To sharply slow global warming, it is estimated that 3-5 trillion of capital spending is required per year for 20+ years, or over $80 trillion. That money will come from many places but the leading edge must come from wealthy families who control most of global wealth, as policy solutions on climate from the US and most governments are still sorely lacking. There are 2,700 billionaires on the planet who hold over $13 trillion in assets and the top 1% of Americans hold over $40 trillion.
Even today’s prominent climate investors and philanthropists could be doing a lot more. While many have signed the “Giving Pledge” to donate more than half their fortunes before they die, that means half their multi-billion-dollar fortunes are still left over. Of the money they have pledged, only a modest fraction has been deployed into climate solutions or other causes. Bill Gates has given $50 billion to his foundation but he’s still worth $130 billion – and his foundation only gives away around $5 billion a year for poverty, education, health and climate. Warren Buffet is worth $115 billion, and he pledged his money to the Gates Foundation. The investment assets the Gates foundation holds often appreciate by more than what it distributes in any year.
Jeff Bezos made a $10 billion pledge to invest in climate initiatives but he’s worth $170 billion and his Amazon stock usually goes up by more than $10 billion a year. He also spends billions on his space program, a half billion on personal real estate and he's building a climate unfriendly $500 million super yacht. The guy has quite the carbon footprint. His ex-wife MacKenzie Scott is doing a lot better: she’s given away $10 billion of the $50 billion she ended up with in the divorce. Mike Bloomberg is worth $70 billion and has given $13 billion. Mark Zuckerberg is worth over $100 billion, and he’s only given $3 billion to a personal foundation.
We admire entrepreneurs who have amassed fortunes by building great companies. Their hard work and ingenuity bring prosperity to our country. Having built their fortunes, most just want to keep and grow their wealth even though they only need so much for houses, boats, and planes. Leaving their kids tens of millions, much less billions, isn’t such a great idea.
To avoid taxes, wealthy Americans make big contributions to Donor Advised Funds (DAFs) and set up personal charitable foundations. These funds mostly get invested in stocks and bonds (that pay fees to their investment managers) and mostly lay idle till the donor dies. When the wealthy do make major gifts, they often go to religious non-profits, local hospitals, or “ego” gifts to their alma mater where they get a building named for them.
Adding to the problem is the conflict of interest with many wealth managers and their clients on philanthropy. Wealth managers want to keep their clients’ wealth invested in financial assets where they earn fees. Trust and estates lawyers don’t want to initiate conversations about philanthropy for fear of making clients feel guilty about not giving away more. The lawyers focus on helping clients pass wealth to their children with the least amount of taxes to be paid.
We will continue to write about climate investing options in future issues of TCC. These include making pure grants to companies and non-profit advocacy organizations or to invest for profit in speculative start-ups or other climate investment products. That’s a big improvement to the wealthy just leaving their money on their personal balance sheets, to be spent years or decades in the future by other people. By investing NOW, wealthy families can help save the planet, which is the best legacy they can leave their children and grandchildren.
