May 25, 2017

Rockefeller Brothers Fund Finds Out Divesting is Easier Said Than Done

Following the Global Divestment Mobilisation earlier this month, we figured now was as good a time as any to check in with one of biggest backers of the fossil fuel divestment movement, the Rockefeller Brothers Fund (RBF).  It’s been three years since the fund’s PR stunt of a divestment announcement, yet aside from some initial press attention the group doesn’t seem to have a lot to show for it.

It’s not surprising RBF has made little headway on its divestment commitment. The divest campaign has essentially stalled across the nation, with several recent high profile university rejections and a lack of support from peer philanthropic organizations.

Let’s take a look at what has happened in the years following RBF’s 2014 announcement.  Here are five things you need to know:

1. The Rockefellers are still invested in fossil fuels

Years after bold declarations, funding of anti-fossil fuel groups and coercion of other groups to follow suit, the Rockefeller Brothers Fund is still invested in fossil fuels.  A recent article from the Nonprofit Chronicles approximated RBF’s fossil fuel investments at around three percent of the overall endowment.  Yes, the same foundation bankrolling Bill McKibben’s anti-fossil fuel group, 350.org, still invests in the very industry it’s trying to eliminate.  RBF only had about six percent of its endowment invested in fossil fuels to begin with, so what’s the hold up?

It’s probably because divestment is both expensive and a complicated process, especially when comingled funds are involved (as they most likely are with large endowments).  RBF has only been averaging a decrease of one percent of fossil fuel holdings per year.  Back in 2015, Fund President Stephen Heintz talked about the challenges associated with divesting when he said:

“You can’t just throw a switch overnight and divest. It’s complicated for all kinds of reasons…It is possible if you go at it with intention and are honest about the challenges and how long it’s going to take. We are divesting, but it’s going to take us three years to get down to zero and to do it responsibly.”

Not quite the splash that was intended in 2014.

2. You wouldn’t know that if you listened to Bill McKibben.

Bill McKibben typically tries to gloss over the fact that his benefactors still have direct ties to fossil fuels.  He also tends to overstate the level of divestment participation exhibited by the Rockefeller family.  In a 2015 Op-Ed he wrote for the Washington Post, McKibben made it seem that all the Rockefeller charities, of which there are many, were divesting from fossil fuels.  In reality, RBF was the only group to have had made such an announcement.  He earned a fairly extensive correction courtesy of the Washington Post at the top of his piece:

“An earlier version of this commentary incorrectly stated that “the Rockefeller philanthropies announced [they] were divesting” from fossil fuel stocks. McKibben was referring to one Rockefeller philanthropy, the Rockefeller Brothers Fund, which announced in September that it had divested from companies involved in coal and tar-sands mining, with a divestment from other stocks related to fossil fuels to follow. The following version has been updated.”

Indeed, only the Rockefeller Brothers Fund and the much smaller Rockefeller Family Fund have announced plans to divest in any capacity.  The Rockefeller Foundation, whose $4 billion in assets dwarfs both in size, is reportedly against divesting.

3. The Rockefeller Brothers Fund confirmed their announcement was a PR stunt

Last year, The ImPact released a case study touting RBF’s “mission-aligned and impact investing strategies.” The ImPact is a non-profit that was co-founded by Justin Rockefeller—who is on the Board of RBF.  Its mission is to “inspire families to make more impact investments more effectively.”

The study, conducted in partnership with RBF itself, details the process the Fund undertook to divest and move its money into ESG investments.  They explained how the divestment announcement was perfectly choreographed to elicit the most influence and press reach.

“One unique tool in the hands of the RBF was the Rockefeller name itself and the origins of the family’s wealth in the fossil fuel industry. The RBF made strategic use of that tool by crafting a public relations campaign around the announcement of its divestment strategy. The public relations strategy aimed to magnify the influence they could have on other families, foundations, and the financial marketplace in general.” (emphasis added)

Not only did they capitalize on the Rockefeller name for attention, they also timed the announcement around the People’s Climate March to make sure media coverage of the event included their divestment decision.

“The RBF planned the announcement of its divestment strategy to coincide with the People’s Climate March in New York City on September 22, 2014. The march took place just two days before Ban Ki Moon, Secretary General of the United Nations gathered, gathered with 120 heads of state to continue negotiations on a global climate agreement. The nature and timing of the RBF’s announcement made it front page news across the globe. The overwhelming media attention it generated succeeded in magnifying the impact of the RBFs divestment decision and helped build momentum in the divest-invest movement.” (emphasis added)

As we’ve been saying all along, divestment is nothing more than a feel-good gesture. RBF knows this, and constructed an entire PR campaign around it.  It’s clear that the ultimate goal around divestment is not to actually impact the environment or the targeted companies, but to stigmatize the industry and wage war through the media.

That’s why most groups and universities agreeing to “divest” fall short of actually selling their fossil fuel investments in any meaningful way.  Most schools tend to follow the “Syracuse Model,” pledging to sell off only direct investments, if they even exist in the first place.  This is all for PR, a concept RBF embraced early.

4. Three Years Later… Rockefeller Brothers Fund Stands Alone

Despite all the fanfare and press coverage, the Rockefeller Brothers Fund hasn’t seemed to convince many others to follow their lead.  The push for divestment at universities has essentially stalled, with recent high-profile rejections at schools like Washington University, St. Louis, Swarthmore (where the campus movement began) and the University of Denver.

None of RBF’s peers have followed suit either.  In fact, most foundations with missions tied to climate or environmental causes have called for other action over empty divestment gestures.  According to that same Nonprofit Chronicles article, which profiled Fund President Stephen Heintz, “the divestment movement doesn’t seem to be gathering momentum in philanthropy. Since the RBF’s big announcement, none of the biggest foundations that focus on climate change – Hewlett, Packard, MacArthur or Bloomberg Philanthropies — has divested.”

So why aren’t other foundations divesting?  Perhaps because it’s costly, difficult and has no measurable impact on the environment or targeted companies.  As much as RBF is using divestment as a means to stigmatize fossil fuels, other foundations are opting for more practical ways to combat climate change.

5. A Lack of Transparency

The RBF set out to divest without suffering decreased returns.  Back in 2015, RBF Trustee Valerie Rockefeller Wayne told the Guardian, “We were not willing to lose any money. Our business is giving away money so we were not willing to take any reduction in returns.”

The ImPact’s case study heralds RBF as an example of successfully implementing “mission-aligned investment strategies without fundamentally changing the return objectives, risk profile, liquidity, or asset allocation of their portfolios.”  They say that a shift toward investing in ESG initiatives and removing exposure to fossil fuels has not in any way decreased returns.  Yet, we have no way of verifying that claim.  Non Profit Chronicles points out that RBF, like most other big foundations, doesn’t disclose investment performance.

What we do know, is that divesting typically has an adverse impact on endowment returns.  According to Prof. Dan Fischel’s research, a divested portfolio could lose 23 percent over a 50-year timeframe.

BOTTOM LINE: The Rockefellers have declared themselves the standard bearer of the divestment movement, but have ironically proven how difficult it is to actually carry out.  Three years later and the Rockefeller Brothers Fund is still invested in fossil fuels, with a long road ahead before its portfolio is truly fossil free.  It’s clear that universities and foundations have resisted calls to divest to avoid such a long and costly process.