At the UN climate summit in New York in September, key nations took steps forward in relation to global warming. Many major corporations went well beyond greenwash. People took to the streets in hundreds of thousands and climate change returned to the front pages ahead of the all-important December 2015 climate summit in Paris.
The philanthropic community, too, played a prominent role in New York, as Alliance readers will know. Dozens of foundations announced divestments from fossil fuels – the source of most emissions – bringing the cumulative total withdrawn from coal, oil and gas to more than $50 billion. Moreover, philanthropists have organized themselves into a ‘divest–invest’ campaign, whereby money withdrawn from fossil-fuel investment will be reinvested in climate-change solutions. So where does this money go?
There should be some attractive investment options. A recent estimate from UBS, the world’s biggest private bank, is that, as early as 2020, an ‘energy-trio’ purchase of solar roof plus electric vehicle plus domestic battery will pay itself back within six to eight years while giving a 7 per cent return on investment pre-tax. Such developments, UBS says, will change the face of the energy industry. Among others, the utility business model will wither and the oil-and-gas model will come under even more pressure from investors as capital expenditure requirements soar.
Out of this emerging revolution can come another pool of new capital, to augment the (hopefully) snowballing capital made available by the divest–invest movement. I am seeking to enlist the help of foundations in what I think of as the ‘5 per cent club’, soon to be launched. The idea is simple: a club of companies donating 5 per cent of their profits to the battle against climate change and for development, in perpetuity.
Backers of the idea could feasibly start by investing in companies benefiting from the divest–invest trend. Companies riding the solar-plus-storage revolution and other elements of the carbon-to-clean-energy transition can (indeed must) grow from minnows worth millions to giants worth billions. Success in this venture would provide a whole new class of capital for social good.
Solarcentury, which I founded in 1999, illustrates the potential of this idea. Today it is a healthy, middleweight, international downstream solar company, heading for more than $200 million turnover this year, aiming to ride the fast-emerging global solar revolution to billion-dollar scale as quickly as possible. Since 2006, 5 per cent of our annual profits have gone to a charity, SolarAid, dedicated to development and climate change abatement.
SolarAid’s current mission is to play the lead role in replacing kerosene lighting with solar lighting in Africa, as soon as 2020. This is a goal which we are on track for: our retail brand SunnyMoney has become the biggest retailer of solar lighting on the continent in just four years. We have sold 1.3 million solar lights – most in the last year – operating in just four of the continent’s 54 countries. All four are soon to break even and recycle 100 per cent of profits back to the charity. The multiple social benefits from displacing kerosene extend across home-and-community economics, education, environment and health. As for climate, each kerosene lantern displaced by solar keeps as much as a tonne of CO2 out of the atmosphere.
If one middleweight clean-energy company can do this with 5 per cent of its profits, just imagine what a global movement of companies could do.
And imagine how the marketing of the idea might change as the club grows from a small group of pioneers into a movement, with an increasing pool of capital-for-good. In the initial phase a question to CEOs of start-up clean energy companies might be: ‘Why not give 5 per cent like Solarcentury? You won’t even notice it’s gone.’ Or: ‘In Solarcentury’s case, there is clear evidence that 5 per cent was well invested: key staff stay in post longer than average in large measure because they love the SolarAid mission and ethos.’
In the middle phase of the project the question to CEOs might be more like this: ‘You mean you’re not in the 5 per cent club? And you are talking to us about corporate responsibility?’ And, in the late phase, the question might become: ‘Which is the most effective national/global company at leveraging its 5 per cent levy?’
With time so quickly running out on climate and development, inspiring stories are needed, both in the run-up to the Paris climate summit and beyond. I am full of hope that a 5 per cent club might provide one.