The Rockefeller Foundation, a 107-year-old philanthropy built by oil magnate John D. Rockefeller, is breaking away from fossil fuels in an effort to save the planet.
Beyond pledging to dump its fossil fuel stocks, the $ 5 billion endowment also promises no new investment in the troubled sector. The moves make the Rockefeller Foundation the largest foundation in America 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 detrimental to our climate future,” Rajiv Shah, president of the Rockefeller Foundation, told CNN Business in an exclusive interview.
This divestiture is especially symbolic because the Rockefeller Foundation was founded with oil money. The endowment was built largely on revenue from Standard Oil, a company that at its peak controlled more than 90% of the petroleum products in the United States. ExxonMobil (XOM) has its roots in Standard Oil.
More than a century later, the Rockefeller Foundation decided it was time to cut ties with fossil fuels because such investments conflict with its mission to uplift humanity. The step puts an exclamation point on the enormous pressure facing the fossil fuel industry as socially conscious investing goes mainstream and the climate crisis intensifies.
By divesting from fossil fuels and instead investing money in clean energy like solar power, the foundation strives to accelerate the energy transition.
“It helps collectively put our thumb on the scale toward a more sustainable future. That is our hope. That is our aspiration,” said Shah, who previously headed the United States Agency for International Development (USAID) during the Obama administration.
In 2014, the Rockefeller Brothers Fund, a sister organization to the Rockefeller Foundation that was founded in 1940, announced that it would no longer invest in coal and oil sands and that it would begin a transition away from other fossil fuels. At the time, the fund controlled about $ 860 million.
Two years later, the Rockefeller Family Fund, a charity founded by family members in 1967, pledged to divest from fossil fuels, including its stake in Exxon.
In the past six years, the Rockefeller Foundation’s fossil fuel footprint has been cut in half to just 2% of total assets, reflecting the industry’s deep decline. That relatively small exposure makes divorce less of a hassle today.
“It’s absolutely easier now than it was five, 10 or 20 years ago, without a doubt,” Shah said, adding that the foundation’s exposure to fossil fuels will hit zero “pretty quickly.” He added: “We are doing it now and we would love to have our peer institutions join us.”
The consequences for oil and gas
While fossil fuel divestments initially focused on coal and the dirtiest forms of oil extraction, they have spread to oil and gas companies, generally creating a new headache for an industry in disarray.
The S&P 500 Energy sector (primarily oil and gas companies) has underperformed the overall market in nine of the last 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 over the past decade,” said Pavel Molchanov, energy analyst at Raymond James.
The risk is that the divestment move will amplify pressure on the oil and gas industry by raising the cost of capital through higher borrowing costs and depressed equity valuations.
As it moves away from fossil fuels, the Rockefeller Foundation is committing $ 1 billion to support a global ecological recovery from the pandemic, the largest investment in the foundation’s history.
The largest project in that commitment strives to bring solar power to rural Indian families disconnected from the electrical grid.
“You simply cannot improve your living conditions or move up the ladder of economic opportunity without access to electricity,” Shah said. “This Covid-19 crisis has gotten worse [and] has removed the covers of extraordinary inequality in our society and around the world.”
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