Philanthropy’s New Bottom Line: A More Sustainable Capitalism

One of the worst consequences of the current financial crisis may be that we were all looking the other way as the world slipped into irreversible global warming and the vital natural resources on which our security depends became depleted beyond repair. But these risks carry a new set of opportunities.

Not one but two global crises are unfolding in disconnect from one another. One crisis is of course much noticed. It is the current recession and a financial mayhem that is spreading through a global system that has become overexposed to risk. Others are neglected as a result: the ever more pressing need to address global warming and the impending ecological crises we face as we struggle to ensure we have sufficient food, water, and energy to satisfy the growing demands of a growing population and as we cope with extreme weather events. The 20th anniversary of the first Rio Earth Summit (Rio+20) will come (and swiftly go) this year, and it looks unlikely to produce any substantial results. It’s time to look at the difficult topic of investment and the social-ecological resilience we must now master—not just as philanthropists and impact investors but as a species.

With governments everywhere focused on cutting deficits, these issues seem to be way down the list of priorities. The public, increasingly squeezed economically, is putting minimal pressure on their leaders to consider the long-term effects of this lack of action. The recent agreement to negotiate a follow-up treaty to Kyoto has been hailed as a great advance, but the timetable doesn’t envisage an agreement in place until 2020—eight precious years from now—while urgent matters such as water scarcity, biodiversity loss, and food security remain outside the concerted agenda on climate change.

In these circumstances, the lack of action or any sense of urgency on the part of governments leaves a gap for philanthropists and impact investors to step in. The just-published Alliance special feature on “resilience investing” identifies three ways in which this agenda can now develop. First, by helping foundations and impact investors consider ecological risks when strategizing by bringing existing data on ecological trends out of the scientific realm and into the domain of economic decisions and accountability. Second, by directing investment to proposals that protect or regenerate vital ecological assets, and building the resilience of communities and ecosystems in critical regions. And third, by getting foundation endowments to influence industries that are accelerating the loss of resilience in areas such as energy, food, and agriculture.

The consequences of action and inaction are even more far-reaching than might at first appear. For example, the collapse of fisheries off the coast of Somalia due to overfishing by foreign industrial fleets is now understood to have been critical in turning fishermen to piracy. Joshua Reichert of the Pew Environment Group writes of a mission to establish very large-scale marine protected areas, and the case of Somalia suggests how we could connect this urgent marine protection agenda with an increasingly important ocean security agenda. Major General Muniruzzaman (retired) of the Bangladesh army paints a picture of the consequences of climate change in South Asia in terms of mass migration, lack of food security, and the rising threat of conflict among countries mutually dependent on the Himalayan basin’s water.

For private funders interested in wading into these waters, there are extraordinary opportunities for leadership. For example, Climate Change Capital and the Yansa Group describe attempts to structure financial arrangements to put communities that own natural resources in the driver’s seat. Impact investments structured around a community’s majority ownership of capital are among the most exciting initiatives to create more sustainable forms of capitalism that respect people’s rights while stewarding natural capital. The Earth Security Initiative’s work with the land agenda is creating a unified framework from which to look at biodiversity, water, soil erosion, human rights, and governance, usually seen in isolation, as a measure of country risks that spur investors and politicians to focus on long-term prosperity. Arnold Schwarzenegger’s R20 Initiative sees a catalytic role for regional governments in encouraging more investments in renewable energy. Kristian Parker of the Oak Foundation urges funders to support advocacy, understand the security implications of the environmental agenda, and take more risks. EKO Asset Management Partners and the Packard Foundation have formed a coalition to try to overcome the technical, economic, and political barriers that have so far prevented the significant involvement of agriculture in the solution to climate change.

Many of these initiatives are new and untested; they involve coalitions to change the basic building blocks of capitalism. All are ambitious and offer philanthropists and social investors an opportunity to get involved now, and start tackling this gravest of threats to the human race. Governments will still be needed in the end, but for the time being, with governments focused elsewhere, private funders can start to fill the vacuum and focus the short-term gaze of political systems and financial markets on the long-term risks we are creating.

Read more stories by Alejandro Litovsky & Caroline Hartnell.