Funder Commitment on Climate Change: 2023 update

• We capture key learning and resources from our work and those of others which we disseminate internally. We also regularly share our own learning as well as research and evaluation reports we’ve commissioned about work we support. They include:
  • Mid-strategy review of our support for Nature Friendly Farming
  • Case studies for Climate Confident: Charity investments and net zero and Active Philanthropy’s resources on Climate Funding Strategies
  • ProspectUs’ Philanthropy Podcast on Climate philanthropy
• We also regularly highlight the work of organisations we support on our social media channels and newsletter. For example, we shared:
  • State of Nature Report 2023
  • So, what do we really want from food
  • Just Transition Criteria – a tool for fund managers
  • People’s Plan for Nature
  • Green expectations: engaging people on changing land use for climate and nature
• We host monthly sessions for staff and our Involving Young People Collective to hear from experts and key partners on issues we care about including the nature and climate crises. They include:
  • Surfers Against Sewage on their campaign against sewage pollution and the impact on communities, freshwater and marine habitats.
  • Cambridge Associates on the challenges and opportunities around achieving net zero and the low carbon transition when it comes to finance.
• Together with the Environmental Funders Network, we hosted another year of learning workshops for 15 Environmental Finance and Learning Fund participants. These are philanthropists and foundations that are active or planning to become active in environmental investing, but want to develop their skills, confidence and networks. Our mid-term review of the programme shows promising results – 58% of participants report that they have already increased their environmental investing as a result of their participation, and 75% report increased confidence.
• We circulate invitations we receive to external presentations and events to our staff and trustees. We do the same with key pieces of research on climate change. Reports from the likes of CarbonTracker, CDP, ShareAction have been influential.
• We also held our annual staff day at OrganicLea, a community food and sustainability project. We also have an annual budget for staff development for those who wish to attend more specific courses.

• We are a longstanding environmental funder and Our Natural World is one of three main strategic aims, contributing to five funding priorities: peat, space for nature, freshwater, nature friendly farming, and fishing in tandem with nature. In 2023, our Board of Trustees agreed a two-year extension to our strategy, committing to our current funding priorities to the end of 2027.
• Our total funding towards our goals in Our Natural World as well as work to address climate change totalled £25.9m. This includes all related grant funding, social and impact investments, as well as spending using our Tools budget. In addition to funding in our priorities for Our Natural World (£24m), this includes work that contributes to our priorities in Creative, Confident Communities and our support for infrastructure (£1.9m) – examples include support for Environmental Funders Network and Good Ancestor Movement who are working to leverage private capital to accelerate the just transition to a regenerative economy. We’ve also supported work towards local circular economy models (see below under 'Integrate' for examples). We publish our grants, social and impact investments on 360Giving.
• Together with participants of our collaborative Environmental Finance and Learning Fund, we committed £2.5m in social investment to a range of projects including: supporting a Wildlife Trust to purchase land for rewilding and ecological restoration; a tech platform that makes it easier for eco-agricultural farmers to sell direct to local communities; an early stage venture that enables communities to own and manage woodland; a community in the North West to purchase a farm for regenerative agriculture; and a fund providing small loans to regenerative farmers.
• We launched Blue Spaces – Wales to fund projects that support communities in Wales to improve their local freshwaters. Following an open call for expressions of interest, we offered grants to eight projects to help them develop their ideas.
• We supported the Climate Coalition, a network of over 130 organisations including the National Trust, Oxfam and the Women’s Institute to mobilise their members and demand more ambitious action on Climate Change. We have also funded Sizzle, who have convened a movement of influential organisations committed to replacing peat with sustainable alternatives and demonstrating the circular economy in action.

• We are committed to addressing the causes and impacts of climate change and to tackling injustice and inequality. They underpin our strategy and everything we do as an organisation.
• We know that environmental justice and social justice go hand in hand, and to make progress, we need to address the lack of diversity in the environment sector. As part of this, we are proactively finding and supporting environment organisations led by, and for, communities experiencing racial inequity, as well as organisations whose work links both environmental and sustainability issues with those from economically and culturally marginalised communities. For example, in 2023, we supported:
  • All the Elements Outdoors, who work with leaders improving diversity across conservation, environment, sustainability, and sport
  • Radical Ecology, who work across culture, research and policy to advance environmental justice
  • Black Girls Hike, who provide a safe space for Black women to explore the outdoors and connect with nature
  • Granville Community Kitchen, a community-led organisation aiming to reimagine the food system with a model rooted in agroecology, food sovereignty and the right to good and nutritious food.
• We continue to support initiatives to improve the diversity of the environment sector:
  • We commissioned research to map work on diversity in the environment sector to help inform our support. We will share a report with a summary of the findings and our next steps in due course.
  • We worked with Ocean & Coastal Futures to improve opportunities to progress diversity, equity and inclusion in the marine sector, which included offering a bursary for young people currently underrepresented in the marine sector to attend the Coastal Futures Conference.
• As well as being a signatory and funder of the RACE Report, we ask all environment and conservation organisations awarded funding from Esmée to engage with the initiative. Organisations signed up to the RACE Report are asked to submit data on the race and ethnicity of their staff as well as report on actions they are taking to progress diversity, equity and inclusion within their organisation. We also signpost resources to organisations we fund like the Route map towards greater ethnic diversity, which was developed by Full Colour in partnership with organisations including Wildlife and Countryside Link. We are also proud to support the Ethnic Minority Environment Network, convened by CEMVO.
• A key focus of our work in Creative, Confident Communities and our Social Investment is on local circular economy models, where communities are leading change to address the climate and nature crises by reducing waste and pollution and extending the life of the products and resources in use for as long as possible. Work we supported in 2023 includes:
  • Action on Empty Homes to empower communities to drive their transition to a more equitable lower carbon future.
  • Middlesbrough Environment City, who are creating a blueprint for long-term food system change, making sustainable and healthy food readily accessible.
  • The Community Farm, a community-owned farm who take a whole-farm approach where food, farming, wildlife, and community are fully integrated and interdependent.
  • Kindred LCR to evidence the social and economic impact of socially trading organisations and build support for pioneering models for local economies.
  • Greater Manchester Community Renewables, a community-owned energy organisation working to install solar panels on schools and community buildings.

• We have made a commitment that our investment portfolio will be net zero in terms of carbon emissions by 2040 at the latest and we continue work to make this happen. Our approach to stewarding our investments through the transition is being increasingly influenced by the concept of universal ownership – that long-term investors have a vested interest in the health of the economy as a whole rather than only being focused on the holdings within their own portfolio. A 2022 paper by the UK’s Institute and Faculty for Actuaries report in partnership with the University of Exeter stated that there was “…a compelling logic for net zero becoming part of fiduciary duty, as if we do not mitigate climate change, it will be exceptionally challenging to provide financial returns.”
• During 2023 we re-wrote our investment policy statement (IPS) to better reflect the fact that we want to take sustainability considerations into account in every investment decision. We specify funds that we are looking to avoid, namely:
  • Those with high exposure to long-lived fossil fuel production, especially exploration for new reserves, unless there is a truly credible path to net zero.
  • Funds with a significant proportion of holdings that are heavy CO2 emitters with inadequate net zero transition plans and when there is no credible and robust engagement process likely to improve those transition plans.
  • Funds with significant holdings contributing to biodiversity loss, again where there is no credible and robust engagement process.
  • Funds with holdings classified as breaches of the UN Global Compact. (The Compact is a series of sustainable and social responsible policies covering human rights, labour, anti-corruption and the environment.)

We also now highlight in our IPS investment areas when there is likely to be good alignment with our strategy. These include renewable energy, biodiversity preservation and restoration, decarbonisation, social justice and thematic funds focusing on water, food and communities.

• Our immediate goals and approach on net zero vary slightly for the different parts of our investment portfolio. The majority of our portfolio is in liquid funds investing in global stock markets and we continue to increase our exposure to climate solutions to a level which is 25% higher than that of the broad index. Our portfolio emissions remain well below the global index but the focus has been on gathering reference points for engagement with our managers on real world progress on net zero. The importance of science-based targets (SBTs) for aligning with the Paris agreement is very clear and we are now tracking data on SBT adoption across public equity funds within our portfolio. We have introduced a target that, by 2030, 90% of holdings in this area will either have SBTs or substantial engagement to that end.
• Within our private investments, which represent around a third of our portfolio, we continue to add investments which will make direct contributions to the energy transition. For example, funds focusing on UK offshore wind, geothermal projects and onshore wind in Europe and solar projects in North America. A number of these investments have strong cash yields and returns that are inflation-linked through long term contracts with governments, utilities or other high investment grade counterparties. Alongside funds working to scale climate solution technologies, we are adding new capital to companies looking to commercialise disruptive technology in areas such as agriculture, food, transportation, buildings and ecosystem restoration.
• We have a smaller allocation to hedge funds and have continued to make changes to ensure that we are invested with managers who have good transparency and are taking ESG (Environmental, Social and Governance) factors into account in the way they manage money.
• We have a £70m allocation for funds looking to achieve enhanced ESG impact as well as financial return. This allocation is for funds that do not naturally fit within our mainstream investments due to size, focus or risk profile. Examples include a fund looking to use litigation tools to achieve measurable social and environmental impact.
• As well as aligning the portfolio with a net zero target, we want to use our position as an investor to contribute towards real world impact. We are looking at how best to do this through our voting and engagement practices. We are members of a number of collaborative engagements with other investors who are looking to change company behaviour in areas connected to climate change. Examples include:
  • An investor initiative managed by FAIRR (Farm Animal Investment Risk & Return) focusing on engagement with some of the world’s largest meat producers to improve environmental practices, particularly in relation to biodiversity loss.
  • A collaborative initiative managed by ShareAction engaging some of Europe’s largest banks to stop financing new oil and gas fields.
• Alongside our main portfolio of investments, we continue to grow our social investment fund and our newly launched impact investment fund, both managed by our own internal team. We further developed our social investment strategy, identifying opportunities social investment can support our mission. Our social investment plans for Our Natural World include evolving our Land Purchase Facility; and supporting early-stage, high-integrity nature finance and mission-driven environmental ventures. A key focus for our impact investment allocation is on solutions that directly address climate change, covering several themes including sustainable food, circular economic models, and decarbonisation. Recent additions to our impact fund include a manager focusing on mid-sized, sustainable, businesses in the UK and another focused on climate technologies.

• During 2023, following the completion of a review of our office needs going forward we identified we could operate to our business needs with around a third less space. We therefore identified a refurbished building close to our existing office with good environmental performance and have subsequently moved there, reducing our office space by c. 34%. We took all existing furniture (desks, chairs, tables etc) to our new office, and recycled all excess furniture. We tried to minimise any ‘new’ items purchased. We also focused on improved cycling facilities for staff/visitors.
• We are undertaking the second carbon audit of our operations (the first was in 2020) during the first quarter of 2024 and we hope to have the findings, which we will share, by March.
• All our internal meetings are now conducted using electronic papers and file notes and the volume of any outgoing post from our premises is now minimal.
• Where we host lunches at our offices for any reason, the food is vegetarian and vegan by default.

• We are fortunate to have significant resources in comparison to a number of other UK charities and therefore the ability to devote time to sharing our learning with others. We produce periodic insights and learning reports on different areas of our operations and publish all our funding data on 360Giving.
• We take the view that sharing our learning with others so they can respond to the challenges of climate change can be impactful work in itself and our staff are encouraged to do this with peers and industry groups such as the Association of Charitable Foundations.