Editor’s Note: This is the second of two articles about philanthropies divesting their assets from the fossil fuel industry. See Part 1 on the financial and logistical concerns about divestment. Here, we look at the strategic and moral arguments that make the concept powerful, but have not won over holdouts.

Wallace Global Fund started its journey toward divesting from fossil fuels as far back as 2009, but along with trying to change its own investment practices, Executive Director Ellen Dorsey became interested in divestment as an organizing strategy.  

Starting in 2010, Wallace Global began making grants to explore a fossil fuel divestment campaign and later convened a group of campus-based activists to discuss the topic, which had been bubbling up at Swarthmore and other colleges around that time.

This was unfolding in the shadow of a failed federal cap-and-trade bill in 2009, and amid a reckoning with the fact that meaningful climate action would require a broad-based, powerful grassroots movement. Campus campaigners were ready to try something new (and old), lifting a page from the divestment campaign against South African apartheid in the 1980s. 

The fossil fuel divestment campaign caught fire, with support from Bill McKibben and, rapidly growing to more than $12 trillion in funds committed today, across more than 1,100 institutions. For proponents of divestment, that growth, and successful campaigns like the Sunrise Movement that have since sprung out of divestment, are solid proof of its power as a movement-building strategy and more.

It also makes it all the more frustrating that leading foundations explicitly concerned with climate change have not joined in by committing to divest their own endowments, after more than five years since an initial push focusing on the philanthropic sector. 

“There’s a lot of talk about philanthropy being responsive, but I believe if there’s a movement, a true global social movement that’s making a demand of investors, philanthropy should heed those demands,” Dorsey says. “Divestment really created the first grassroots climate movement, and to not be responsive to the demands of that movement is just incomprehensible to me.”

To gain a better understanding of the divestment debate, and why so many foundations, including climate leaders, are still invested in fossil fuel companies, I spoke at length with foundation leaders, impact investment experts, and activists. Much of the resistance has to do with an unwillingness to part with a certain status quo of investment practices. But it also comes down to the extent to which a foundation is persuaded of divestment’s impact—a bundle of strategic arguments around movement building and shifting societal norms—and even a larger philosophical disagreement over the morality of investing and the purpose of a foundation.

Why Divestment?

The core political argument is that divestment opens up a path for a variety of institutions and individuals to join a public moral stance against the fossil fuel industry, calling out its harmful business model and decades of active opposition to climate action. As the movement grows, it stigmatizes the industry, stripping away its social license to operate. 

This theory of change has a few components, including boosting the media and public debate around fossil fuels and climate change, and shifting norms around how we think about burning carbon and the industry behind it. This then, ideally, opens up space for more aggressive policy and weakens the political influence of the industry that’s been resisting it.

For opponents, a main argument against is that divestment doesn’t directly reduce emissions or financially impact the industry. Selling shares, it’s said, doesn’t hurt these companies because someone else who is not concerned about the ethics is just going to scoop them up. This is the case that Bill Gates has made, for example, even though there’s evidence that his foundation, an elusive divestment target, has quietly dropped some of its fossil fuel holdings.  

As the movement has grown beyond expectations, there are actually some data points that suggest divestment is having a financial impact on the industry, such as short-term drops in stock prices, and greater difficulty finding bank loans, insurance, and investment. Still, the direct financial impact isn’t usually the main reason to divest, especially for relatively small asset holders like most foundations. Rather, it’s a combination of overlapping impacts around power building and shifting norms (along with the opportunity to stimulate investment in climate solutions). 

That may sound kind of abstract, but that’s really the genius of the divestment movement, and I would wager a big secret to its success—it takes immensely complicated issues like climate change and finance, and chaotic strategies like social movement-building, and distills them all into one concise battle cry—divest

Even the word itself has potency beyond the literal definition of getting rid of financial investments. Divest can also mean to strip something of its power or rights, or to rid yourself of something that you no longer want. It’s the kind of idea that a swarm of young activists can rally behind as they, for example, storm a nationally televised football game.  

Wind at Their Backs 

Starting in 2013, as the campus campaign was picking up steam, Ellen Dorsey and some like-minded philanthropic peers started organizing the sector from within, something grantees could not easily do, considering they depended on foundations for their budgets. There were a few reasons in particular foundations could play an important role here.

One big argument for foundations getting on board at this point was a matter of being responsive to the movement, as Dorsey describes, and using their societal heft to put “wind at the backs” of student activists. Foundations could simultaneously demonstrate that divestment would not harm financial returns, and help drive the market for fossil fuel-free investment products and climate solutions.

A first cohort of 17 foundations committed to divest in early 2014, and outreach continued from there, including a letter to the 3,000 largest foundations in the U.S., signed by the original signatories. Dorsey continued meeting with peers, speaking at events, and even participating in internal debates with foundation leadership. Stephen Heintz at Rockefeller Brothers Fund calls her the “evangelist in chief, but we’re not too far behind.”

Dorsey rightly points out that getting 200 foundations to agree to do something that is public and challenges norms of how they operate is no small feat. But why did so many balk?  

Surprisingly, one factor that comes up a lot in the divestment discussion has not been a major issue in philanthropy, she says. While the desire to engage with fossil fuel companies (rather than stigmatize them) is an oft-cited concern, she hasn’t heard from foundations saying they would rather engage than divest. More common reasons Dorsey and Heintz have heard are related to the stubborn financial concerns, uncertainty around divestment’s impact, and an unwillingness to “politicize” the foundation’s investments, or that they should remain separate from the programmatic mission.

Some of the lively debates over the years, in public and private, have been with the Hewlett Foundation, a leading climate funder that has not divested from fossil fuels. According to Hewlett President Larry Kramer, the impact the team perceived around their own divestment did not make it worth it to the team, relative to the financial risk they saw (see previous article for detail). 

“The political will-building is really the argument behind divestment and [the environment team’s] sense was, the amount of good, political will-building we do by [divesting] is less than the amount we can do by affirmatively funding the grantees who can work on the ground and do the political will-building,” Kramer says. 

He also points to a new emphasis in Hewlett’s grantmaking around climate finance, which focuses on using grants to mobilize much larger pools of capital toward climate-friendly investments. “The goal of the strategy is to make climate-responsible investments more attractive to all investors, meaning on a scale vastly greater than foundation endowments,” Kramer says. 

He acknowledges that divestment has had some impact, particularly on college campuses, but considers it just one of many elements and players that have been moving things forward. This is core to Kramer and the Hewlett Foundation’s assessment of divestment—that it is just one potential strategy a foundation might employ. For some institutions, it may make sense; for others, it may not. 

Still, at this point, the impact of divestment, and by extension, the foundations that threw their weight behind it, is quite impressive. There’s no database to track where those first campus activists ended up. But consider that the founders of the Sunrise Movement, one of the most influential groups working on the issue today—which arguably changed the policy discussion with its campaign around the Green New Deal—got their start in the divestment movement. Others have gone on to work on campaigns targeting banks, insurance companies, and more. 

In fact, Dorsey recalls Wallace Global Fund’s first engagement with the idea of divestment, as she told her board that its success would only be partially measured in the number of institutions signing on.

“But more importantly, whether we could build a grassroots climate movement, led by highly motivated and focused youth, that would target the real barrier to action—the fossil fuel industry—and begin to strip their social license to operate.” 

The ‘Invest’ of Divest Invest

Another big rationale behind foundations getting on board with Divest Invest is the second part of the equation, investing, although that gets less attention I suspect because it lacks the fireworks of the divestment side of things. 

The pledge requires not just divesting from fossil fuel companies, but also committing at least 5 percent of assets to climate solutions. For foundations, that means using assets driven by a social mission to develop new fossil-free projects and financial products. Even relatively small investors who sign on to Divest Invest can use their assets to help pave the way for larger investors. 

In fact, one of the impacts that multiple people attributed, at least in part, to the divestment movement has been a heightened conversation around climate-conscious investing. 

It’s certainly part of a larger trend happening in finance, but even foundations that have resisted divestment from fossil fuels have advanced their impact investing in recent years, most notably the Ford Foundation. Ford, in announcing $1 billion in mission-related investments to be spread over a decade, even celebrated divestment movements, saying it was now building on their “proud, powerful legacy”—but alas, did not divest.

Another example is the Surdna Foundation, a progressive leader in philanthropy, similar in size to RBF with an endowment of around $1 billion, and running an environmental and climate justice program called Sustainable Environments. In 2017, the foundation released a report documenting its path toward a new impact investing program with a $100 million carve-out from its endowment. 

The report notes how foundation decision-makers diverged when it came to divestment, and ultimately decided to move forward on their areas of agreement at the time. Worth noting that Surdna has a 13-member board of directors, about half family members. “Not everyone was happy with the decision, but it made forward momentum possible,” the report states.

Shuaib Siddiqui, Surdna’s director of impact investing, had a similar take to Hewlett’s, although Surdna is much more enthusiastic about impact investing in general. (Kramer has argued against it.) Divestment, Siddiqui says, is just one approach foundations can take, and it’s not the one they chose. 

“We don’t see it black and white and we don’t see it cut and dry. We see each institution trying to do what’s right for them,” Siddiqui says. “And the fact that we’re all acting together is the most important part.”

There were multiple factors behind the decision, including capacity and what it would take to execute divestment, balanced with their impact investing program, he says. Part of the goal is to use that $100 million pool to support earlier stage funds that align with their mission, which they hope will grow and eventually could become part of their main endowment. 

In fact, Siddiqui thinks peers that have divested have been quite effective in putting the issue of climate and investment on the map. “They have led the way in what we’re seeing today and the discussion and dialogue both around impact investing and how we place capital. … [Divestment’s] just not where we landed.”

The Philosophy of Divestment 

For some proponents, however, the idea of divestment as just one potential tool doesn’t hold up. Not that they don’t value other strategies like impact investing or grantmaking, quite the contrary. 

But even with financial and strategic factors set aside, part of this debate is a philosophical one about the ethics of investment and even the role of philanthropy. In other words: Isn’t it just kind of messed up for a foundation fighting climate change to be invested in fossil fuel companies?

“It is unconscionable and immoral to support the industry that is burning down the planet,” says Clara Vondrich, director of Divest Invest. “So, yes, it is a litmus test for real climate commitment, particularly given that there’s a false choice between returns and divestment.”

For Rockefeller Brothers Fund President and CEO Stephen Heintz, it was actually this moral argument that first moved him to pursue divestment not long after he took over. 

“We were getting deeper and deeper into work on climate change in our grantmaking and convening and thought leadership,” Heintz says. “It was increasingly uncomfortable from a moral point of view, remaining invested in the very source of the global warming that is affecting the climate.” 

Kramer has an interesting take on the moral argument for divestment, in that he considers climate change certainly to be a moral issue, but always through a utilitarian frame of how much impact the Hewlett Foundation can have on solving the problem.

Divestment proponents, however, challenge an entrenched idea in philanthropy that the investment and grantmaking functions of a foundation can operate in isolation, with a firewall between the two—one to maximize returns and the other to carry out a mission by paying out the 5 percent or more of your assets legally required every year. 

“You can’t be funding a movement with 5 percent of your assets through grants, and then pretend that there actually is a firewall between your grants and your investments. There’s no firewall,” Dorsey says. “You’re one institution and you receive charitable tax status because you serve the public good, and your investments, arguably, should not be undercutting the public good.”

David Wood, director of the Initiative for Responsible Investment at the Harvard Kennedy School, points out that all investment has a moral component—only a sociopath would invest in slavery, for example—so all asset holders already contend on some level with what their investments are doing. 

“Even if it is a good return, everyone has a moral hurdle to clear in order to get into a portfolio, and the question is when fossil fuel investments don’t clear the moral hurdle,” Wood says. “I do question the idea that you’ll necessarily make more money if you’re just a cold, hard, rational investor who doesn’t take these social issues into account. There’s not a lot of reason to think that, and it’s not a very tenable moral position either.”

Finally, there’s the case for the power of symbolism. That it’s important for institutions with missions for social good to send a certain message about where the world should be headed and what’s acceptable. 

“I think it is a case of putting your money where your mouth is and it really does demonstrate the sort of seriousness and the intent that you have behind your work on climate change,” says Glen Tyler, South Africa team leader at

For Rockefeller Brothers Fund, the symbolism of their decision was meaningful, but it was also tangibly impactful, Heintz says. The day after RBF made the announcement, the foundation’s decision was on the cover of major newspapers around the world. One fund manager the foundation had to turn down previously contacted the foundation to say they were compelled to develop a fossil-free fund, and today RBF is invested in it. 

“In our particular case, yes, it is largely symbolic. We’re not a huge institutional investor,” he says. “But symbols have power. Symbols motivate people. Symbols inspire people… and they do change behavior.”

Tip of the Iceberg

Dorsey and Heintz expect we’ll see more waves of foundations making divestment announcements, that it’s certainly not over. Clara Vondrich suspects some who didn’t sign on previously may have dug in too far on their decision at this point. Even so, she would be thrilled to see some of the big foundations come around and make a public commitment.

“It would be tremendous if one of those big guns divested and we would absolutely welcome them with open arms and celebrate their pledge,” she says. “And also lift up the fact that in the intervening years they’ve been pursuing other worthwhile initiatives on the climate crisis, and now they’ve taken the next step and fully aligned their priorities with the movement.”

I will say that in the course of reporting on divestment, I have certainly gained a better understanding of why foundations have said no. As Heintz puts it, “It’s complicated, right? It’s complicated technically, it’s complicated from the point of view of governance, and it is hard work overcoming deeply embedded conventional wisdom." 

But it also seems as though the barriers foundations cite to divestment are often overstated or overestimated, as a result of advisors and leaders not wanting to either change their ways or yield control. Meanwhile, they are perhaps underestimating some powerful financial, strategic, and moral reasons to divest, some of which are only becoming more urgent.

As Dorsey puts it, foundations need to declare a climate emergency. If they did, they’d reconsider many aspects of their business-as-usual conduct, including substantially increasing their rate of grantmaking and capping the growth of their endowments.

“We would use every tool in our toolbox, including our investments,” she says. “And we would divest from fossil fuels, immediately, and invest in climate solutions. To do anything less puts us on the wrong side of history.”

That’s one important aspect of this debate that is maybe the most compelling to me—divestment from fossil fuels points in the direction the world is heading. 

The status quo is shifting underneath us, whether it’s the energy that fuels our lives and economy, intolerance of those standing in the way of climate action, the public’s demands of philanthropists, or institutions’ financial practices.

“This is the next wave,” says Tom Van Dyck of asset management firm RBC, referring to socially responsible investing. “It’s the learning evolution of where investing is going. It has to go this way.”

The younger generation of investors and advisors are thinking much more holistically about where they are putting their money these days, he says. “Our clients view investment as the economic expression of their thoughts and values.” 

Climate-conscious investment will also have to go much further than just reducing exposure to a waning fossil fuel industry. Van Dyck’s team is working to identify “carbon bombs” within their clients’ portfolios, hidden risks such as mortgages or long-term municipal bonds in areas vulnerable to climate disruption. 

In other words, all signs point to this massive societal and economic transition underway, and divestment is just the tip of the iceberg in terms of how investors need to be thinking about their assets. 

They can either watch the transition unfold, quietly tweaking their portfolios as they make routine grant payouts, or they can use their entire financial and societal heft to ensure it’s a better world on the other side.

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