turbine

Guidelines for foundations

This content forms part of the DivestInvest guide.

1. Research: Read, watch, ask, listen

Are we up to date with the latest research?

Divestment is a dynamic and relatively recent discipline with new entrants, initiatives and publications emerging all the time. The following publications have been selected to provide you and your organisation with key insights into divesting and investing to mitigate climate change. They have been authored by leaders and pioneers in the field. We encourage you to keep up to date with current developments as they emerge.

What kind of training is available?

The following videos are insightful, instructive and entertaining tools to bring investment committees, trustees and management together for initial engagement on investing in a time of climate change.

Suggested resources

  • Investor Group on Climate Change (Australia/NZ) – Trustee Training on Climate Change
  • AEGN – Stephen Heintz, President, Rockefeller Brothers Fund: Video for trustees

How can we analyse our portfolio’s carbon footprint?

Carbon footprint analysis determines an investment portfolio’s exposure to fossil fuel reserves, its overall carbon intensity, as well as its exposure to low carbon opportunities such as renewables and clean technology.

Suggested resources

The Montréal Pledge provides a global guide to specialist carbon footprinting services.

Sample portfolio carbon footprinting may be available at:

What is our fiduciary duty in relation to climate change and investment?

“In light of new evidence that climate change risk can impact investment performance, the relevance of climate change is no longer only an environmental issue – it is an economic one. Trustees with long-term investment horizons who fail to take account of this risk may be exposed to personal liability for loss – as may the directors. The focus has therefore shifted from whether it is permissible to consider climate change risk to whether, as a prudent fiduciary investor, with a long term investment horizon, you can afford to ignore it.” Pam McAllister, Partner and Director of Mercer Legal. The following publications will help you to better understand your fiduciary responsibilities with regard to climate change, and to address concerns that may be raised by various parties as you develop and implement your DivestInvest plan.

Suggested resources

  • Climate Change and the Fiduciary Duties of Pension Fund Trustees – Lessons from the Australian Law, Barker et al. (2016)
  • Legal Opinion on Climate Change and Directors Duties (Aus) (2016)
  • Ethically Questionable Investments, Christopher McCall QC (UK) (2015)
  • Impact Investments: Perspectives for Australian charitable trusts and Foundations (2014)
  • Fiduciary Duty in the 21st Century (2015)

Can our current fund managers and advisers help us with DivestInvest?

You will need to assess whether your current investment service providers have sufficient expertise, resources and interest to support your decision to divest from fossil fuels and invest in climate solutions, or whether additional expertise is required. These questions are designed to help you gather the information required to make this assessment.

Questions for fund managers and advisers

  1. What services do you provide to support organisations wishing to implement a divestment or decarbonisation strategy?
  2. How and by whom are they resourced? What are the skills and experience of responsible team members in this area?
  3. Do you engage with companies? If so, how is this researched, resourced and implemented?
  4. Are you able to exercise voting rights in accordance with trustees’ instructions?
  5. Do you charge an additional fee for these services? If so, how much?
  6. How do you incorporate climate risk into your investment process?
  7. How do you assess and report on divestment, portfolio decarbonisation and engagement?

If our current managers and advisers cannot help us, how can we find alternatives?

The following organisations have supporting members and signatories who offer climate risk investment expertise. Reviewing these memberships will provide insight into who is actively involved in the area and the products and services they offer.

Suggested resources

  • Investor Group on Climate Change (Aus/NZ)
  • Asia Investor Group on Climate Change
  • Responsible Investment Association Australasia
  • Principles for Responsible Investment

Which foundations are already divesting?

DivestInvest Philanthropy is a growing global community. The following websites will keep you up to date with these expanding lists of participating Australian and international foundations. We encourage you to connect with organisations with experience in the area, to access shared resources and knowledge.

Suggested resources

What other expertise or information is available?

In addition to organisations central to the global DivestInvest movement, the following groups also offer local publications and initiatives on divestment and investment supporting climate change solutions.

Suggested resources

  • DivestInvest Australia/Asia Pacific
  • The Climate Institute
  • Centre for Policy Development
  • 350.org Australia
  • Market Forces
  • The Australia Institute
  • Australian Environmental Grantmakers Network

Back to top

2. Discuss: Is divestment right for us?

Having completed your background research, the next step is to explore how divestment might fit into your organisation’s mission and strategy. The following are suggested questions for trustees and management to discuss. Your responses will become the foundation for developing your divestment policy in Step 3.

  1. What values and beliefs are important to our organisation?
  2. What values and beliefs are important to our beneficiaries and other close stakeholders?
  3. What issues do we address through our grantmaking?
  4. Is there a link between action on climate change and our values and beliefs?
  5. Is climate change related to the issues we address through our grantmaking?
  6. What do we know, believe and agree on about the investment risks associated with climate change?
  7. Are those beliefs reflected in our current investment strategy and risk assessment approach?
  8. What do we want to achieve from a divestment or decarbonisation policy in relation to our current investment strategy and risk assessment approach?

Back to top

3. Commit: Create a solid policy

You are now ready to write your policy, considering the following questions.

  1. Reflecting on questions 1 to 5 in Step 2, how does a divestment or decarbonisation strategy reinforce or strengthen our organisation’s values and beliefs, grantmaking and mission?
  2. Reflecting on questions 6 to 8 in Step 2, how does this strategy strengthen or reinforce our current investment strategy and risk assessment approach?
  3. Are there any other outcomes we might achieve through such a strategy?
  4. How will we assess our progress and achievements?
  5. Who needs to be consulted about, or asked to contribute to the policy?
  6. To which asset classes will we apply the policy? For example, Australian equities, international equities, property, fixed interest, alternatives, infrastructure, sovereign and corporate debt.
  7. What methodologies will we use? For example: – complete or partial divestment – positive investment in low carbon assets across one or various asset classes – hedging – reducing our carbon footprint across the whole portfolio – specific sector or company weightings – using carbon indices – engaging investee companies about their transition to a net zero carbon economy.
  8. Which sectors do we include in this strategy? For example, all sectors, only high carbon sectors (for divestment), only very low carbon sectors (for investment)?
  9. Which services or suppliers do we engage? For example, index provider, asset consultant, wealth adviser, fund manager, carbon footprint consultant, in-house analyst?

Back to top

4. Act: Implement the policy

Here are some questions to help you consider the various steps of an implementation plan.

  1. When do we sign off on the policy?
  2. What are our key performance indicators for the strategy – financial performance, carbon reduction, other KPIs?
  3. What resources do we need to implement the strategy successfully?
  4. What is our timeframe?
  5. Are there any governing documents or legal and reporting requirements we need to make reference to the policy?
  6. How do we appoint managers, advisers and services, if necessary?
  7. Do we need to issue amendments to our existing Investment Management Agreements and communicate this to appointed investment managers or in-house investment staff?
  8. Do we create a wider communications strategy to announce the policy?

Back to top

5. Report and review

Consideration for monitoring, reviewing and reporting on the progress of your divestment or decarbonisation policy could include:

  1. What approach do we use for our reporting – basic disclosure, narrative reporting, storytelling?
  2. What do we report on? For example, financial performance and carbon reduction achieved? How the policy has strengthened or reinforced our values, beliefs, grantmaking, mission and strategy?
  3. When and how often do we review our investment methodology to determine if it is still effective?
  4. When and how often do we evaluate the performance of participating fund managers, asset consultants, advisers and research providers?
  5. What costs are we allocating for the strategy and for resources?
  6. How do we communicate the results and who is the intended audience?