Introduction

Aligning your financial investments with your values will make sure that your philanthropic purpose isn’t undermined by investing in companies that are worsening the climate crisis. By going a step further your funds can be a catalytic force for good. 

The following practical steps and suggestions will empower you to use your wealth to help people and the planet. And remember, there’s no correct way to go about considering a safe climate, so start by what makes sense for you today and learn as you go.

Why your investments matter 

Australian philanthropists hold an extraordinary amount of funds as capital, yet to date, much of the focus for funders has been on the power of grantmaking. How to use the corpus of foundations and wealth of individual Australians has received far less attention, but that is rapidly changing. 

In the coming 20 years, Philanthropy Australia estimates that upwards of $2.6 trillion in wealth will be transferred from baby boomers to the next generations. Unlocking this wealth to invest in climate solutions can transform Australia’s contribution to climate change.

So, as wealth holders, what can you do? Work your way through the side menu for some ideas to get you thinking.

First up — learn what is possible.

Disclaimer: This information is general in nature and not intended as financial advice and should not be relied upon as such.

Learn what is possible

As concern about climate change grows, so too has the number of resources and expert fund managers to help you transition your funds to climate solutions. The Responsible Investment Association Australasia (RIAA) has more than 500 members representing US$29 trillion in assets under management. RIAA exists to “promote, advocate for, and support approaches to responsible investment that align capital with achieving a healthy and sustainable society, environment and economy”. RIAA has a wealth of knowledge to help build your knowledge on what is possible:  

• Responsible Investment Association Australasia factsheets and guides 
• Read and watch case studies of funders who apply a climate lens to their investments. 

Understand your desired impact

Every wealth holder is different and has unique aspirations for their investments. Australian Impact Investments’ tool, based on the globally recognised Impact Management Project, categorises investments into four types: 

1. Harm People & Planet — The enterprise is directly involved in activities that harm or may harm people or planet. 
2. Avoid Harm — The enterprise has no direct involvement in activities that harm people or planet. 
3. Benefit People & Planet — The enterprise not only acts to avoid harm but is also involved directly in activities that benefit people or planet. 
4. Contribute to Solutions — The enterprise not only acts to avoid harm, but also intentionally generates positive, measurable outcomes for people or planet. 

You may wish to consider your current investments along this spectrum and decide how you would like them to look in future. 

• View the Impact Spectrum

Engage your fund manager or advisor

If you would like to engage your fund manager or advisor in a discussion about the climate impact of your existing investments, you will need to assess whether they have sufficient expertise and resources to support you. Below are some questions you may like to ask to help you assess their skills and knowledge: 

• What is your company’s approach to climate change and how do you hold yourselves accountable? 
• What services do you provide to support organisations to implement a decarbonisation strategy? 
• What skills and experience do the responsible team members have in climate change investment or divestment? 
• How do you incorporate and price climate risk into your investment process? 
• How do you assess and report on portfolio divestment and decarbonisation? 

If you would like to talk with a specialist advisor, these organisations provide directories: 

• Ethical Advisers Co-op 
• Responsible Investment Association Australasia 

As considering the environmental and social impact of investing becomes more common, the risk of “greenwashing” is increasing. Do your own due diligence to ensure the impact you are seeking is being achieved. You may also like to include some questions about the social impact of your current and future investments. For example, are any renewable energy projects included, providing good working conditions and securing free, prior and informed consent with Traditional Owners before progressing?

Develop a responsible investment policy

You may like to develop a responsible investment policy to clearly state your organisation’s approach to considering climate change in your investments. Having an organisational policy can be important to ensure your corpus investments are managed in line with the objectives you’ve laid out and that there are robust governance and review processes in place. It also ensures the policy is insulated against staff changes and that the rationale for decision-making is transparent. These resources may help you to develop a policy: 

• View Principles for Responsible Investment’s guide to writing a policy 
• 2X Collaborative’s Green Toolkit provides information on applying a climate and gender lens to investments.

Decarbonise your investments

There are several strategies you can employ to decarbonise your investments. Shareholder activism, divestment and impact investing are three such strategies you may wish to consider. They can be used in isolation or combined; there is no one way to use your investments to support a safe climate. 

Divest your funds 

There is huge momentum behind the global divestment movement, which encourages individuals and institutions to remove (divest) their money from fossil fuel companies that are fuelling climate change. Since gaining traction a decade ago, globally more than AUD $59 trillion has been divested from fossil fuel and other companies that contribute to climate change. That’s a figure higher than the combined GDPs of the United States and China. To learn more about divestment: 

• Go Fossil Free – global 
• Pledge your commitment to divest 
• Divest/Invest guide for philanthropists 

There are also those who advocate for wealth holders who care about climate change to use their power as investors and shareholders to push companies to decarbonise. More information on the power of this approach is included below, and Forbes magazine has a short thought-provoking series about the power of divestment and engagement: 

• Forbes on the merits of divestment and engagement 

Shareholder activism 

Many of Australia’s biggest polluters are publicly listed companies with shareholders ranging from big institutional fund managers to everyday Australians. Shareholders have incredible power to put pressure on companies publicly and through internal processes to urge the business to transition away from fuelling climate change and instead invest in climate solutions. This may look like asking questions or passing resolutions at Annual General Meetings, requesting meetings with staff, speaking out in the media or writing to the CEO and Board. Shareholders may also take legal action against companies they believe are failing to preserve the value of their investment by not considering climate change.  

Many Australian businesses are increasingly considering and committing to net-zero targets and shareholders can play an important role in ensuring companies create and deliver on these commitments in line with the Paris Agreement to keep warming to as close to 1.5 degrees as possible. 

Organisations that support shareholders (and often funded by philanthropy) to use their power for good include: 

• Australasian Centre for Corporate Responsibility 

• Market Forces 
• Investor Group on Climate Change 

Invest for positive impact 

The term “impact investment” has gained significant traction in recent years as people seek to generate more than simply financial returns from their investments. Impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. Those investing for impact are encouraged to consider required levels of financial return and what form of environmental (and/or social) outcomes they’d like to achieve. 

To learn more about impact investment and to connect with other investors: 

• The Impact Club host regular events to learn about investing opportunities. 
• Impact Investing Institute’s learning hub has general resources. 
• Impact Investing Hub has useful resources. 
• Global Impact Investing Network (GIIN) has several climate finance resources

Put it into action

Once you’ve committed to applying a climate lens to your investments, here are some actions you may like to take to get started using your investments for good. (These actions do not need to be followed in a particular order, so start where feels right.) 

Commit 

Make a commitment with your investment committee or financial manager to act. You may like to invite expert speakers such as ethical investment advisors, or funders who have implemented climate change into their investment portfolio, to address your Board or finance committee. Can you anticipate the questions that may come up and have a response ready? Does developing a responsible investment policy make sense for your organisation? If so, who will draft it and by when? 

Take stock and engage experts 

Review your current investments to assess your impact on our climate. Are any of your funds invested in fossil fuels? Do your investments match your values? Several organisations — many of which are listed in this section — specialise in supporting investors to decarbonise, so you don’t have to learn alone. Who needs to be involved in making these decisions with you? 

Determine your vision 

Decide what you would like your investment portfolio to look like. What would you like to invest in instead? Which strategy such as divestment or impact investing — or combination of strategies — would you like to employ to pursue your climate objectives? Consider whether you are willing to accept fewer financial returns in exchange for greater social or environmental good. 

Connect 

Connect with others and learn together. What can you learn from your existing investment manager, leaders in the field and other investors and philanthropists? 

Develop an action plan 

Develop an action plan to turn your vision into a reality. What timeline and process do you need to reach your vision? What additional skills or resources do you need to implement your plan? 

Learn and adapt 

Consider how you will monitor and evaluate your impact. Set a timeframe for when you will assess your approach.

Disclaimer

This online tool (and accompanying report available as a download) has been prepared and presented in good faith, and to the best of the Australian Environmental Grantmakers Network’s (AEGN’s) and Philanthropy Australia’s (PA’s) knowledge and honest belief. 

While all care has been taken in its preparation, the AEGN, PA and the authors assume no responsibility for the accuracy, reliability or completeness of the information contained therein (except to the extent that liability under statute cannot be excluded). 

Information in this document does not constitute financial advice and the AEGN and PA does not have an Australian Financial Services Licence. The information is of a general nature only and does not take into account the individual objectives and needs of your organisation. 

The guide should not be used, relied upon or treated as a substitute for you or your organisation’s specific requirements. The AEGN and PA recommend that funders adapt their investment strategy to take into account any existing contractual obligations. The sole object of the guide is to encourage funders to invest in climate solutions. The AEGN and PA in no way intends any harm to any individual or organisation as a result of advice given in the Climate Lens tool.