Growald Family Fund: Putting Venture Philanthropy to Work on Climate Change

November 22, 2016

“Carbon Tracker has changed the financial language of climate change”

The Guardian, May 2014

Established by Eileen and Paul Growald, The Growald Family Fund (GFF) is a venture philanthropy fund concentrating on minimizing climate change. Its strategy is to catalyze a rapid and dramatic shift to clean energy, away from fossil fuels. GFF deploys a blend of collaborative funding, capacity building, and networking to invest in scalable approaches for transitioning to a low carbon energy future. It uses a philanthropic strategy similar to venture capital investing, making focused bets on entrepreneurial, mostly early stage NGOs who have metrics-based business plans that project outsized impact on reducing climate change inducing carbon emissions.

Carbon Tracker (CT) is one of GFF’s most notable core portfolio grantees, and a prime example of the impact that venture philanthropy investments can realize.

Growald Family Fund first connected with Carbon Tracker’s founding board member Jeremy Leggett following the Copenhagen COP15 climate talks. Jeremy Leggett had written an op-ed in The Guardian (op-ed link) where he made the case that following the failed COP15 climate deal, we couldn’t let the first successful IPO on the London Stock Exchange be Coal India.

GFF’s Executive Director, Joanna Messing, called Leggett to ask whether an organized campaign could be created to avoid this, and who with deep experience in financial markets might lead it. Leggett’s answer was, “Yes. City of London veterans Mark Campanale, Nick Robins and James Leaton are ready, if funding is available.”  Seed grants from GFF, Rockefeller Brothers Fund, and Tellus Mater Foundation launched the initiative, and have been core supporters, both financially and strategically, ever since.

Carbon Tracker has emerged as a powerful, game changing voice in efforts to reflect climate reality in financial markets. Their first, seminal March 2012 report on the risks of a “carbon bubble” in fossil fuel investments changed the language used to discuss climate change risk. Terms they first brought to broad attention have included “Carbon Bubble”, “Stranded Assets”, “Carbon Budget” and “Unburnable Carbon”.  Together these turned their insightful, accurate financial analysis into understandable and compelling messages.

Though CT’s primary targets are financial markets and government regulators, their research  has also catalyzed action from climate-change-aware individuals, NGOs, and investment committees. They also notably sparked Bill McKibben’s “Do the Math” tour, a widely-read Rolling Stone article and helped spark creation of the fossil fuels divestment movement.

Carbon Tracker’s impact has been driven by its small team of self-dubbed “financial sector refugees” - analysts, lawyers and other experts who applied their expertise and experience to alert the markets to the looming, under managed risk of overexposure to carbon assets in a world facing climate change.

Carbon Tracker argues that since climate change is real and human-driven, rational financial markets will necessarily recognize and reflect that most fossil fuel reserves currently carried on public companies’ balance sheets cannot be extracted, sold and then burned. They have shown that without an orderly transition from their use, the markets will be vulnerable to a massive overvaluation bubble that bursts into rapid downward revaluation and potential global economic chaos.

CT’s analysis has demonstrated that fossil fuels are becoming more risky investments because of a perfect storm of factors, including emerging cleaner, cheaper technologies, energy efficiency, power storage and expanding moves to tackle climate change, most recently expressed in the Paris Agreement.

Their work has shown that between 60-80% of coal, oil and gas reserves of publicly listed companies are ‘unburnable’ if the world is to stay below 2°C global warming. Regulators, governments and investors need to re-evaluate energy business models against their risk profiles and carbon budgets to prevent an estimated $6 trillion of wasted capex in the next decade.

Carbon Tracker believes that if markets and regulators are able to forge and follow plans for the transition to a low carbon economy, the potential disruption will be manageable. However, just as in the previous sub-prime mortgage and earlier dot-com bubbles, if markets and regulators do not plan prevention, devastating results are possible if not inevitable. 

These arguments are gaining traction in financial circles. They have been widely communicated in the financial press, reportedly soon to be integrated into Bank of England planning and by some major investors.  Recent turmoil in the energy markets is only serving to strengthen their case. In addition to the changed narrative, they have seen investors defer/delay or cancel over $230B in new capital expenditure away from new high carbon projects.

As a result of significant growth, Carbon Tracker is now poised to reach their next level of impact, remaining small but with growing demands on their resources.

For Growald Family Fund, Carbon Tracker is a shining example of the venture philanthropy investor model that backs bold, high risk/high return ideas by leaders with clear plans and passion. Patient philanthropic capital, access to networks, business planning and deep strategic partnership can lead to outsized impact. GFF is proud to call Carbon Tracker our grantee.

Additional information about Carbon Tracker can be found here.