We are in a race against the clock to combat the impacts of climate change and preserve a livable planet. Philanthropy has a unique role to play and untapped potential to provide leadership and make a difference.
Climate science shows we must reduce global emissions to net zero by 2050 to limit warming to 1.5°C and stave off the worst effects of climate change. The transition to a net zero world is one of the greatest challenges ever faced by humankind.
At The Russell Family Foundation (TRFF), we believe that foundations play a unique role in the investment community. As foundations, we have the flexibility of philanthropic tools like grants, investments, communication, and convening that are highly valuable in aligning mission-oriented pools of capital to a common goal, like net zero.
A few ways that TRFF has deployed these tools since announcing our commitment to Net Zero is by making a $500,000 investment in Carbon Direct, which supports growth-stage companies in the U.S. and Europe focused on reducing, removing, and monitoring their carbon emissions.
We further used our grant capital to partner with Confluence Philanthropy to create two Net Zero Intensive convenings in San Francisco and New York where peer foundations, along with their investment advisors, gathered for a day and a half intensive to learn about what it takes to make a Net Zero commitment with authenticity and rigor. In addition to the convening grant, we provided a grant to As You Sow to support active ownership.
Moving forward, we will continue to explore how we can use grant capital in areas where investment capital may not be the right tool to support a net zero transition. Finally, we will use our communications and voice to transparently share our learning and progress and build a roadmap for making a Net Zero transition.
Values-aligned
While some foundations may have smaller pools of capital compared to other asset owners who are making similar commitments, foundations have the opportunity to move more quickly and nimbly to affect change due to fewer regulations than you would find in pension funds, endowments or regulated for-profit corporations.
Even with these advantages, relatively few foundations have committed to net zero. This isn’t surprising given that there is no single roadmap for doing so; we are learning how to achieve an ambitious goal each step of the way. For starters, it can be challenging to get all key decision-makers to align on this level of commitment. It could also require revising a foundation’s investing philosophy, depending on the foundation’s current mission-aligned investing strategies.
At TRFF, we’ve been focused on the environment for more than 20 years. Today, our portfolio is nearly 100% values-aligned, and we are building on 10 years of progress moving to a low-carbon portfolio, so committing to net zero by 2030 late last year was a natural next step for us. As we take these early steps in our journey to net zero, we want to share tools and learnings with other foundations to help them get started.
Four steps
For foundations looking to explore the world of net zero but are unsure of where to begin, consider these four steps:
Learn and engage with peers to understand their pathways. Learning is a key first step. To do this, invite all key stakeholders into the learning and due diligence process to examine what committing to Net Zero will look like for your foundation. Bring in peers, asset managers, and professionals who are already navigating the pathway to share their lessons learned.
TRFF spent many months exploring what a Net Zero commitment would mean for a foundation of our size and scope, and we had the opportunity to learn from leading peers in the field who could answer our questions based on their own experiences. Our journey started by reevaluating our foundation’s future and determining what areas of impact were most important to achieve.
Taking action on the climate crisis became the leading priority while ensuring we uphold a commitment to diversity, equity, inclusion and access. We spoke with investment managers and foundations who have made Net Zero commitments, such as Terra Alpha, Capricorn Investment Group, David Rockefeller Fund, McKnight Foundation and others, reviewed available frameworks such as the Net Zero Asset Owners Alliance and Science-Based Targets Initiative and partnered with Confluence Philanthropy to develop Net Zero intensives.
Each foundation will have its own unique path, so it was extremely valuable to hear how others got started and what their biggest challenges have been so far to help shape TRFF’s approach.
Discuss your mission and values as a foundation. Before setting any course of action, a foundation must determine if its current mission and values align to support a Net Zero goal and update them as it aligns with the current climate. During this work, define your “why.” Ask your team what is the guiding principle that drives a goal of Net Zero and why your foundation?
Having a clear sense of purpose can help you create new principles that set your path. At TRFF, we’ve been environmentally-focused since our inception, so committing to Net Zero is a natural next step in the evolution of our history and mission.
However, it did involve truly aligning on “what is Net Zero?” and ensuring our board, team members and investment partners agreed with what this meant for our foundation.
As a learning and sharing organization, we also see a continuing opportunity to use our voice and experience to convene others and bring them along on a similar journey to address climate change.
Review your current investment strategy and start making shifts. Foundations that are already investing in sustainable solutions will have greater experience and an advantage in moving towards a decarbonized portfolio. For those who are not investing in these spaces, this is an opportunity to learn from peers and philanthropic support organizations convening on the topic about the types of changes that need to be made and new opportunities that exist.
Making a Net Zero commitment does not mean you will need to lower expectations of the performance of your portfolio. Just the opposite; in fact, by leaning in to focus on investing in the economy that we know is to come, in the just right way, with the right partners, you will likely be able to increase returns.
It is also likely you can avoid downside risk that will come from continuing to hold the type of climate risk that is going to have to eventually come out of the economy. Climate risk will create a lot more volatility going forward; you will be able to lower the contribution to volatility coming from climate risk by moving in this direction.
There is a deep opportunity for market-rate investments to address the climate crisis. Foundations have an opportunity to make a commitment and help build the ecosystem by using philanthropic capital in a way that has the potential to intersect with market rate approaches.
At TRFF, we started with a baseline audit of where the Foundation was at both in our grantmaking and investment portfolios as well as operations. We’ve partnered with Carbon Direct Inc. to develop the baseline on our operations and grantmakng and to access their breadth of tools to help guide our strategy that incorporates nature, climate justice- and inclusivity-based solutions. Our investment advisor, AlTi created a baseline for our investment portfolio and Carbon Direct, Inc. provided a peer review of that data as well.
We are now evaluating the baseline data to begin the process of approving interim targets, formal reporting, and integrating our diversity, equity, inclusion and access framework into our Net Zero strategy.
Start small. Any step toward net zero is progress. Making a commitment, taking a baseline of where your organization is today and starting with incremental moves count. Set goals for yourself along the way that you can celebrate and use as moments of reflection. Refer to your mission and values and use them to help guide your path forward on a timeline that will support the planet’s needs for action.
Our journey started with learning, followed by an official commitment when we signed on to the UN-convened Net Zero Asset Owner Alliance (NZAOA), which provides guidelines for achieving this commitment. Not all who commit to net zero sign on to NZAOA, but for TRFF, it was an important first step to align with as we build the playbook for how foundations can take similar steps to have a meaningful impact on climate change.
Kathleen Simpson is CEO at The Russell Family Foundation
