New York (CNN Business) The Rockefeller Foundation, a 107-year-old philanthropic organization founded by oil tycoon John D. Rockefeller, aims to divest from fossil fuels to save the planet.
The $5 billion endowment not only commits to releasing its fossil fuel holdings, but also commits to no new investment in sectors facing hardship. The move makes the Rockefeller Foundation the largest U.S. foundation to embrace the rapidly growing divestment movement.
“Burning fossil fuels is not necessary to sustain our economy and economic growth in the long term, and it is harmful to our climate future,” Rockefeller Foundation Chairman Rajiv Shah said in an exclusive interview with CNN Business. ” he said.
This sale is especially symbolic because the Rockefeller Foundation was founded with oil money. This fund was created primarily from the profits of Standard Oil Company, which at its peak controlled more than 90% of the petroleum products in the United States. exxon mobil (XOM) Its roots lie in standard oil.
After more than a century, the Rockefeller Foundation has decided that it is time to sever ties with fossil fuels because investing in them conflicts with the Foundation's mission to improve humanity. The move puts an exclamation point on the enormous pressures facing the fossil fuel industry as socially conscious investing becomes mainstream and the climate crisis intensifies.
The foundation is seeking to accelerate the energy transition by divesting from fossil fuels and putting money instead into clean energy such as solar power.
“It is our hope and our aspiration that we can collectively put our thumbs together for a more sustainable future,” said Shah, who led the United States Agency for International Development (USAID) during the Obama administration. ” he said.
Prominent family cuts ties with oil
The news comes weeks after New York state's $226 billion pension fund pledged to divest from fossil fuel stocks over the next five years and divest from companies that contribute to global warming by 2040. It was done.
The Rockefeller Foundation is the largest philanthropic organization to divest from fossil fuels, but it is not the first member of a prestigious family to do so.
The Rockefeller Brothers Foundation, a sister organization of the Rockefeller Foundation founded in 1940, announced in 2014 that it would no longer invest in coal and tar sands and begin transitioning away from other fossil fuels. At the time, the fund managed about $860 million.
Two years later, the Rockefeller Family Foundation, a philanthropic organization founded by members of the Rockefeller family in 1967, pledged to divest from fossil fuels, including Exxon stock.
Over the past six years, the Rockefeller Foundation's fossil fuel use has been cut by half to just 2% of its total assets, reflecting the industry's deep decline. With that relatively small exposure, divorce today is less messy.
“It's definitely easier now than it was five, 10, 20 years ago,” Shah said, adding that the foundation's fossil fuel exposure has been zeroed out “pretty quickly.” He added that it would be. He added: “We are doing that now and we would love for our peer institutions to join us.”
Record year for divestment
In parallel with the rise of ESG (Environmental, Social, Governance) investing, the divestment movement is gaining momentum.
More than 1,300 institutions managing $14.5 trillion have divested from fossil fuels in some way, according to a tally by environmental group 350.org.
Other estimates are even larger. According to Raymond James, as of August 2020, funds that manage approximately $18 trillion have divestment policies from fossil fuels, compared to just $2 billion in 2014 and $3 trillion in 2015. This is an astonishing increase since then.
This year is expected to be a record year for divestment announcements led by large institutional investors. black rock (BLK)The world's largest asset manager, with $8 trillion, pledged in January to exit thermal coal producers and other investments it deems sustainability risks.
The divestment movement has a long history, including previous efforts to move money away from the defense, alcohol, and tobacco industries. Fossil fuels have come under fire in recent years due to increased attention to climate change.
“We know that the climate crisis is absolutely urgent,” Shah said.
Impact on oil and gas
Divestment from fossil fuels, initially focused on coal and the dirtiest oil drilling, has expanded broadly to oil and gas companies, creating new headaches for an industry in turmoil.
According to Raymond James, the S&P 500's energy sector (primarily oil and gas companies) has underperformed the broader market in nine of the past 11 years.
“A lot of funds don't want to invest in these companies simply because they've been terrible over the last 10 years,” said Pavel Molchanov, an energy analyst at Raymond James. .
The risk is that divestment moves will increase the cost of capital through higher borrowing costs and lower equity valuations, compounding pressure on the oil and gas industry.
As we divest from fossil fuels, the Rockefeller Foundation will commit $1 billion to support a global green recovery from the pandemic, the largest investment in the foundation's history.
The initiative's largest project aims to bring solar energy to off-grid homes in rural India.
“Without access to electricity, we cannot improve our living conditions or climb the ladder of economic opportunity,” Shah said. “This COVID-19 crisis has made both worse.” [and] We lifted the lid on the extraordinary inequalities in our society and around the world. ”
countless jobs are at risk
Moving away from fossil fuels also threatens to eliminate countless good-paying jobs. The decline of the coal industry is already destroying Appalachian communities. Shah doesn't take that lightly.
“For these transitions to be effective, we cannot continue to leave communities behind and write off their futures,” Shah said. “We must reinvest in their sense of dignity and hope for the future.”
That reinvestment includes retraining workers whose careers have been abandoned. The Rockefeller Foundation is working with the Chan Zuckerberg Initiative to identify and scale such programs.
“We can build innovation economies in the industrial Midwest, the Appalachian states, and other places where the oil, natural gas, and coal industries are major sources of both jobs and culture,” Shah said. Ta.
President Donald Trump won the 2016 election in part because he promised to help coal workers who felt left behind. President Trump has slashed environmental regulations, installed a coal lobbyist to lead the EPA, and even falsely suggested that windmills cause cancer.
But President Trump's efforts to eliminate red tape will not help struggling coal industry and coal community workers, as this change is driven by market forces. Not yet.
Shah said history will not look kindly on President Trump's record on climate change, saying, “Ignoring reality doesn't make reality disappear.”
