Confluence Philanthropy issued a Call to Action on June 2, 2022, to Confluence Members to support the Paris Agreement’s 1.5°C goal by celebrating and making public a list of those members that are making public commitments to achieve Net Zero.
Climate science tells us that we need to reduce global emissions down to Net Zero by 2050 to limit warming to 1.5°C to stave off the worst effects of climate change. Financial assets must decarbonize along the same science-based Net Zero trajectories and pathways.
The Russell Family Foundation (TRFF) has spent the last several months learning more about our role in reducing carbon emissions and what it would mean for the foundation to make a Net Zero commitment. We believe foundations have a unique role in contributing to Net Zero goals for our global economy. We have long been divested of fossil fuels as one of the original signatories to DivestInvest. As an environmental foundation, with an increased focus on climate change, and our concern for this issue, we want to make sure we are part of the change we want to see on our planet.
As we have been exploring what a Net Zero Commitment means for a foundation like TRFF, we have been fortunate to learn from leading peers such as Tim Dunn and Julianna Brunini of Terra Alpha, Nili Gilbert of David Rockefeller Fund, Carbon Direct & Glasgow Financial Alliance for Net Zero, and Tamara Larson of Mercer, Intentional Endowments Network, David Rockefeller Fund & The Clara Lionel Foundation in addition to our partnership with Tiedemann Advisors.
A natural question for our organization has been, “how can a foundation have an impact on the climate crisis by making a Net Zero commitment?” The fiduciary duty of trustees, managers, and foundation committee members holds a dual mandate—a fiduciary duty to the mission of the foundation and a duty to its financial assets and investment portfolio. Foundations hold a unique role in the investment community and have the flexibility of philanthropic tools, including grants, investments, communication, human capital, and convening. These tools are particularly valuable in aligning mission-oriented pools of capital to a common goal of Net Zero. Foundations may be relatively smaller pools of capital than some other asset owners who are pledging Net Zero; however, we can move more quickly and lean in more easily to the decisions and commitments.
Does making a Net Zero commitment mean we will need to lower our performance expectations for the portfolio? Just the opposite; in fact, by leaning in to focus on investing in the economy that we know is to come, in the right way, with the right partners, we should be able to increase returns and avoid downside risk that will come from continuing to hold the type of climate risk that is going to have to come out of the economy eventually. Climate risk is going to create a lot more volatility going forward; we want to 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 the market rate approaches.
There seems to be some mystery on the “how” of moving organizations to Net Zero. From our learning, the key steps of getting started are to engage and learn from your peers, do a baseline assessment of where your portfolio is today, level set with the definition of terms, and determine if your organization is willing to commit to our planet.
Once a commitment is made, several frameworks can be adopted to help set the pathway beginning with setting a long-term target. The UN-convened Net Zero Asset Owners Alliance (NZAOA) has been passionate about Net Zero by 2050 because they are most focused on supporting the Net Zero transition of the real economy. Others are making a 2030 commitment. NZAOA employs a rigorous approach to setting interim targets for 2025, 2030, etc., by being thoughtful and intentional about taking proactive steps. There is no one way to reach the goal, and transparency about your process encourages others in the field.
We have learned from our peers as we explored committing to Net Zero:
- Start with your why.
- Learn – Engage with peers to understand their pathways.
- What does success look like, and who are the partners you will need to achieve this goal?
- There is climate and fiduciary value in the journey coalescing around a common vision for Net Zero.
We hope that not only will our portfolio and organization meet Net Zero goals but that our learning and implementation will encourage others to make similar commitments. I would encourage you to sign up for Confluence’s Net Zero Intensives on the West Coast (November 10-11) and East Coast (in January 2023), which is being offered to help this community make and meet their Net Zero commitments.
- Kathleen Simpson, CEO, The Russell Family Foundation
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