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Frequently Asked Questions
What is the Divest-Invest Philanthropy initiative?
Divest-Invest Philanthropy is a coalition of U.S. and global foundations pledged to divest from fossil
fuel companies and invest a portion of their assets in the clean energy economy. They are calling for
other philanthropies to join them. Foundations now join the rapidly growing divestment movement
among colleges, cities, states, pension funds, and religious institutions, a moral movement of our
time.
Divest-Invest Philanthropy believes the fiduciary duty of foundations requires investments not
undercut their mission of serving the public good. Grants and investments must be aligned, not in
conflict. Divest-Invest also seeks to protect endowments from the “carbon bubble.” Scientists have
shown that most fossil fuel reserves must be kept in the ground to protect the climate. As market
valuations of fossil-fuel companies are linked to their reserves, this means they are overvalued and
risky investments.
Foundations in Divest-Invest are confident of comparable or superior returns for their endowment
portfolios without fossil fuels, as a number of studies, and real world experience, have demonstrated
is readily achievable. And they are committing to help fund the transition to a new, clean energy
economy by investing in the many growing opportunities in this sector. Strong returns are coming
from sustainable companies across sectors – including power, electricity, water, waste management,
energy efficiency, transport, manufacturing, services and food and agriculture. This transition will
require one “clean” trillion dollars of new investment globally per year.
The fossil fuel divestment movement follows in the footsteps of other efforts to divest from apartheid
South Africa and tobacco, which successfully focused ethical and financial power to benefit society.
When did the initiative begin?
In January 2014, more than a dozen philanthropies with an asset base of nearly $2 billion announced
their commitment to divest from fossil fuels and invest in the new energy economy and called on
other foundations to join them. The founding members of the Divest-Invest Philanthropy initiative are
united around a shared conviction that investments must not undercut philanthropy’s mission to serve
the public good. Rather, endowed assets should advance both financial and ethical goals.
Who is involved?
Divest-Invest Philanthropy was launched by a group of foundations committed to expanding the
climate dialogue within philanthropy and acting in solidarity with the exploding fossil fuel divestment
movement. The initial cohort represents a wider group of foundations currently moving down the
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divestment pathway. An expanding list of committed foundations and philanthropic organizations can
be found at www.divestinvest.org/philanthropy.
What is the commitment?
Foundations have committed to divest from fossil fuel companies and invest a portion of their assets
in the clean energy economy. They are committed to move with at a pace equal to the urgency of the
crisis. They are asking other foundations to:
ASSESS: Conduct an assessment of their exposure to climate change risk, defining the degree to
which you are invested in fossil fuels versus climate solutions and investments that support your
mission.
CONSULT: Launch a dialogue among the Board and Staff on investment strategies that align
investments with mission and support a sustainable and just economy.
COMMIT: Commit to a timetable and process, commensurate with the pace of climate change, for
eliminating all fossil fuels from their investment portfolios while investing in a new, clean energy
economy through renewable alternatives, clean tech and other innovations.
Why go public with this commitment?
Despite universal agreement among climate scientists that the world must move quickly and
aggressively in order to avoid severe climate dislocation and safeguard a livable future, the public
and private sectors are not responding adequately. In fact, the problem is only growing worse as
global emissions continue to climb. Openly declaring philanthropy’s commitment adds critical energy
and influence to the escalating divestment movement. It is not about drawing public attention to
individual commitments or accomplishments but to call upon philanthropy to have a dialogue about
this critical issue of climate risk and to demonstrate that business as usual is no longer an option.
Why is this right for foundations?
Every foundation’s success depends upon our ability to retain a global climate that is livable. This is
true irrespective of whether that foundation is focused on human health, education, human rights,
poverty alleviation, equal opportunity, community development, housing, homelessness, scientific
research, arts and culture, or the environment. Unabated consumption of fossil fuels will destroy a
climate suitable for human civilization and undercut the mission of all philanthropies.
Divestment is right for foundations for many reasons, including the following:
Fiduciary Responsibility: As long-term investors, foundation endowments need to mitigate the
substantial risks presented by climate change and the carbon bubble.
Ethical Imperative: Divestment is an ethical choice for institutions that care about communities most
vulnerable to climate change, the future viability of our economy and humanity itself.
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Efficacy: Divesting and investing create the political space for the systemic changes required to level
the playing field so that clean technologies can compete fairly in the marketplace.
Leadership: By divesting from fossil fuels and investing in climate change solutions, foundations will
help lead the transition to a new energy economy.
Mission: Foundation investments should support philanthropy’s public purpose and programmatic
mission. It is paradoxical for environmental grantmakers to fund climate solutions while investing in
companies that are accelerating climate change. However, even for other foundations that may lack a
programmatic focus on the environment, the public interest demands consideration of the
consequences of climate change on foundation endowments. Investing in dirty energy when
profitable investments in clean energy are readily available is irresponsible. What’s more,
philanthropies enjoy tax-exempt status precisely because of their social purpose. Investing in the
companies that are accelerating climate change is not consistent with that purpose.
What is the fossil-fuel divestment movement?
Divestment is a tool used by social movements to pressure a government, industry, or company to
change, by encouraging a large-scale sell off of securities tied to an offending institution. Divestment
sends a strong signal to the target that business-as-usual is no longer acceptable. In essence,
divestment undermines a company or industry’s social license to operate.
What is the history of divestment movements?
Activists used divestment in the 1980s to hasten the dismantling of South Africa’s racist Apartheid
regime. The tactic has also been applied to actions targeting repressive regimes or human rights
violations in states such as Iran, Sudan, Northern Ireland, Myanmar (Burma) , and Israel. Divestment
has pressured industries like tobacco and firearms to make changes in their business practices.
Divestment movements empower people and institutions to take action even in the face of
government intransigence. Their aim is to foster justice, health and a sustainable future that benefits
all of society.
Following in the footsteps of historical movements against Apartheid and tobacco, the fossil-fuel
divestment movement began on college campuses, and has spread to cities, states, faith
communities, hospitals, pension funds, and other institutional investors. Today’s movement creates
space for political action by exposing the financial and ethical imperative to divest, while raising
awareness about the fossil fuel industry’s efforts to block progress to a clean renewable energy future.
Oxford University researchers have called this the fastest-growing divestment movement in history.1
What does “divestment” mean for the Divest-Invest Philanthropy initiative?
Divestment means selling the securities of fossil-fuel companies, including any commingled funds
with exposure to fossil-fuel stocks and bonds. Some institutions have begun by divesting from a
group of “filthy 15” coal companies and then moved to the 200 publicly traded companies with the
largest proved reserves of coal, oil and gas.2
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The Carbon Tracker Initiative, a UK-based non-profit that has analyzed the financial risks associated
with the “carbon bubble,” initially developed the list of 200 targeted companies. In a 2012 report,
“Unburnable Carbon,” Carbon Tracker’s team noted that more than two-thirds of current proven
carbon reserves held by oil, gas, and coal companies and oil states must ultimately remain in the
ground in order for global temperatures to avoid rising more than 2 degrees above pre-industrial
levels, a threshold widely recognized by climate scientists as an upper limit of acceptable global
warming.3 As policymakers respond to climate change by regulating the sources of greenhouse gas
emissions, even in fragmentary ways, these “unburnable” carbon reserves held by fossil fuel
companies may become “stranded assets.”4 Divesting from the Carbon Tracker 200 provides
investors with a strategy for mitigating the stranded asset risk associated with fossil fuel companies
with the largest proved carbon reserves and for attacking their social license to operate in the face of
mounting evidence of global climate change.
What does “investment” mean for the Divest-Invest Philanthropy initiative?
Investment means allocating endowment assets to sustainable, fossil-free investments in climate
solutions and the new energy economy. Fossil-free investment opportunities exist across all sectors of
the economy and across all asset classes of a diversified investment portfolio, from conventional asset
classes such as cash, fixed-income, and public equities (stocks) to alternative asset classes such as
hedge funds, private equity, real estate, farmland and timberland, and other commodities and real
assets. Investors can invest in clean technology and renewable energy sources such as wind and solar
and incorporate environmental, social and governance (ESG) factors into fossil-free investments in
other industries, and move their money to more resilient community investing institutions. All
portfolios can be readily structured around themes of climate-related strategic asset allocation,
carbon risk mitigation, sustainability solutions, and positive environmental impact.5
What are the financial risks of continuing to invest in fossil fuels?
There is growing recognition that to maintain a livable climate, the majority of fossil fuel reserves now
on the world’s books must be left in the ground. Yet these assets, which must eventually become
stranded and unusable, inform the present market price of fossil fuel companies—among the most
highly capitalized and profitable businesses on the planet.
Financial analyses from PricewaterhouseCoopers,6 Carbon Tracker,7 the London School of
Economics,8 Capital Institute,9 Standard & Poor’s,10 and others agree that fossil-fuel security prices are
significantly inflated precisely because their value is tied to current reserves that cannot be fully
exploited. Conservative estimates suggest a multi-trillion dollar “Carbon Bubble” that would dwarf
the recent housing meltdown.11 Smart investors are divesting from legacy fossil fuel assets and
investing instead in the clean energy future.
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How does this contribute to a more sustainable future?
Divesting from fossil fuels and investing in climate change solutions — these twin acts create a new
investment narrative to accelerate the switch to an economy fueled by clean energy and technology.
Investment opportunities in the new clean energy economy are manifold. Strong returns and jobs are
opening up in sustainable companies across every sector — including power, electricity, water, waste
management, energy efficiency, transport, manufacturing, services, and food and agriculture.
Once a foundation makes the commitment, how will you make sure they follow through?
The initiative will not be monitoring individual foundations commitments, but aspires to create a
sense of accountability around climate change and investment. Together, the signatories form a
community of practice, learning from each other’s efforts, sharing strategies, and scaling innovation.
What are common misconceptions about fossil fuel divestment?
Misconception 1: “Even if all foundations divested, it wouldn’t dent the bottom lines of the fossil
fuel companies.”
Reality: In the struggle to end Apartheid, divestment was both economically and politically
significant, helping to transform the political conditions in which real change could occur. Divestment
is a tool that weakens the power of fossil fuel companies over the political process, thereby creating
space for real solutions – like a price on carbon – to take hold.
Misconception 2: “Fiduciary Duty means we can’t divest.”
Reality: In truth, fiduciary duty compels divestment. First, the returns of a divested portfolio meet or
surpass a fossil fuel portfolio. Second, a foundation’s Trustees have a clear duty to consider climate
change risks and relevant laws and policies in making investment decisions where such matters prove
to be material. In fact, failing to do so would be negligent and a breach of duty. Third, fidelity to one’s
mission must also be counted as a fiduciary duty of foundations and nonprofits that receive charitable
tax status for serving the public good.
Misconception 3: “Divestment is too hard and complicated from a financial standpoint.”
Reality: It is not hard; it is simply a thoughtful process. Many investors have successfully and
profitably divested already. Experienced professionals are available to mentor, advise or manage the
process.
Misconception 4: “Other methods, like shareholder engagement, work better.”
Reality: Shareholder engagement is an inadequate response to the climate crisis – it’s like slowing
down from 60 to 50 mph while speeding toward a cliff. Further, it is a tactic that has failed for over a
decade to move fossil fuel companies in sustainable directions. Moreover, divestment creates political
space for the systemic changes, such as a meaningful price on carbon, required to level the playing
field so that clean technologies can compete fairly in the marketplace. However, shareholders should
be asking how all companies are managing climate risks and responding to global warming.
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Misconception 5: “It’s better to maximize returns through investments so that the money can be
used for grants.”
Reality: Foundations can divest and achieve superior returns for their endowment. In fact, given the
overvalued assets of fossil fuel companies, divesting and reinvesting in carbon-free assets is more
fiscally responsible than remaining invested and exposed to what many have termed the “carbon
bubble.” Several investment companies have tracked portfolio performance without fossil fuels and
found either no difference or a small advantage to fossil-free investments.12
Misconception 6: “Clean tech and renewable energy sources are too volatile and lose money.”
Reality: The clean energy industry is growing at nearly double the rate of the overall economy.
Meanwhile, dirty energy is getting dirtier: half of the long-term capital spending of the largest fossil
fuel companies goes to costly unconventional fuels — like the Alberta tar sands — or deep-water
oilfields. These will be the truly volatile assets over time as climate risks become universally
acknowledged. Meanwhile, secure climate bonds are growing and multi-year public purchase
agreements for power offer stable returns for investors.
Misconception 7: “I use fossil fuels in my daily life, so I’m complicit”
Reality: Continuing to drive your car simply cannot be compared to the forces that have manipulated
the system and constrained consumer and political choice. What’s needed is to make the energy
system low-carbon. Divestment creates political space for the systemic changes, such as a meaningful
price on carbon, required to level the playing field so that clean technologies can compete fairly in
the marketplace.
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1 Ansar, Atif, et. al., Oxford Smith School Divestment “Stranded assets and the fossil fuel divestment campaign: what does
divestment mean for the valuation of fossil fuel assets?” University of Oxford’s Smith School of Enterprise and the
Environment, October 8, 2013. http://www.smithschool.ox.ac.uk/research/stranded-assets/SAP-divestment-report-final.pdf
(accessed January 2014).
2 Leaton, James, “Unburnable Carbon – Are the world’s financial markets carrying a carbon bubble?” Carbon Tracker
Initiative, March 2012, Figure 5. http://www.carbontracker.org/wp-content/uploads/downloads/2011/07/UnburnableCarbon-Full-rev2.pdf (accessed January 2014).
3 Ibid.
4 Leaton, James, et al., “Unburnable Carbon: Wasted Capital and Stranded Assets,” Carbon Tracker Initiative, 2013, available
at http://carbontracker.live.kiln.it/Unburnable-Carbon-2-Web-Version.pdf (accessed January 2014).
5 Joshua Humphreys, “Institutional Pathways to Fossil-Free Investing: Endowment Management in a Warming World,” Tellus
Institute, 2013, at http://tellus.org/publications/files/fossilfree.pdf (accessed January 2014); “Resilient Portfolios and FossilFree Pensions,” HIP Investor, September 30, 2013, at http://hipinvestor.com/wp-content/uploads/Resilient-Portfolios-andFossil-Free-Pensions-ByHIPinvestor-GoFossilFree-vFinal-2014Jan21.pdf (accessed January 2014); and “Responding to the
Call for Fossil-fuel Free Portfolios,” MSCI ESG Research FAQ, December 2013, at
http://www.msci.com/resources/factsheets/MSCI_ESG_Research_FAQ_on_Fossil-Free_Investing.pdf (accessed January
2014).
6 PricewaterhouseCoopers, “PwC Low Carbon Economy Index 2012: Too late for two degrees?”
http://www.pwc.com/gx/en/sustainability/publications/low-carbon-economy-index/index.jhtml (accessed January 2014).
7 Leaton, et al., “Unburnable Carbon: Wasted Capital and Stranded Assets.”
8 Leaton, et al., “Unburnable Carbon: Wasted Capital and Stranded Assets.” http://carbontracker.live.kiln.it/UnburnableCarbon-2-Web-Version.pdf (accessed January 2014).
9 Fullerton, John, “The Big Choice: Money or Planet?” The Guardian, October 12, 2011, available at
http://www.guardian.co.uk/sustainable-business/blog/carbon-reduction-commitment-finance (accessed January 2014).
10 Simon Redmond and Michael Wilkins, “What a Carbon-Constrained Future Could Mean for Oil Companies’
Creditworthiness,” Standard & Poor’s, RatingsDirect, March 1, 2013, http://www.carbontracker.org/wpcontent/uploads/downloads/2013/03/SnPCT-report-on-oil-sector-carbon-constraints_Mar0420133.pdf (accessed January
2014).
11 Fullerton, John, “Financial Overshoot,” Capital Institute, July 23, 2012. http://capitalinstitute.org/blog/financialovershoot#.UuAGNeQo7WQ (Accessed January 2014); also Flanders, Laura, “How Ivy League Universities are Failing Us
on Climate Change,” The Nation, December 4, 2013, http://www.thenation.com/blog/177449/how-ivy-league-universitiesare-failing-us-climate-change# (accessed January 2014).
12 Patrick Geddes, “Do the Investment Math: Building a Carbon-Free Portfolio,” Aperio Group, 2013, available at
http://www.aperiogroup.com/system/files/documents/building_a_carbon_free_portfolio.pdf (accessed January 2014).