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How do you consider climate change in your work? – Esmée Fairbairn Foundation

As politicians and policy-makers struggle to tackle the devastation threatened by global warming, how central is climate change in the work of both environmental funders and those whose objects may not include the natural world, but who nonetheless see it as a top priority? We spoke to members about how they consider climate change in their work.

The third article in this series comes from Jenny Dadd, Grants Manager (Environment Lead) and Matthew Cox, Investment Director, Esmée Fairbairn Foundation

This series was first published in Trust & Foundation News

All of our environmental and food funding links back to climate change. If you include our social investment, it totals £13.9 million last year. The link might not always be obvious, but it is there. For example, a project on peat conservation might appear to be about nature, but peat stores carbon, and damaging it releases carbon into the atmosphere. Even something like helping small-scale fishermen is not just about fisheries – small boats use less fuel and do less damage to the seabed, keeping the carbon stored there. Similarly, greening the transport network and our work on taking action on marine plastics clearly relate to climate change as it all links back to the use of oil. Even a land purchase through social investment may save the land from being ploughed and releasing carbon.

There is crossover with the other areas that we work in too, but clearly not all of them. For example, one of the organisations we fund, Campaign Bootcamp, is encouraging the leaders of the future, a lot of whom are interested in climate change, while for our leaving care programme it is not relevant. In the arts, we support Julie’s Bicycle, who carry out environmental audits of arts organisations. But we don’t stipulate under our arts priorities that we want grantees to think in a climate-type way, or to undertake a sustainability audit, although we may consider this for all grantees in the future.

I spend a lot of time with funders who maybe haven’t been in the climate space before but are interested to know more. Climate change has been very poorly explained and presented as hugely scientific and technical. But people are realising that even if they don’t want to campaign or get involved in the social movement of climate change, there are other ways to intervene. There is a lot of goodwill to do more, much of it driven by the clear message from young people that more needs to be done, and done quickly.

But while the amount of climate change funding from trusts and foundations has increased in recent years, it is nowhere near the scale we need to achieve change. Spend from trusts and foundations on climate in Scotland is proportionately lower than in England. Likewise government investment in climate has been so poor relative to the issue. Although the Scottish government is much more proactive. For example, we recently partnered with the Scottish government on a social investment project on Iona to install heat pumps to combat fuel poverty but also to provide renewable, less polluting energy.

Ten or 20 years ago, like lots of foundations, our investment purpose was to fund grant-making and operational costs, but since then we’ve seen a sea change in our investment management. In 2013 we signed up to the UN Principles for Responsible Investment, and have since seen incremental improvements in how our investment portfolio is integrated with our core mission and purpose. We use external consultants who find investment managers around the world, and for every recommendation they bring we ask how they analyse factors such as climate change in the companies they invest in.

We have ranked all of our fund managers and now it is a steady process of giving more money to the ones that we believe are focusing on sustainability issues and gradually exiting those we think are no longer pursuing best practice. With an endowment our size – more than £1 billion – it takes time to make such a transition, and our size has enabled us to access some illiquid funds that smaller charities cannot. Certainly, the investment industry is adapting to what investors are increasingly looking for – greater thoughtfulness in investments and more long-term thinking. The next generation is very progressive, with younger investors setting up firms to provide not only a good return but also trying to address some of the issues, for example, encouraging companies to set targets aligned to the Paris Agreements, or challenging big corporates using single-use plastics. Our best managers have longer-term time horizons of 10 to 15 years and are looking to invest in climate solutions. If we continue on this course of climate degradation the projections show adverse economic impacts in all sorts of industries around the world.

As well as our grant-making and social investment, we are looking to use our endowment to support our mission, particularly thinking about how we might use our voice and reputation as active shareholders. In recent years we have signed joint letters with other investors on issues that are closely aligned with our funding, for example, one asking multinationals to commit to sourcing all their power from renewable energy. Big companies like Tesco have signed up, and there will be more of those opportunities going forward.

While we have not divested from fossil fuels, our exposure is very low. Our view is that engagement is a powerful tool to initiate conversations to encourage the best companies to see the longer view and change.

Climate change dictates that there are a lot of behaviours that we need to stop but there are also great opportunities for forward-thinking businesses to benefit from the huge transition from fossil fuels to renewable sources. 20% of our endowment is in venture capital managers who are very focused on start-ups – companies at the forefront of electric vehicle design, for example, or next generation battery storage, transport fleets and so on.

And we don’t think that aligning our investments in a responsible way has an impact on our returns. I might not have said that 20, 10 or maybe even five years ago, but the investment industry has definitely changed and adapted.

Jenny Dadd, Grants Manager (Environment Lead) and Matthew Cox, Investment Director
Esmée Fairbairn Foundation

www.esmeefairbairn.org.uk

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