Peggy Dulany, Founder and Chair at Synergos and I were honored to come together in a fireside chat for Confluence Philanthropy’s Reset 2021: Climate Summit to discuss a topic that is top of mind for many leaders today. How can we limit global warming to 1.5°C, and stave off the worst effects of climate change?
It was so special to combine Peggy’s perspective as a renowned philanthropist and activist, with my own perspective as a mainstream investor. Together with several other leaders, Peggy and I recently co-founded the Net Zero+ Investment Collaborative, which is setting a way forward for mission-driven asset owners to eliminate greenhouse gas (GHG) emissions from our portfolios by 2050 or earlier, consistent with the 1.5° goal.
In reflecting on the difficulty of motivating leaders to rise to this challenge, Peggy shared her lived experience from the fight to end South African apartheid years ago. That movement, she said, was advanced in important ways by “Bridging Leaders” who were able to convene key discussions between disparate national groups who were entirely lacking in trust, but who needed to come to the same table and find agreement to move the country forward.
Those same principles of building bridges of trust will also be needed in spades to bring leaders to the table to achieve the critical 1.5° C target for climate change. Even within our community of mission-driven institutions, we have serious debates about the way forward. Should we divest from ownership of the worst emitters, or continue to own their shares so that we can engage with them and help them to improve? Should we support the “netting” aspects of the “net” zero movement, which call for not only minimizing the GHG emissions that our society produces, but also for removing remaining emissions from the atmosphere with carbon offsets?
In this article, we wanted to share some perspectives on these debates, with the hopes of bridging some gaps.
Divestment vs. Engagement
Several of the portfolios which Peggy and I oversee are committed to fossil fuel divestment. Today, through the Net Zero+ Investment Collaborative, we are also advancing a new approach of “Engagement With Teeth,” through which we will address ownership in other types of high-emitting companies and hard-to-abate sectors. In this approach, we will specifically target the worst emitters in our portfolios and engage with them on improving their carbon footprints. For companies that are difficult to engage with, or fail to show progress, the nature of the engagement will be escalated, with a clear timeframe on a path that ultimately leads to divestment.
We believe that the Engagement With Teeth approach, in addition to hopefully helping the real economy advance down the all-important decarbonization path, also has the potential to show how divestment and engagement can work together. Asset owners who have chosen different paths – divestment vs. active ownership – can build bridges within our community, so that our efforts and choices will be mutually supportive. It should be quite possible for us all to be “rowing in the same direction,” given that we all share common goals.
Carbon offsets are also an area of growing debate in climate finance. Critics worry that the ability for companies or other actors to offset their emissions will permit high polluting companies to “get away” with continued inaction in addressing unsustainable practices. They also worry that net zero pathways ask more of offsets than the technology can currently support. These voices would like to see our society target “Real Zero” pathways which do not rely on offsets, rather than the “Net Zero” pathways which do.
However, in our own work and net zero thinking, we have deferred very heavily to the analysis of climate scientists to guide us, and the fact is that scientists have found no credible pathways to limit global warming to 1.5° C that do not use some form of offsets. The Intergovernmental Panel on Climate Change (IPCC), a leading research body on this topic states that:
“All analysed pathways limiting warming to 1.5°C… use CDR (Carbon Dioxide Removal) to some extent to neutralize emissions from sources for which no mitigation measures have been identified…. The longer the delay in reducing CO2 emissions towards zero, the larger the likelihood of exceeding 1.5°C, and the heavier the implied reliance on net negative emissions after mid-century to return warming to 1.5°C.”[i]
Four indicative pathways to 1.5°C from the IPCC’s calculations are shown below. The gray areas represent GHG emissions caused by fossil fuels and industry. The brown areas show the contribution from agriculture, forestry and other land use, which you see can be positive or negative, depending on how we manage them. The yellow areas demonstrate the use of manmade negative emissions technologies. And the first pathway (P1), although not entirely absent of offsets, comes closest to the vision for “Real Zero.” For this scenario to work in practice, we would need global CO2 emissions to peak around now, and then decline by about 8% per year for the next 30 years. By contrast, in 2020 during the pandemic and global lockdown, global emissions decreased by only ~6% per year. So, in order to achieve the nearly “real zero” P1 pathway, we would need to do better than the global lockdown in every single year between now and 2050, and then stand pat for perpetuity.
[ii] 
It seems quite possible to us that this honorable goal might well be missed by a longshot. Therefore, we are encouraging fellow Confluence members, and others, to step up with us as “Bridgers” in helping society to figure out the responsible approaches to account for some amount of carbon dioxide removal (CDR). While it should be moderate and measured, the science suggests with a high level of statistical confidence that offsets will be an important tool on our path to 1.5° C which should not be ignored or delayed.
Just like the “bridging leaders” who came together at the table in Peggy Dulany’s recounting of the successful movement to end apartheid, our community can come together with business leaders and policy makers, with an eye towards ensuring that offsets programs focus on high quality, verifiable standards, and are managed on an ongoing basis. We can also take a stand for decarbonizing what can be decarbonized, and only offsetting where it is absolutely necessary. Similarly, those in our community who have chosen to divest will have the opportunity to build useful bridges to those who continue to own and engage.
To offset, or not to offset… to divest, or not to divest. How we get to 1.5° C is the real question.
- Nili Gilbert, Co-Founder,Net Zero+ Investment Collaborative, Trustee, David Rockefeller Fund, and Omar Sana
Nili Gilbert is the co-founder of the Net Zero+ Investment Collaborative, a group formed in recognition of the urgency of the climate problem and the special role that investment will play in addressing it. The collaborative is designing a malleable framework for portfolio decarbonization, and was launched with net zero investment commitments from three founding Rockefeller Family organizations.
From 2010 to 2020 Nili co-founded and served as Portfolio Manager of Matarin Capital Management, one of the larger women-owned asset management firms in the U.S., where she was responsible for managing hedge fund and equity strategies for institutional clients. Matarin has been recognized as both a performance leader and as a thought leader, with its research cited in such publications as The Wall Street Journal and Barron’s. Nili is a regular contributor on CNBC and Bloomberg television, as well.
Nili serves as Board Member and Chairwoman of the Investment Committees of the David Rockefeller Fund and the Synergos Institute. She also serves on the Social Mission Board of Seventh Generation, a wholly-owned subsidiary of Unilever.
Notes: [i] Rogelj, J., D. Shindell, K. Jiang, S. Fifita, P. Forster, V. Ginzburg, C. Handa, H. Kheshgi, S. Kobayashi, E. Kriegler, L. Mundaca, R. Séférian, and M.V.Vilariño, 2018: Mitigation Pathways Compatible with 1.5°C in the Context of Sustainable Development. In: Global Warming of 1.5°C. An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty [Masson-Delmotte, V., P. Zhai, H.-O. Pörtner, D. Roberts, J. Skea, P.R. Shukla, A. Pirani, W. Moufouma-Okia, C. Péan, R. Pidcock, S. Connors, J.B.R. Matthews, Y. Chen, X. Zhou, M.I. Gomis, E. Lonnoy, T. Maycock, M. Tignor, and T. Waterfield (eds.)]. In Press.
[ii] “Global Warming of 1.5 Degree Celsius.” Intergovernmental Panel on Climate Change, Intergovernmental Panel on Climate Change, Jan. 2019, www.ipcc.ch/site/assets/uploads/sites/2/2018/07/SR15_SPM_version_stand_alone_LR.pdf.
