Corporations’ Assets Have Huge Carbon Footprints

What About Foundations?

Michael Kavate – Inside Philanthropy

Published July 12, 2022

Microsoft, Apple and other companies have invested millions to electrify their operations and otherwise cut their emissions. Yet all those efforts may be outweighed by the carbon footprints of the money they have in the bank, according to a report released in May.

Take Meta, the parent company of Facebook. The emissions financed by its $48 billion in cash and investments exceed all of its other emissions combined, accounting for 112% of those generated by the creation, transportation and use of all Meta products, according to “The Carbon Bankroll: The Climate Impact and Untapped Power of Corporate Cash,” published by a trio of climate-focused nonprofits.

This brings up a tough question for philanthropy: What about foundation endowments? Are the billions they have invested in the economy dwarfing their annual grantmaking when it comes to impact on the climate? The authors of the report say that’s likely the case, and are currently working on follow-up research to pin down just how bad the imbalance is.

Based on back-of-the-envelope calculations shared by Paul Moinester, co-founder and executive director of the Outdoor Policy Outfit, one of the groups that released the report, top American philanthropies’ assets likely also account for significant emissions, which in some cases may even rival today’s carbon footprints of the huge corporations that originally generated their founders’ wealth.

Moinester plans to do a full analysis later this year of both foundation and university endowments. But as with the recent report, which emphasized that several of the companies in question are otherwise climate leaders, the team’s goal is to shine a light on how this often unconsidered source of emissions, cash and investments may be rivaling or even outweighing funding or other efforts to curb climate change.

“The impact of these foundations’ [assets] is dramatically undermining their climate missions, sometimes to the point of neutralizing or even worsening the impact they are setting out to have,” said Vanessa Fajans-Turner, executive director of BankFWD, another of the report’s partners. “In my view, this means that the very purpose and structure of philanthropy as we think of it needs to be rethought.”

Activists and movements like DivestInvest have long pushed for philanthropy not only to divest from fossil fuels but also invest their endowments to advance climate action. DivestInvest asks institutions to commit to making no new investments and sell off existing investments in the top 200 oil, gas and coal companies. But the carbon footprint of an investment portfolio is much more than just what’s invested directly in the fossil fuel industry. Investments denote a share in or financing of all manner of carbon-emitting activities — from construction projects to small-business loans. And cash sitting in the world’s largest banks helps them to finance fossil fuel expansion.

So the Carbon Bankroll took things a step further and calculated the entire carbon footprint of companies’ invested assets, then compared them to their other direct emissions. How do you calculate emissions for a pile of money? In analyzing companies, the team used different multipliers based on every type of asset listed in those corporations’ financial statements, with each multiplier set at a different level depending on the average carbon emissions attributed to those types of assets. For example, the report estimated the average carbon intensity of cash in the U.S. financial sector, to take one class of assets, is 126.03 kilotons of carbon dioxide per billion U.S. dollars.

Foundations’ financial disclosures vary, but some reveal just as much as corporate filings, which makes it possible to do a similar analysis for philanthropic endowments. Moinester said that ideally, he would work closely with a few select foundations and educational institutions to generate a more detailed analysis. His experience suggests that they are also carbon-intensive.

“If you have $50 billion, and you’re not laser-focused on ensuring that that $50 billion has the lowest carbon intensity possible, it’s inevitably going to generate a substantial carbon footprint,” Moinester said. The report comes after a year in which three of the largest foundations in the United States publicly pledged either to divest their endowments from fossil fuels or make them net-zero.

Granted, not everyone believes that investments should be evaluated this way. Companies of all types have plans to go net zero. The carbon-intensive investments of today could be carbon neutral tomorrow if — and it’s a big if — those pledges are fulfilled.

But the report’s authors are not alone in using this approach to paint a more complete picture of climate impact, even within philanthropy. Major banks’ roles in fossil fuel financing has led several groups, including BankFWD, to push their peers to move their accounts to carbon-neutral banks, or at least lobby the banks they use to change, as I’ve reported for IP.

The Carbon Bankroll team hopes their analysis moves companies, and soon foundations (though that analysis is not yet funded), to consider the carbon impacts of their assets beyond whether they are invested in companies pumping oil and gas out of the ground.

“Divestment is important, but decarbonisation is really the next step along that journey,” Moinester said. “Just because you’re divested, specifically from fossil fuels, doesn’t mean that your endowment and that your cash management is not exacerbating climate change, because it’s still being invested in high-emission sectors, and it’s being invested in hard-to-abate sectors, as well, like mortgages, and things like that.”