A world fit for life: A guide for changemakers and philanthropists on how to tackle the climate crisis
Introduction
“All philanthropy is meaningless unless we have a world fit for living in” Anonymous philanthropist
Humanity has long taken the natural world for granted, benefitting from the plentiful resources that have enabled us to grow and excel unlike any other lifeform on this planet. Now, the evidence is clear and resounding: we are not apart from the natural world, but part of its delicate ecosystem.
We now find ourselves at a crossroads, one that presents us with a tremendous test. We can either continue on our current trajectory – one that may well lead to the end of humankind – or we can alter it to build a society in harmony with the natural world.
At the World Economic Forum 2023, Director of the Potsdam Institute for Climate Impact Research, Johan Rockstrom, gave a stark warning “scientifically this is not a climate crisis. We are now facing something deeper. Mass extinction… this is a planetary crisis”.
Scientists like Professor Rockstrom, world leaders and non-governmental organisations across the globe have declared climate change and biodiversity loss as the single biggest threat facing humanity. Yet in spite of the overwhelming evidence that humanity is unequivocally responsible1 , combatting global warming and its impacts is continuing to receive woefully inadequate investment.
This includes of our philanthropic attention, with just 2%2 of global philanthropy being dedicated towards it. In Asia, the region most vulnerable to the adverse consequences of climate change, that figure is less than 1%3 . However, this landscape is changing rapidly and ever more philanthropists are addressing the asymmetry in their philanthropic portfolios or asking how they can do more. We are seeing this amongst our clients and are helping them transition towards a more balanced philanthropic approach, which assigns a more appropriate weight to climate issues.
The impacts of global warming
The impacts of global warming are widespread, interconnected and intensifying at a rapid rate. Collectively they create what is known as climate change. The figure below illustrates some of the key areas where this will be seen and the interlinkages between them (links not exhaustive).
A hotter world
The past eight years have shown to be the warmest on record globally, fuelled by ever-rising greenhouse gas concentrations, according to international temperature datasets consolidated by the World Meteorological Organization4 . Nearly all land areas have seen an increase in the number of heatwaves over the past 70 years5 . A hotter world in turn has a knock on effect leading to the subsequent impacts.
A dying, warming, rising ocean
Our oceans are becoming warmer, at a rate that has been increasing over the past two decades, and more acidic, leading to devastating habitat changes for marine life. In addition, as they become hotter, their volume increases (water expands as it gets warmer), which in conjunction with melting ice sheets will dramatically impact coastal and island communities.
More extreme weather events
Global warming is driving more extreme weather events than at any time in our existence. Floods, storms, droughts, wildfires have increased fivefold over the past 50 years6 . As temperatures rise, more water evaporates, causing more frequent and more intense droughts – but also more extreme rainfall, exacerbating flooding. In parallel, the combination of more frequent heatwaves and droughts intensifies the impact of forest fires.
Famines
The agricultural yields of soy, maize, rice and wheat – which comprise 60% of the calories produced globally today – are all projected to decrease as a result of rising temperatures7 . This will be further exacerbated by increased water stress and extreme weather events. Combined with marine biodiversity loss, this will lead to significant food shortages and famines.
Health impacts
Climate change, together with other natural and human-made health factors, is and will continue to influence human health and disease in numerous ways. Many existing health threats will intensify and new threats will emerge, including an increasing prevalence of vector-borne diseases, a rise in waterborne diseases, growing heat stress, a decrease in air quality impacting respiratory issues and a decline in access to services as a result of natural disasters8 .
Displacement
Global warming and climate change will significantly impact migration, with extreme weather events, famines, armed conflict and health impacts pushing people out of regions that will become increasingly unhabitable. Since 2010 weather-related events have on average displaced over 23 million people p.a.9 , many from countries that are most vulnerable. Some estimates anticipate that up to 1.2 billion10 people could be displaced as a result of natural disasters alone by 2050.
The goal: 1.5°C by end of the century
In spite of these worrying facts, there is hope and scientists globally agree that the worst can be avoided if we limit global warming to 1.5C by the end of the century. Failing to do so, we run the risks of triggering so-called “climate tipping points”, after which it becomes impossible to return to our original climate system, one which has allowed life to thrive for millenia. Climate tipping points can be described as elements of the Earth system where relatively minor increases in global temperature can kick off reinforcing loops that ‘tip’ a system into a significantly different state — in many instances, fuelling more warming.
“The challenge of surviving the next 50 years is a planet-wide existential crisis; we need to work together urgently. What we do in the next five to 10 years will determine humanity’s fate.” Sir David King, Former Chief Scientific Advisor to the UK Government & Chairman ofthe Centre for Climate Repair at Cambridge
One commonly used example is the “albedo” effect – lighter surfaces reflect sunlight and thereby have a cooling effect compared to darker surfaces. A prime example would be the Greenland and Antarctica ice sheets. These “white” areas of our planet are slowly disappearing, being replaced by the darker surfaces of the land or sea beneath, which absorb the Sun’s heat rather than reflecting it, further increasing the speed of their disappearance. In fact, one recent study11 suggests that four tipping points become likely at 1.5°C of warming. Among those, the Greenland ice sheet and the West Antarctic ice sheet collapse, which could lead to a sea level rise of several feet by the end of the century. So, are we on track to limiting global warming to 1.5°C by the end of the century? Unfortunately not. We have currently warmed the planet 1.2°C above pre-industrial levels and are on trajectories of 2.4-2.7°C by end of the century12. This warming is directly attributable to human activities. How fast we reach net zero emissions will determine whether we will limit global warming to 1.5°C or higher – and every single digit counts in restricting its impacts and preserving a world fit for life.
Four ways philanthropists can act
So how can philanthropists address these issues? It can often seem daunting and too large a task to tackle, however as this issue is so intrinsically linked to every aspect of our lives, each action we take can have a positive impact. To start, it helps to look at the approaches one could take across two key areas — mitigation and adaptation.
Mindful of these two categories of action, the following are four key areas philanthropists can consider when looking at how they can play an impactful role tackling climate change.
1. Adopt a climate lens to your existing philanthropy
Climate change will impact virtually everything we care about, across most of the 17 UN Sustainable Development Goals13 (see figure 3). Whether you fund the arts or social justice, are active in the Nordics or Sub-Saharan Africa, on land or in the sea, climate change threatens to undermine your work and compound the issues you are involved with. For example, we already know climate change disproportionally affects the most vulnerable segments of our population, exacerbating existing vulnerabilities and creating new ones. This is due to what is referred to as multidimensional inequality, whereby disadvantaged groups have simultaneously greater exposure to climate hazards, greater susceptibility to damages caused by climate hazards, and less ability to cope with and recover from the damages caused by them14. Climate change therefore poses a significant risk to philanthropists working on issues related to marginalised populations such as health, gender, education, justice etc. Adopting a climate lens to your existing philanthropy essentially involves exploring the link between your field of work and climate change.
Health as a thematic area is one of the greatest recipients of philanthropic attention15 and when we look at this focal area with a climate lens, we can see the potential for disruption. For example, global warming and climate change heightens food insecurity, impacts health from extreme heat, increases the risk of infectious disease outbreaks, and lifethreatening extreme weather events16. Most countries around the world, many of which already have an inadequate healthcare system, are hence left vulnerable to the worsened health outcomes climate change will bring about. For a philanthropist trying to tackle health problems around the world, limiting global warming to 1.5°C should therefore be a priority. So concretely, how should a philanthropist adopt a climate lens? (see figure 4).
2. Allocate a percentage of your annual grant capital to climate initiatives
If your grant-making to date has not been focused directly on areas related to climate, allocate a percentage of your annual budget towards this space, in areas such as the reduction of green house gases, the increasing of carbon sinks, or adaptation. In particular, philanthropy can be extremely important for initiatives that may not succeed in attracting private capital, such as land-, forest- and agriculture-related projects or adaptation solutions.
1. Reducing carbon sources: decarbonising the economic sectors with the highest footprint
Reducing carbon sources is increasingly being invested in by private investors and governments alike in the face of the looming financial costs of climate change – but funding is still crucially lacking. This is particularly true for sectors for which decarbonising may reduce profitability in the short term. One example is agriculture, forest and land related initiatives, which receive only a small fraction of climate mitigation funding, despite contributing around a quarter of emissions17. However, initiatives do exist, such as transition from conventional to regenerative agriculture, a practice that improves soil health and reduces carbon emissions, through the use of a range of practices that include crop rotation, diversification of plant species and reducing use of a pesticides and fertilisers18. Philanthropy can be a crucial lever of action to enable farmers to switch to regenerative agriculture practices (which in the long run can lead to increased yields and resilience) – given that the first few years are often financially prohibitive19. In doing so, philanthropic capital can help catalyse the decarbonisation of one of the major drivers of climate change20. Other areas that are typically underinvested are those that represent co-benefits for climate change but may not be typically looked at by climate funders – or that may not yield a financial return, but rather a societal one. A philanthropist could for example focus their efforts on access to high-quality education and voluntary family planning for women. A prediction model by the climate-focused non-profit Project Drawdown estimates that increased uptake of family planning and rising education levels amongst women will reduce population growth and therefore be reflected on future demand for energy, building space, food waste, and transportation. If this model is correct, such efforts could lead to a reduction of up to 68.9 gigatons of CO2-equivalent between 2020 and 205021. A final example of how philanthropists can play a role is through funding fundamental research on climate change mitigation technologies. Helping both to find new, but also asses existing, technologies that could play a powerful role.
2. Increasing carbon sinks: protecting and restoring the environment, both on land and under water
Trees, and the soils that permit their growth, are our planet’s natural air purifiers – pulling carbon directly out of the atmosphere. Beyond rainforests, other types of land also have important potential, such as peatlands. These are the largest natural terrestrial carbon stores whilst simultaneously providing important ecosystem services like flood prevention and safe drinking water22. One area of action could be the empowerment of indigenous communities. Indigenous land encompasses about 22% of the world’s surface and overlaps with areas that hold 80% of Earth’s biodiversity23. However despite being caretakers for so much of our global biodiversity, they have legal ownership of only 10% of their ancestral territories24. Empowering them to take legal ownership of all their territories would further enable them to protect these areas, and likely yield significant climate benefits, not least by preventing deforestation and enabling the regeneration of their territories. In parallel, our oceans absorb about one-third of the CO2 that humans create25, and generate about half of the oxygen that we breathe26. In fact, several oceanic organisms have a higher carbon capture potential than forests. For example, it has been estimated that mangroves and coastal wetlands store carbon about 10 times faster than mature rainforests – and they store three to five times as much carbon on comparable areas27. Mangroves have several other co-benefits, notably by helping protect lands from coastal storms, which are likely to be further exacerbated by climate change28. In addition, they provide large benefits to oceanic biodiversity, in particular through their synergies with seagrasses and coral reefs, together harbouring exceptional marine biodiversity within relatively small areas. Supporting organisations (both for and not-for-profit) working to restore and protect these ecosystems can play a vital role in combatting climate change – and simultaneously yield several mutual gains, both social and environmental.
3. Adaptation: Empowering new and old innovations to reduce the impacts of climate change
Even if we manage to limit global warming to 1.5°C, some climate impacts will nonetheless be felt and adaptation is an area that is crucially lacking funding29. This is in large part because many of these initiatives do not yield a financial return, especially over a short-term horizon. However, it is crucial we invest in them to mitigate the financial costs of climate change – all the more so when these will be disproportionally imposed on already vulnerable communities.
For example, Indigenous people have been known to find innovative solutions to deal with climate impacts in ways that the rest of society could learn from. These communities play a vital role in developing climate resilience projects and are among the first to feel the consequences of climate change, in part due to their close relationship with nature30.
In Bangladesh, some indigenous communities created floating vegetable gardens, thereby making them more resilient to flooding31. In Mesoamerica, indigenous communities have started using advanced technologies to protect the natural resources they so heavily depend on. For example, the Achuar Nation of Ecuador have started using geospatial tools to stop land encroachment and illegal logging32. Philanthropic funding could go a long way in empowering these communities and giving a platform for their ideas for broader adoption. At the same time, new innovations and approaches are being developed by inspirational social entrepreneurs, whose discoveries and solutions benefit immensely from philanthropic seed funding. One such approach is the so-called “sponge city”, which is better suited to absorb water during periods of heavy rainfall and to release moisture during droughts – thanks to increased greenery, restored wetlands and storage ponds. With the probability of such extreme weather events increasing with climate change, cities around the world are considering this approach to better deal with them. While cities in developed countries often already have the necessary funding to finance such projects, that may not be the case in developing countries or in marginalised communities in the developed world. There, philanthropy could go a long way to advance such crucial initiatives. To tackle climate change, we must work on all aspects of climate mitigation – both reducing carbon sources and supporting carbon sinks – and adaptation. The framework by Project Drawdown illustrates the areas of our world that philanthropists can target relative to their potential for emissions reductions (see figure 6).
“If working apart we are a force powerful enough to destabilise our planet, working together we are powerful enough to save it.” Sir David Attenborough at COP26
3. Fund via a collaborative
The causes of climate change are widespread and complex and its impact on our global communities and planet are and will be profound. Individuals, communities, companies and governments must work together towards rapidly reducing greenhouse gas emissions if we are to have any hope of avoiding worst outcome scenarios.
Because of this, a number of funder collaboratives, giving circles and investment pools have sprung up across the globe to make it easier for philanthropists to engage and amplify their impact; entities such as the Environmental Funders Network, The India Climate Collaborative, Philanthropy for Climate, the European Philanthropy Coalition for Climate, the China Environmental Grantmakers and many more are enabling funders to amplify their voice and impact.
4. Leverage investment capital, business capital and social capital
Every philanthropist has at their disposal a suite of resources they can mobilise in addition to their philanthropic capital to effect the change they wish to see in the world:
Investment Capital
Research suggests that a cumulative investment of USD15 trillion (roughly the equivalent of China’s GDP in 2020) in alternative technologies between now and 2050 is required in order to meet the Paris Agreement goals33. In 2022, global philanthropic capital was estimated around USD2 trillion34, far short of what is needed.
In the same year, global financial wealth reached an all-time high of USD250 trillion35. Given the size of global philanthropic capital vs the size of investment capital, and given the extent of the need, these asset groups need to work better together. Historically, this has not been the case as investing and giving were two distinct activities, often managed independently with little or no interaction between them.
Today, investment and philanthropic capital are becoming increasingly aligned. Instead of allocating only 1–5% of capital per year in pursuit of their impact goals through philanthropy, ever more clients are leveraging the entirety of their assets in pursuit of a more sustainable future.
Philanthropy could have a huge role to play in helping fund and scale innovation that is too early and too risky for conventional financial markets. One could imagine a philanthropist funding an early-stage climate solution using charitable grants or social financing. Once the concept is proven successful and scalable, it will be in a stronger position to secure other, often larger forms of capital such as from angel investors, venture capitalists, actors in private markets, all the way until the positive impact company reaches public markets.
In financing these early stage concepts, philanthropists could help scale climate solutions by making them financially viable and thereby increase their impact exponentially. When it comes to financial wealth, the Wealth Continuum helps us to visualise the ways that financial resources can be mobilised, from ‘investing’ on the left, to ‘giving’ on the right (see figure 8).
That is not to say philanthropists should not fund solutions that never become investable, such as certain climate adaptation or nature conservation initiatives. A strategy could involve doing both, to ensure one's capital benefits the world by bringing crucial solutions to financial sustainability but also by financing the most essential needs, ones that may never become a profitable investment from a financial point of view.
A climate-focused philanthropist could magnify their impact by broadening how they think about “donations”. Diversification could include taking equity stakes in for profit social enterprises, technical capacity building, or taking a first-loss investment tranche to de-risk innovative new projects, making them more attractive to more traditional philanthropists and indeed other more financiallymotivated sources of capital.
Social Capital
In addition to their investments and philanthropic capital, philanthropists are often in the unique position to leverage their social and political capital, which in some instances arguably can yield greater results through the mobilisation of the many. Simply put, this form of capital is essentially one’s voice, one’s standing in society and ability to engage decision-makers, one's network and those in positions of influence to make changes to a specific system. As the African proverb notes “If you want to go fast, go alone. If you want to go far, go together”. A great example of this would be Yvon Chouinard, the founder of outdoor apparel maker Patagonia who transferred ownership of the company, valued at about USD 3 billion, to a specially designed trust and a non-profit organisation that would focus on fighting climate change and biodiversity loss. That alone was a global first, but in addition to that he is using his voice and this action as a tool to inspire others and lead by example.
Business Capital
The last form of capital that many philanthropists have at their disposal are the businesses they own and run. Companies are at the very epicentre of modern society and influence where we are going. Industrialisation and globalisation have played an outsized role in building the world we live in today and in turn the destruction of our natural world. However because of this, these companies have the power to create real systemic change, ensuring that their carbon footprints and activities are ‘the change you want to see in the world’ which can reverberate across industries and help further influence our societies, positively.
Conclusion
Without question, climate change is one of the greatest challenges humanity has ever faced. Though daunting, there is reason for hope – if human action has created this planetary crisis, so too can it be the solution. Whilst the constant flux of news around extreme weather events may overshadow any progress made, much has been achieved in the last years. But so much more can be done if we continue to put our minds, resources, vision and political will towards building a more sustainable world. Reasons for Hope
1. Since 2018, renewable energy has accounted for one-third of global electricity capacity36- and in 2020 82% of new global generating capacity came from renewables37. From 2012 to 2021, renewable energy capacity grew by 112%.
2.In 2020, investments in green bonds reached a new global record of USD 270 billion38.
3.In 2022, the European Union announced a deal to impose a CO2 tariff on imports of polluting goods such as steel and cement, known as the "Carbon Border Adjustment Mechanism" (CBAM), which would enable more industries to be brought under its carbon cap & trade scheme.
4.In 2022, the government of France signed into law a proposal by France’s Citizens’ Convention on Climate to ban flights between cities that are linked by a train journey of less than two and a half hours.
5.In 2020, the global electric car (EV) market exceeded ten million – double its number in 201839.
6.New data shows that the Earth’s ozone layer is on track to recover completely within four decades, as ozone-depleting chemicals are phased out across the world40. This is the direct result of the 1987 Montreal Protocol and suggests what could be achieved with the Paris Agreement.
7. In February 2023, Cape Verde signed a deal with former colonial power Portugal. Some EUR 140 million of debt owed to Lisbon is to be gradually canceled - on the condition that the entire amount is invested in a climate fund for the island nation. Some EUR 12 million are expected to flow into the climate fund by 2025.
8.In 2021, during the COP26 on climate change, 105 countries signed the Global Methane Pledge, committing to reducing global methane emissions by 30% by 2030. Tackling methane emissions is crucial in the fight against climate change, because they are over 80x more potent than CO2 over 20 years and could tip us into global warming exceeding 1.5°C.
9. At the COP 15 conference on biodiversity in Canada in 2022, member nations agreed a landmark deal to protect a third of the world's biodiversity by 2030, which will provide a tremendous support for natural carbon sinks.
So although the situation is stark, if governments, investors, business owners, shareholders, individuals and philanthropists work collectively to mobilise their resources and make the climate challenge a core part of their vision for the future, then we may well still keep global warming to 1.5°C. More work needs to be done and philanthropists have a large role to play in achieving a low-carbon future.
Pictets approach to climate change
How Pictet addresses climate change For Pictet, climate change represents both an urgent challenge and an opportunity to build a more sustainable economy. This is why our investment teams have articulated a common investment philosophy on climate and developed a set of actionable Climate Investment Principles. These convictions underpin our commitments to the Net Zero Asset Managers and Science-Based Targets initiatives.
1. Climate change will have a material impact on asset prices and investment returns.
2.The investment decisions taken today will have a strong bearing on how climate change and its consequences ultimately unfold.
3. No economic system will be immune to the impacts of severe climate change, therefore such a risk cannot be easily diversified or hedged. Given the magnitude of our financed emissions through our investments, we must help accelerate the transition of the global economy towards net zero emissions in line with 1.5°C. We also have a direct responsibility to reduce our operational footprint. This is why we have set the following targets, independently validated by the Science-Based Targets initiative (see figure 9 on the next page).
How we help our clients to do the same
We have been a trusted partner to those seeking to effect positive change with their wealth for generations, going beyond simply managing their assets to helping them achieve their goals.
1. Investment Capital: Since our first sustainable strategy was launched two decades ago, this methodology has become the norm. We help clients mission align their investments, from ESG focused to positive impact strategies.
2. Philanthropic Capital: Our in-house team of philanthropy professionals are driven by a mission to inspire, engage and educate changemakers, connecting the dots and leveraging networks to help them drive long term, sustainable change. We work with our clients no matter whether they are in their philanthropic journey, whether just starting out or further down the path.
To discuss this paper in the context of your own work, please contact your Relationship Manager or your Pictet Representative.
Authors
Christoph Courth
Global Head of Philanthropy Services
Pictet Wealth Management
Marie Neveu
Climate Analyst
Pictet Group
Contributors
Kelly Ayliffe
Risk Manager
Pictet Asset Management
Stephen Freedman
Head of Research and Sustainability, Thematic Equities
Pictet Asset Management
Anthony GAO Head of Philanthropy Services, Asia
Pictet Wealth Management
Melanie LARKIN
Senior ESG Development Manager
Pictet Group
Rosa Sangiorgio
Head of ESG
Pictet Wealth Management
Marie-Laure SCHAUFELBERGER
Head of Group ESG & Stewardship
Pictet Group
Alisson Vuadens
Junior Business Manager
Pictet Wealth Management