finance committees to reconsider how their investment decisions positively and negatively affect climate, and for that matter, rethink issues related to their grant programs. And then, to act accordingly. Just as boards hire consultants to help them manage their investments, specialists can be hired to assist in the climate-investment nexus.
Among the actions that can be taken are:
• Consider equity, fixed income, and alternative investments in funds and companies that are taking climate change seriously as a business and social risk. Many vehicles from mainstream firms like Deutsche Bank and Goldman Sachs compliment those from social investment firms like Calvert and others;
• Develop and implement shareowner proxy voting guidelines as an effective way of encouraging greater corporate attention to climate;
• Make community investments that will assist in mitigation and adaptation to various climate scenarios; and
• Align your foundation with other climate change investors by joining the UK-based, internationally focused Carbon Disclosure Project (with signatories exceeding $50 trillion), the U.S. Based Investor Network on Climate Risk (with signatories exceeding $5 trillion), and the European based Institutional Investors Group on Climate Change that includes 35 of Europe’s leading institutional investors.
Three invitations came across my desk recently to participate in meetings on philanthropy and climate to be held over the coming month in the U.S. and Europe. The speakers and participants were to be distinguished scientists, activists, grantmakers and grantseekers, and from governmental and intergovernmental organizations. Not one of the agendas, however, raised the issue of how philanthropic assets could be used to curb climate risks. This is a norm that needs to be changed. Why do foundations tie one hand behind their back as they try to engage the climate issue?
Climate change may well prove to be the defining issue of the 21st century. For foundations to sit on the sidelines with their assets may be a breach of fiduciary duty, and the lose of a valuable tool for creating change.
Stephen Viederman
[email protected]
2008.4 CCPAN