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Philanthropy – a stakeholder in a low-carbon society
Alongside technological advancement, public policies and sustainable investment, philanthropy also provides solutions that bring us closer to a carbon-neutral society, something that urgently needs to be ushered in. Although our political leaders agreed, under the 2015 Paris Agreement, to keep the rise in temperatures well below 2°C this century, carbon emissions continue to rise. Thus, our economy remains on a trajectory where rising temperatures are damaging our planet. To date, only the emergence of a pandemic with dramatic human consequences, has led to the sharpest annual drop in CO2 emissions ever recorded.
New solutions are necessary to reverse this trend. Environmental philanthropy could help generate them. In partnership with the World Wildlife Fund (WWF), we recently published "The Donor's Guide to the Environment" to help shed light on this issue and suggest avenues for practical solutions. The research explored at least three key contributions that philanthropists can make to the preserve the future of the environment.
Firstly, they can provide their support and expertise when it comes to sustainable policy. Although the environment is a relatively small area of philanthropy, representing an estimated EUR 583 million in subsidies granted by European foundations, i.e. less than 1% of the EUR 60 billion allocated each year, there are some strategic subsidies that can make all the difference. For example, when California adopted a law to curb pollution in 2006, it was the Environmental Defense Fund, an American not-for-profit organisation, that helped policymakers create legislation to cap greenhouse gas emissions for the entire economy, which, in turn, led to the clean energy boom in the state.
Secondly, environmental philanthropy can build on well-established financial instruments, investment strategies, markets and an entrepreneurial spirit to make it sustainable over the long term. In this arena, philanthropic and not-for-profit organisations also provide new solutions. One example is The Nature Conservancy's (TNC) USD 130 million sustainable forest fund, created as a capital investment vehicle to purchase 102,000 hectares of logging forests in the central American Appalachians, Virginia, Kentucky and Tennessee. Its objective is to implement a sustainable forestry strategy that benefits local communities, wildlife habitat, clean water and resilience in the face of climate change. This initiative protects a fragile area and biodiversity over the long term, while providing revenue from sustainable timber harvesting and carbon capture.
Innovative solutions for accessing capital
Thirdly, to protect our environment, we will also need innovative solutions to access capital markets. This could be done with venture capital, seeking to achieve a public benefit, or by investing differently, for example via "blue bonds"1 that target the protection of oceans or water in general. Philanthropists are also investors. Geneva has top-tier financial institutions that specialise in this, as well as centuries-old expertise in how to structure these vehicles within the various asset classes, such that investors naturally think of including them in their portfolios.
Our recent partnership with the social enterprise Plastic Bank illustrates this. The company, present in Indonesia, the Philippines, Haiti, Brazil and Egypt, helps collect and recycle plastic to prevent it ending up in the ocean. The organisation arranges to pay local collectors for the plastic they have collected in exchange for access to essential goods and services. This type of inclusive approach has a real social and environmental impact. A blue bond was the investment vehicle developed to finance this initiative. A portion of the revenue generated by investors is ploughed back into a programme designed to collect 795 tons of plastic that would otherwise have contaminated the waters in Haiti: this also has a significant impact on the life of more than 6,000 local collectors and their families.
Converting debt to protect the marine environment
A classic example of blue bonds issued for the preservation of our planet, by philanthropic organisation, is the Nature Conservancy (TNC). In collaboration with the Seychelles government, TNC, via its investment unit NatureVest, created a revolutionary debt conversion scheme for marine environmental protection and adaptation to climate change. This not-for-profit fund, the "Seychelles Conservation and Climate Adaptation Trust", raised USD 5 million in capital from grants and USD 15.2 million in loan capital to provide a specific-purpose loan to the Seychelles government. Its aim was to buy back USD 21.6 million of its sovereign debt at a reduced price from several of its Club de Paris creditors. To date, the Seychelles government has legally designated 410,000 km2 – an area larger than Germany – as marine protected areas, thus achieving the objective of protecting 30% of ocean area a year ahead of schedule.
The fund bought back the outstanding sovereign debt of its Club de Paris creditors, restructured it with more favourable repayment conditions, and uses the debt payments to finance existing local conservation programmes and to create a conservation endowment fund. TNC aims to replicate this "Blue Bonds for Conservation" model in 20 countries over the next five years.
Examples such as the funding of research for the development of ambitious policies, the raising of investment capital and the implementation of innovative financing solutions to save our environment provide a clear demonstration of why we must consider environmental philanthropy a complementary conduit in the transition towards a low-carbon society. Every donation counts in the response to the climate and environmental crises. If wisely allocated, it could provide the necessary impetus and create a real impact.
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