Despite climate alarm, philanthropic dollars are slow to come: Report

Extreme weather events, including dangerous heat waves sweeping through Europe and large swaths of the United States this summer, have drawn more attention to the growing impacts of climate change, including among philanthropists.

But while philanthropic foundations recognize the dire consequences of inaction on climate change, so far they have largely failed to meet the moment with more funding and resources, according to a report from the Center for Effective Philanthropy, which provides data and other services aimed at helping donors give more effectively.

The report recommends that funders begin taking more steps to address climate change, either by altering their programmatic focus areas or changing how they invest — specifically, by divesting from fossil fuels and other carbon emitters.

While foundation and nonprofit leaders see climate change as an “urgent problem,” only a small percentage have taken action on this issue, CEP says in the report. Foundation leaders reported making “relatively limited” efforts to address climate change through grants or other investments, according to the research.

Climate change mitigation funding accounted for less than 2% of total global philanthropic giving in 2020 but is slowly increasing over time, according to an earlier study by ClimateWorks Foundation.

“One of the reasons that we heard from about a third of the folks who are not funding in climate change about why they’re not is this sense that it’s just such an overwhelming problem — like they don’t know that they can really make a difference, essentially,” said Phil Buchanan, CEP’s president, in an interview with Devex.

CEP conducted a survey from January to March for the report, receiving responses from 188 leaders at foundations and 120 at nonprofits based in the U.S.

As a whole, survey respondents “overwhelmingly see climate change as an urgent problem that will negatively impact the lives of the people served by their organizations, especially historically marginalized communities,” the report reads. The impact of extreme weather on their work, as well as on the health and well-being of staff members, was among their concerns. Foundation and nonprofit leaders told CEP that they believed the public and private sectors weren’t doing enough to address climate change and that their sectors also could do more.

However, the report suggests that climate change was siloed from other issues in the minds of most grant-makers. A majority of funders that did not focus specifically on climate change tended to see the issue as outside the scope of their mission.

“I always want to be careful to respect the fact that people have to choose what they focus on,” Buchanan said. “But if you look at it in aggregate, there does seem to be a disconnect between the level of alarm or the perception of urgency of this problem and the engagement with actual work, whether programmatically or on the investment side.”

Noninterchangable: ‘Environmental’ and ‘climate change’

Sixty-one percent of foundation leaders said their organizations funded efforts to address climate change. Among these, 22% funded efforts to explicitly address climate change, 45% funded environmental efforts that address climate change, and 33% funded both climate and environmental efforts. Thirty-six percent of foundation leaders said their organizations did not fund any climate change efforts at all.

The terms “environmental” and “climate change” are not interchangeable in this context. Environmental work can include efforts that do not have a direct impact on mitigating climate change, such as protecting certain species of animals.

Of the nonprofit leaders, 25% said that climate change was a core focus of their work. Among that segment, 20% focused explicitly on climate change and 57% on environmental issues that addressed climate change, while 23% focused on both climate and environmental issues.

Leaders of climate-focused nonprofits and foundations are urging funders in other areas to consider how climate change will affect other challenges, such as addressing socioeconomic issues for impoverished communities, according to the report, which was funded by the William and Flora Hewlett Foundation.

The release of the findings follows a recent U.S. Supreme Court decision to limit the Environmental Protection Agency’s authority to regulate carbon emissions from power plants, which some experts say will further discourage U.S.-based funders from engaging on the climate issue.

The Supreme Court’s decision “not only imperils the health and future prosperity of all Americans, but every individual on the planet,” ClimateWorks President and CEO Helen Mountford said in a statement after the ruling.

Buchanan acknowledged that it might be hard to motivate funders to give more to climate change when governments do not seem to support such action. There is a sense that for real change to happen, government and business must change too, he said.

Where foundations can start

Still, there are some areas where philanthropies can take action on their own, according to Buchanan.

Divestment from fossil fuels is among them, he said. That is something that any foundation can do, but the report shows the “relatively small number of folks” either divesting from fossil fuels or engaging in climate-related investments, he added.

One of the arguments against divestment is that it could result in lower returns and ultimately a reduced grant-making budget — but the new CEP research shows that “those folks who have divested from fossil fuels report either the same performance or better performance than the benchmarks that include fossil fuels,” Buchanan said.

The Ford Foundation and the John D. and Catherine T. MacArthur Foundation are among those institutions that have announced divestment plans in the past year. The Rockefeller Brothers Fund also “put our money — literally — where our mouth is” and began divesting from fossil fuels in 2014, according to a blog post written by the organization's president and CEO, along with its program officer for sustainable development.

“Since then, the financial results exceeded expectations and demonstrated that it is possible to align the endowment with the Fund’s mission without compromising performance,” said the blog post, which was published Tuesday.

Transportation and cooling are other areas ripe for philanthropic intervention, according to Shawn Reifsteck, ClimateWorks’ vice president of strategy, collaboration, and brand. In a blog post last week, he highlighted cooling in particular as an “intersectional area where funders and partners with varying priorities across energy access, climate mitigation, and climate adaptation have come together through the Clean Cooling Collaborative.”

The Clean Cooling Collaborative is a philanthropic program launched by ClimateWorks with the self-described mission to “transform the cooling sector and make efficient, climate-friendly cooling accessible to all.”

On Tuesday, the collaborative announced that it had received a $25 million grant from the IKEA Foundation to develop cooling solutions over the next four years. The IKEA Foundation is among those philanthropies that have recently stepped up their climate efforts. Last year, it formed an alliance with the Bezos Earth Fund and The Rockefeller Foundation to secure up to $100 billion in public and private capital for renewable energy.

“Perhaps the most promising data point uncovered in CEP’s report is that 45 percent of foundation and nonprofit leaders have not closed the door on the possibility of funding climate change,” Reifsteck wrote in his blog post.

“This reinforces that there is a large number of folks within philanthropy that are open to joining the climate fight but may not know where to start,” he said.