175 philanthropic foundations around the world are now signatories to the DivestInvest movement and Australian Communities Foundation (ACF) is the most recent addition to that list. ACF Chief Executive Officer, Maree Sidey, says the process to divest the foundation’s $90 million corpus from fossil fuels was three years in the making and though the journey’s not over yet, the decision to take a values stance has already paid dividends.
Nicole Richards, September 2018
What do the American Medical Association, the nation of Ireland and Australian Communities Foundation (ACF) have in common? They’ve all become signatories to the DivestInvest movement in 2018 which now tallies 985 institutional investors with $6.24 trillion in assets under management.
ACF CEO, Maree Sidey, says she didn’t expect the divestment announcement of an Australian community foundation, albeit a large one, would warrant much attention in the global scheme of things but the news became part of a global announcement ahead of the Global Climate Action Summit in a bid to encourage more foundations to participate.
The journey to divestment started three years ago for ACF when the organisation began exploring ethical investing at the behest of its donors.
“As a community foundation it’s critical that we are very accountable to our donors and the community,” Sidey says. “It has been both challenging and rewarding to be holding up a mirror to ourselves by taking this action.”
It took ACF 12 months to transition its investing to an ethical screen but the returns were encouraging.
“Our returns weren’t reduced but had actually increased,” Sidey explains. “Having that higher return gave us a lot of confidence to look at the next step which was to look across our portfolio and see that we had less than 2 per cent of our investments in fossil fuels.
“Whereas the move to ethical investing came about after a push from our donors, I knew that we couldn’t afford to let divestment come about in the same way. From my perspective, that’s not leadership - we needed to be out there in front of it so with the backing of the board and finance committee we decided it was time to lead on this.”
After surveying donors about their investment priorities, including the importance of financial returns, positive social and environmental returns and impact investing, 70 per cent of ACF donors indicated positive social and environmental returns were their highest priority. Armed with that mandate, Sidey and the ACF board took swift action, encouraged by a conversation with Wallace Global Fund Executive Director, Ellen Dorsey at this year’s Australian Environmental Grantmakers Conference.
“I didn’t think our drop in the ocean would even be noticed,” Sidey says, “but Ellen encouraged us by pointing out that a commitment by a foundation our size was significant in the Australian context where large foundations have been slow to take the pledge. She encouraged us to work towards a target of announcing it to coincide with the Global Summit and that became a very motivating deadline.”
“We took divestment to the finance committee and board in the context of our earlier discussions to review the whole investment approach and that really has to do with being public about where we stand and having a horizon we’re moving towards.
“We want to strongly align the focus of our distributions with the investments, beginning with the four areas of climate change, poverty and inequality, Indigenous issues and democracy – that will give us a framework to begin exploring positive investments.”
“Not only will the $9 million of grants we distributed last year improve our communities, now our $90 million corpus investment portfolio will multiply its positive impacts to the world.”
Walking the talk
While the divestment decision has been warmly greeted by a “cheer squad of donors and board members,” Sidey says it hasn’t been unanimously welcomed.
“One of the biggest challenges for a community foundation is appreciating that we’re a broad church,” she says.
“While we operate from a social and environmental justice values base, it’s hard to represent everyone’s values and we learned this particularly with our transition to ethical investing where one person’s definition of ethical is not necessarily that of others.
“You can’t please everybody all the time. You’ve got to be prepared for the downside when you take a values stance but there’s usually an upside too and for us, it’s that this announcement is helping attract new donors to ACF who want to be part of something meaningful.”
Being part of a global movement to protect the planet Sidey says is another source of inspiration for the leadership and governance team.
“It comes back to that fundamental question: ‘Are you creating a foundation where people can be really proud of its collective achievements and impact, or are you playing it safe?’”
For other foundations considering divestment, Sidey offers two pieces of hard-won advice:
“Don’t bite it off in one go, stage the approach and take it one step at a time,” she says. “You don’t need to get it perfect straight away, it's important to learn as you go. As a sector we're more inclined to be riskier with our grantmaking and more risk averse with our investments. That mindset needs to change towards a more integrated and wholistic approach, balancing and managing the risk on both sides.”
“And secondly, be sure to push your financial advisors. If you’re not pushing your investment advisors to give you the kind of investments that are mission-aligned and meet your values they won’t go out of their way to find them...that's our job!”
Photo by Vidar Nordli-Mathisen on Unsplash