Can Philanthropic Funds Capitalize on Fossil Fuels?

Par Caroline Bergeron , Director of the Quebec Hub
05 June 2019

philanthropy and fossil fuelsA fund managers’ primary responsibility, for a fund that was patiently formed over the years through repeated fundraising efforts, is simple: secure long-term returns while maintaining the capital. Basically, conservative management is a must, and the sums given by donors must in no case be put at risk, even when faced with the promise of higher returns on the short term. However, when we say conservative management, we also mean investments in companies that are profitable and well-established. Can Philanthropic Funds Capitalize on Fossil Fuels?

Oil companies are on the list of established, profitable companies, but they are also at the heart of the debate for the conservation of humanity’s ecological balance. Following the commitment made by many countries to reduce their fossil fuel use by 2050 to counter climate change, investing in the sector is not only an aberration but removing oneself from it becomes an environmental and social strategy and proof of good governance.

According to the Guardian, in 2015, over 200 institutions around the world were starting their withdrawal from fossil fuels. Among them, we find pension plans, philanthropic foundations, religious organizations, municipalities and universities. Ahead of them all, religious organizations lead the race against philanthropic institutions, with 29% of the withdrawals compared to 17% for philanthropic funds. Interesting fact, a coalition of philanthropic foundations, including the Rockefeller Brothers Foundation, whose fortune was built on oil, began their withdrawal from fossil fuels in 2014.

What position are universities taking?

The first European university to withdraw from fossil fuels was Glasgow University (October 2014) and the most significant one was Syracuse University in the United States. In Canada, it is Université Laval who was the first (February 2017) to make a formal commitment to withdraw from fossil fuels. In the Fall of 2017, it is the Université d’Ottawa who revealed their strategy to switch to renewable energies progressively. At the same time, UQAM announced that their Foundation’s Board of Directors will sell all of their fossil fuel stocks. Also, it is now formally stated that the foundation’s capital could never be reinvested in the sector in the future. These decisions are significant, but let us remember that these announcements concern only the foundations of these institutions, and not the retirement funds, which are often much more substantial.

The road to a consensus is long for universities who continue to resist the trend. Their arguments against withdrawing their investments are based solely on a short-term vision. Several believe they can better influence oil company strategies by remaining stockholders and in taking part in the decision process through their votes. For the moment, universities maintain that the fossil fuel problem is mainly caused by global consumption and that withdrawing their savings wouldn’t have an effect as other investors, less morally inclined, would take their place. This argument highlights the importance of financial stability for universities more than their courage and the alignment of their governance with the teachings they advocate regarding ecology. This kind of attitude under-estimates the symbolic value of university discourse versus that of individuals. However, we have already witnessed humanitarian successes based on the financial withdrawal from immoral or dangerous activities, and universities should find their inspiration there.

The withdrawal of funds from companies that encouraged racial segregation in Africa led to the end of the Apartheid as a social framework. The boycott of companies that favoured Darfur’s political regime, or that were connected to tobacco proved the global success of the strategy. Soon, most likely, those who are becoming wealthy thanks to opioïds with no responsible framing will learn of the consequences.

It is philanthropy’s responsibility to adopt a coherent position in the face of the ideas it defends and to use its influence in high places, such as in universities, to accomplish its ultimate objective: achieving and maintaining a better human balance. Can Philanthropic Funds Capitalize on Fossil Fuels?