The Hewlett Foundation and fossil fuels

The William and Flora Hewlett Foundation, one of the US's biggest and most influential foundations, has taken a small step to distance itself from financing fossil fuels.The Menlo Park-based foundation, a leading funder of programs to avoid the worst impacts of climate change, has amended its social investment policy to say that it will

refrain from future investments in private partnerships primarily involved in oil and gas drilling.

It will do so, the policy says, "to reflect the Foundation’s extraordinary commitment to mitigating climate change."This is significant, for a couple of reasons.First, with $9 billion in assets, Hewlett is the US's 5th biggest foundation, measured by asset size, according to the Foundation Center. While Hewlett's step falls far short of divestment, Hewlett becomes the biggest and most influential foundation to publicly exclude some fossil-fuel investments from its investment portfolio. For context: The Rockefeller Brothers Fund, which got a lot of attention when it decided to divest fossil fuels last year, has about $900 million in assets, placing it 98th in the rankings. Most  other foundations that have agreed to divest are much smaller.Second, Hewlett is by its own account "is not attracted to either positive or negative screening," explaining that "the reasons that a company might be positively or negatively screened are highly subjective and are subject to significant differences of opinion among reasonable observers." Until this year, it made only one exception, for tobacco which, it said,"even if used as intended, has deleterious consequences for both individuals and society." Of course, the same could be said about fossil fuels although, unlike tobacco, coal, oil and gas deliver economic benefits that, some argue, offset their negative impact.One can only imagine the debate inside Hewlett that led to this decision. The foundation's president, Larry Kramer, has been outspoken about the climate threat; he called "the defining issue of our day" in an essay for the Chronicle of Philanthropy. Here's how Hewlett describes the work of nonprofits it funds in its climate program, with emphasis added:

Our grantees’ efforts to reduce the development and use of fossil fuels are global, particularly with regard to high-carbon fuels. Their initiatives focus on ensuring that energy policies reduce the extraction and development of high-carbon fuels such as coal and tar sands in order to slow global warming and protect human health and the environment. Reducing the use of coal is essential to tackling climate change. Tar sands, a semisolid form of petroleum extracted from sand and rock, is a particularly inefficient fuel, generating up to a third more of greenhouse gas per barrel of final product than conventional oil does in a life-cycle assessment.

Nevertheless, Hewlett almost surely owns companies that mine and burn coal, and extract oil from the tar sands through its investment in index funds, including the S&P500 and Euro Stoxx 50. Its most recent Form 990-PF says the foundations owns shares of Petrobras, a Brazilian oil and gas company, and Anglo American, one of the world's largest mining company, which describes itself as a global leader in coal supply. It also owns bonds issued by Petrobras and by the Norwegian fossil fuel company Statoil, and appears to invest in oil and gas futures. Until the company is more open, it's hard to know whether oil and gas partnerships accounting for 1% or 0.1% or 0.0001% of its holdings.I emailed Ana Marshall, Hewlett's vice president and chief investment officer, to try to learn more. She referred me to the communications staff, who referred me to the social investment policy. (This extended discussion on the Hewlett website is outdated, and doesn't reflect the 2015 exclusion of oil and gas partnerships.) Whether Hewlett's policy is settled, or whether the debate is ongoing--well, that's anybody's guess.The question is, which big foundation will be next to take up the divestment question? I wonder about Bloomberg Philanthropies, which has supported the Sierra Club's Beyond Coal campaign, as well as the climate work of the Natural Resources Defense Council and the Environmental Defense Fund (some of which supports "cleaner" natural gas.) I've emailed Bloomberg, but haven't heard back yet.Divestment, remember, is more than a symbolic issue for foundations, as  I wrote in a earlier post. (See Why Won't Foundations Divest Fossil Fuels?) The DivestInvest Philanthropy campaign asks foundations not just to sell off their coal, oil and gas holdings, but also to invest in climate solutions, such as clean energy and energy-efficiency projects.That said, symbols matter. Staffers at Hewlett work in California's first LEED-certified Gold building, "a building that reflects our values," says Mary Jaffe, the daughter of William and Flora Hewlett and a lifelong environmentalist.A green building. Green grant-making. Can greener investing be far behind?