“Burning fossil fuels is not necessary to sustain our economy and economic growth in the long term – and it is detrimental to our climate future,” Rajiv Shah, the president of the Rockefeller Foundation, told CNN in an exclusive interview. Business.
By divesting fossil fuels – and instead plowing money into clean energy such as solar energy – the foundation aims to accelerate the energy transition.
“It helps to collectively put our thumb on the scale for a more sustainable future. That’s our hope. That’s our ambition,” said Shah, who previously led the United States Agency for International Development (USAID) during the Obama administration.
Famous family cut ties with oil
The Rockefeller Foundation is the largest philanthropic organization to abandon fossil fuels, but it is not the first in the famous family to do so.
Over the past six years, the Rockefeller Foundation’s fossil fuel footprint has halved to just 2% of its total assets, reflecting the industry’s deep decline. That relatively small exposure makes the separation less messy these days.
“It’s definitely easier now than it was five, 10, 20 years ago, without a doubt,” Shah said, adding that the foundation’s exposure to fossil fuels will “pretty soon” become zero. He added, “We are doing it now and we would love it if our fellow institutions join us.”
A record year for divestments
The divestment movement is seriously gaining momentum, coupled with the rise of ESG investments (environment, society and governance).
Other estimates are even greater. According to Raymond James, funds holding about $ 18 trillion in total had a fossil fuel divestment policy, a staggering increase from just $ 2 billion in 2014 and $ 3 trillion in 2015.
There is a long history of divestment movements, including previous attempts to keep money away from the defense, alcohol and tobacco industries. Fossil fuels have come under fire in recent years due to the increasing focus on climate change.
“We know the climate crisis is absolutely urgent,” said Shah.
The consequences for oil and gas
While fossil fuel divestments initially focused on coal and the dirtiest forms of oil drilling, it has grown into oil and gas companies broadly causing another headache for an industry in disarray.
The S&P 500 energy sector (largely oil and gas companies) has underperformed the broader market in nine of the past 11 years, according to Raymond James.
“A lot of funds don’t want to invest in these companies simply because they have been terrible investments for the past decade,” said Pavel Molchanov, an energy analyst at Raymond James.
The risk is that the movement of divestments will put pressure on the oil and gas industry by increasing the cost of capital through higher financing costs and lower equity valuations.
As it withdraws from fossil fuels, the Rockefeller Foundation is committed $ 1 billion to support a global green pandemic recovery, the largest investment in the foundation’s history.
The largest project in that commitment aims to provide solar energy to rural families in India cut off from the electricity grid.
“You simply cannot improve your living conditions or climb the ladder of economic opportunity if you don’t have access to electricity,” said Shah. “This Covid-19 crisis has exacerbated both [and] pulled the cover up for the extraordinary inequality in our society and around the world. “
There are numerous jobs at stake
“To make these transitions effective, we cannot leave community after community and write off their future,” Shah said. “We need to reinvest in their sense of dignity and hope for the future.”
“We can build an innovation economy,” Shah said, “even in places like the industrial midwest, the Appalachians and other places where the oil, natural gas and coal industries have been dominant sources of employment and culture.”
Shah said history will not seem friendly to Trump’s track record on climate change: “Ignoring reality won’t make it go away.”