“A Major Shift in Thinking.” Why Climate Funders Are Paying More Attention to Universities
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UPENN IS AMONG THE SCHOOLS THAT HAVE LANDED BIG GIFTS FOR ENERGY AND CLIMATE RESEARCH. f11photo/SHUTTERSTOCK
In a 2018 piece in the Washington Post, University of California President Janet Napolitano and State University of New York Chancellor Kristina Johnson argued that universities should lead efforts to slow climate change, writing, “As the nation’s most important performers of basic research,” universities are “likely to generate the discoveries and innovations required to turn things around.”
Second Nature, an organization committed to accelerating climate action in higher education, is doing its part. Since 1993, Second Nature has worked with over 4,000 faculty and administrators to make principles of sustainability fundamental to every aspect of higher education. Among other things, it helps universities lower their climate footprints through its online solutions center, which identifies energy-reducing activities and other steps schools can take.
Now comes word of a new funding opportunity from Second Nature and the Intentional Endowments Network (IEN), a peer-learning network of universities and other mission-driven institutional investors, to support universities seeking to implement climate solutions “that benefit all segments of their communities.”
The Climate Solutions Acceleration Fund is open to signatories of Second Nature’s Climate Leadership Network, all of whom have pledged to adopt at least one formal commitment with respect to climate leadership, and members of the University Climate Change Coalition, which shares best practices in accelerating local climate solutions. Grants range from $5,000 to $10,000. Five to 10 proposals will be funded. Applications are due by April 3.
“As the science continues to reflect the urgency of the need for climate solutions, philanthropy is increasingly paying more attention to the issue,” Second Nature President Tim Carter told me. “Especially during this time where there is a lack of federal leadership on climate action, it is critical for philanthropic support to not only continue, but increase as the crisis becomes more acute.”
Campuses as “Institutional Climate Actors”
Last April, when P. Roy Vagelos and Diana T. Vagelos’ announced a $50 million gift earmarked for energy sciences at the University of Pennsylvania, I called attention to donors’ relative lack of support for climate initiatives, even as growing threats on this front alarm students and demand more attention from university-based researchers.
In the 11 months since the gift, however, we’ve noticed an uptick in big climate-related gifts from donors, including an anonymous $19.3 million gift to William & Mary to establish an Institute for Integrative Conservation, Joan Brock’s $3 million gift to Old Dominion University’s Institute for Coastal Adaptation and Resilience, and Lynda and Stewart Resnick’s whopping $750 million donation to Caltech.
In some ways, donors have been following the path laid out by large institutional foundations over the last 10 to 15 years. “Many of the leading academic climate centers, like the Georgetown Climate Center (GCC), have always had strong philanthropic support,” Carter told me. The GCC is supported by the Rockefeller Brothers Fund, Kresge Foundation, the John D. and Catherine T. MacArthur Foundation, the Barr Foundation, the Energy Foundation, the William and Flora Hewlett Foundation, and others.
Carter also noted that Arizona State’s Global Institute of Sustainability was launched with a gift from Julie Wrigley, who was married to William Wrigley of the family chewing gum empire, in 2004. The Walton Family Foundation has provided substantial support for the institute.
“What we are seeing is a shift in giving to support higher education initiatives that drive climate solutions that are directly responsive to the needs in their communities, including cities and states, not just producing academic knowledge,” Carter said, citing the Barr Foundation’s work with Boston University to develop the city’s plans for a “Carbon Free Boston.”
“Funders are recognizing that campuses play a significant role as institutional climate actors, not only supportive agents of change,” he said. “By supporting network organizations,” he said, “those investments can really scale quickly across the country.”
Carter pointed to two examples of the kind of climate solutions that Second Nature and the IEN are looking for: University of California, Irvine engineers’ successful implementation the first power-to-gas hydrogen pipeline injection project in the U.S., and the University of California System’s Carbon Neutrality Initiative, which commits UC to emitting net zero greenhouse gases from its buildings and vehicle fleet by 2025.
Anticipating Pushback
It’s one thing to provide funding opportunities to University Climate Change Coalition members like Johnson’s State University of New York and Napolitano’s University of California, which pledged to divest from fossil fuels last September. But how can climate funders nudge universities to divest or adopt certain environmental, social and governance criteria (ESG)? This is where things can get tricky.
As often noted, some foundations have shown little appetite for fossil fuel divestment, for a whole host of reasons. The Hewlett Foundation, considered by my colleague Tate Williams to be “without question, a philanthropic leader in the climate fight,” provides an instructive case study here. Last year, foundation president Larry Kramer told Williams that after his team looked at data from the previous 10 years, it concluded that had Hewlett divested, its endowment would have seen lower returns, and as a result, a “very substantial decrease in our overall grantmaking power.”
University presidents face a similar dilemma. As Williams noted, many argue that divestment will adversely affect endowment performance and undermine what they consider to be their chief reason for existence—education and research. This risk is magnified by exploding deficits, shrinking enrollment, skyrocketing tuition, diminished public funding, and a pre-COVID-19 drop in alumni donations between 2018 and 2019. It’s a trade-off that many universities, including affluent Ivies like Harvard and Yale, have been unwilling to make.
But does the data back up these fears about diminished financial performance? To coincide with the announcement of the Climate Solutions Acceleration Fund, the network published a report looking at nearly a dozen higher education institutions that are early adopters of ESG, fossil fuel divestiture, or other sustainable investment strategies, and found that fiduciaries are proceeding “without sacrificing financial returns.” Participating schools included California State University, Arizona State University and North Carolina State University.
The report joins a growing body of research showing that fossil-free and ESG investments perform just as well or better than those that are exposed to oil and gas.
In fact, according to Jagdeep Singh Bachher, UC’s chief investment officer, and Richard Sherman, chair of the UC Board of Regents’ Investments Committee, the reason UC sold some $150 million in fossil fuel assets from its endowment last fall “was the reason we sell other assets,” they wrote in an op-ed in the Los Angeles Times: “They posed a long-term risk to generating strong returns for UC’s diversified portfolios.”
“No Downside in Terms of Performance”
IEN’s co-founder and executive director Georges Dyer told me that additional challenges that universities face in trying to advance climate solutions through endowment investing include “resistance from investment committee members who have not updated their views on investment strategies to reflect the realities of the climate crisis, and a lack of access to climate-friendly investment vehicles.”
Development officers and fundraisers also need to be responsive to alumni who want their money to be “invested in a way that aligns with the school’s values—including its climate commitments,” Dyer said, either through the full endowment or in a sustainable investing “sleeve,” whereby endowments carve out a specific amount or percentage of the portfolio for sustainable investing. IEN’s site contains many examples of the latter investment vehicle, which can capitalize on the increasing demand by donors who want their funds sustainably invested.
As the Climate Solutions Acceleration Fund suggests, climate funders have a role to play in nudging universities toward sustainability while effectively managing financial risk. Foundations are in a “unique position of being able to use grant funds or mission-related investments to de-risk investments or seed climate solutions that can later be scaled up with capital from more traditional investors—including higher ed endowments,” Dyer said.
And as for engaging climate-focused alumni and building out the infrastructure to develop the kinds of climate solutions that the IEN and Second Nature support, Dyer noted that university fundraisers are launching Green Revolving Funds to bankroll energy efficiency, renewable energy and/or sustainability projects on campus.
“We are reaching a point now in early 2020 when everything is coming together for a major shift in the thinking and practices of university and college officials on climate solutions,” Dyer said. “The student and broader community support are there, and now, we are seeing growing evidence that early-adopter higher education institutions are able to ‘clean up’ their investments with no downside in terms of performance.”
