By Sarah Bahn and Stephen Pittam
Five years ago the term ‘stranded assets’ was unknown; now it is central to financial markets thinking about the value of fossil fuel holdings. This is due to the work of the Carbon Tracker Initiative, funded in its early stages by grants from a handful of American and British foundations, including a £38,000 grant (later extended) from the Joseph Rowntree Charitable Trust (JRCT). JRCT is proud to have played a role in bringing a radical and visionary idea to mainstream global economic thinking in just five years.
We received a request for support for a new project, the Carbon Tracker Initiative (CTI) in 2010. The initiative’s aim was ‘to make the financial markets accountable for the carbon reserves that are listed on them, and hold investors accountable for the carbon intensity of their investment portfolios’. Climate scientists calculated that global warming is likely to exceed 2°C by 2050 if 1,000 Gt of carbon dioxide is released globally between 2000 and 2050. By 2010, we had already used up a third of this allowance, and the fossil fuel reserves easily exceeded the balance. In order to prevent continuing climate damage, CTI said that between 60% and 80% of these reserves would need to stay in the ground. Fossil fuel companies were in effect greatly overvalued if you took account of these ‘stranded assets’. CTI wanted the value of fossil fuel companies to fall to reflect their true value, which would lead investors toward more sustainable forms of energy. CTI planned to identify the cumulative fossil fuel reserves held by companies listed on stock exchanges to increase public knowledge about the stranded assets in companies and the danger of extracting more fuel.
Now, it is as clear as day, but at the time I struggled to understand how this project could fit with JRCT’s interest in promoting social justice. Most people wouldn’t think of financial markets as a typical social justice issue. However, JRCT has been increasingly drawn to look at the imbalances within financial and corporate systems that add to global inequality and hit the poorest people hardest. Financial markets can be detrimental to poor communities, whether in relation to income distribution or the impact of climate change. For too long the philanthropic community has ignored the power of the corporate and financial sectors. Could this be because foundations are too close to these sectors and rely on them for generating their own income? In my role as trust secretary at JRCT, I felt it was important for foundations working through a social justice lens to recognize the need for social change at multiple levels, especially with those who control the economy.
Despite our struggles to understand the technical complexities of the CTI project proposal, JRCT Trustees were all intrigued by the CTI team’s innovative thinking. We also valued the expertise of their small yet competent team, which included an expert on financial markets, a sustainability aficionado, and a climate change expert. In my experience, taking calculated risks is part of the DNA of JRCT. The Trust acknowledges that it doesn’t have the answers to all the pressing issues of the day and tries to avoid the arrogance that can easily creep into organizations that have resources and thus power. In the case of CTI, the Trust knew the track record of the people involved, was convinced by the vision of CTI, and found its analysis compelling, if hard to grasp. The Trust saw its role as that of undertaking due diligence, making an assessment, and then empowering those involved to get on with the task without unnecessary interference.
Within a year, CTI had come up with its first ground-breaking report, “Unburnable Carbon: Are the financial markets carrying a carbon bubble?” This report immediately prompted a new global debate on the future of energy and investment and was picked up for stories by Rolling Stone, the New York Times, the Guardian, and other major media sources. Introducing a completely new idea and seeing it transform the thinking of the financial markets in five years is a remarkable achievement. This success was an important reminder to us as funders that taking risks, backing visionary ideas, and relinquishing control to the experts can be a great way to invest in projects that aren’t normally viewed as part of the philanthropy or social justice agenda. Social justice issues are often associated with bottom-up change, but philanthropy with a social justice lens can also play a transformational role with major global issues like climate change and financial systems.
Sarah Bahn is a former Foundation Center knowledge services fellow. She is currently pursuing a Bachelor of Arts in peace and justice studies at Tufts University.
Stephen Pittam is a former trust secretary of JRCT. He joined the trust in 1986 and served as its trust secretary from 2001 until his retirement in 2012. He now serves on the boards of the Global Greengrants Fund, the Global Fund for Community Foundations and the Polden Puckham Charitable Foundation. E-mail firstname.lastname@example.org
This post first appeared on the blog of GrantCraft, a service of the Foundation Center.
It is the tenth post in a series of 11 posts being released by the Working Group on Philanthropy for Social Justice and Peace and GrantCraft, since September 2016.
The post is derived from the recently published Effective Philanthropy: Another Take, a collection of stories describing a philanthropic intervention against some form of injustice (socioeconomic and/or political) at a local, national or global scale. Each story addresses key questions grantmakers wrestle with in order to effect systemic social change and the blog posts in this series highlight certain details that feed into the bigger story. Through this blog series, the partners hope to raise awareness of some of the most effective examples of philanthropy in tackling injustice and achieving lasting structural change. By sharing knowledge in philanthropy and being willing to learn from one another’s experiences and perspectives, we can improve our practice together.