Philanthropy
Philanthropy includes grants for charitable purposes, as well as allowing an endowed foundation to allocate part of its corpus to impact investment in climate transition funds and companies.
Philanthropy
Philanthropy, especially endowed philanthropy, sits in a unique and powerful place in the continuum of capital.
Philanthropy used for charitable purposes which benefit the community, such as advancing the natural environment and advancing health (see Australian Charities Act 2013). Philanthropy has a special role to play in supporting a fair and inclusive climate transition and in nature conservation. Philanthropy can play an important role as the risk capital of the not-for-profit sector. Philanthropy can provide the catalytic capital required to initiate new enterprises and projects that will contribute to Australia’s climate transition. In addition to making grants for charitable purposes, an endowed foundation can choose to allocate part of its corpus to impact investment; place responsible investment lens across its whole portfolio, and/or invest in climate transition funds and companies.
While philanthropy towards environmental causes is only 5% of Australian philanthropy, this is expected to grow. Philanthropy has a special role to play in Australia’s climate transition as a source of catalytic capital in both individual transactions and via funds. While there are some major initiatives internationally spearheaded by philanthropy, Australian philanthropy can play more of leadership role. This requires skills and connections. The Rockefeller Foundation US$1 billion Catalytic Fund focuses on renewable energy around the world; IKEA Foundation’s $500 million Global Energy Alliance for People and Planet; Project Finance for Permanence, an initiative of WWF, which encourages blended finance for financing of conservation areas, are good examples. DFAT has created the Australian Climate Finance Partnership, which is managed by the Asian Development Bank and is designed to mobilise private sector investment into low emission, climate-resilient solutions for developing countries in the Pacific and Southeast Asia. However, this does not have a domestic Australian remit. However, this learning can galvanise local action within Australian philanthropy.
Australian philanthropic foundations, such as Lord Mayor’s Charitable Foundation, have provided seed funding for initiatives such as Beyond Zero Emissions’ 1 million jobs plan and strategic funding of Climate Works and the Smart Energy Council. Philanthropy can also provide early stage or scaling up funding to develop and test social enterprise business models in relevant areas such as the circular economy (Green Collect) renewable energy (Good Cycles’ eBike cityservices and Good Deliveries businesses) and sustainable food (including initiatives of Sustainable Table). There is more to be done across all aspects of the energy transition, in new manufacturing, and in supporting resilience.
Philanthropy is more than granting.
Philanthropy can be influential through the use of its capital. This can include:
- Grant for an early-stage enterprise or project related to the climate transition.
- Recoverable loan (grants) or guarantee (e.g. private ancillary fund guidelines).
- Impact investment – concessional loan, patient equity.
- Impact investment – market return debt but usually more flexible, longer term, and/or open to early-stage ventures.
- Investment opportunities as part of a decarbonisation or climate lens approach across the enterprise investment portfolio, often through funds in various asset classes.
Philanthropic Blended Finance Case Studies
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