GreenBiz: Climate philanthropists, don’t make the VC mistake—invest in people of color
GreenBiz – September 21, 2021
By Davida Herzl, CEO and Co-Founder of Aclima, and Donnel Baird, CEO of BlocPower
As two entrepreneurs of color, we are all too familiar with the pattern of underinvestment for communities of color in the venture capital-funded climate technology sector.
Against all odds, we have raised more than $130 million combined of climate tech venture capital at our public benefit corporations, Aclima and Blocpower. However, this private sector investment in our firms represents a tiny fraction of the more than $16 billion in total climate tech venture funding raised in 2019. While overall venture funding in climate tech grew 3,750 percent from 2013 to 2019, the overall percentage of venture capital invested in founders of color is shrinking.
The percentage of U.S. venture funding raised by founders of color is below 5 percent and below 1 percent for venture capital raised by women of color. This is in stark contrast to emerging Federal Reserve Bank data that indicates that the robust economic recovery from the 2009 financial crisis was most correlated with women of color-led digital businesses. Yet American counties with the highest percentage of digital businesses led by women of color were the most likely to experience outsized economic growth.
Innovative environmental justice (EJ) organizations and Black, Indigenous and people of color (BIPOC) leaders are ignored by mainstream climate philanthropy in a similar way. With philanthropic funding in the nonprofit climate sector, the statistics for leaders of color are worse than in climate tech venture capital. From 2015 to 2019, climate philanthropy nearly doubled to $9 billion per year. However, a recent study by the New School found that only 1.3 percent of $1 billion granted by 12 of the nation’s largest U.S. environmental grantmakers from 2016 to 2017 went to environmental justice organizations helmed by and serve people of color.
The billions of dollars deployed to date in climate philanthropy have not resulted in the change we need. This summer’s climate catastrophes, from coast to coast, are evidence of a shrinking window for success. Climate philanthropy needs a new model.
Fortunately, the Donors of Color Network Climate Funders Justice Pledge gives us a roadmap to successfully scale environmental and climate justice. It is building new momentum that will deliver climate solutions in both the public and private sectors.
The Biden administration has signaled renewed commitments to environmental justice and economic development, but will need support on the ground. The pledge calls for the largest climate funders to devote at least 30 percent of their U.S. climate dollars to justice-focused climate groups led by people of color and for transparency in reporting on funding to POC-led organizations. This transparency sets a new standard for climate funding, ensuring accountability and knowledge sharing across a sector in urgent need of transformation.
In private markets, investors such as Kapor Capital and the Schmidt Family Foundation (two early investors in Aclima and BlocPower) are building investment portfolios of high-impact companies led by people of color.
Since the pledge’s February launch, 21 climate funders (including top 40 climate funders, the Kresge Foundation, the Schmidt Family Foundation and Pisces Foundation) have committed to fulfilling at least the transparency portion of the pledge — but most of the top 40 climate funders are still deciding if they will step up.
Climate action without equity, justice and the transformative contributions of communities of color will continue to waste dollars — and fail — because barriers to equity are also barriers to building necessary political power and climate innovation. The National Academy of Science’s recent recommendations to the Biden administration released in February make this clear. There is no path to solving the climate crisis without scaling up investments in the talent, skill and widely distributed genius in underserved communities of color.
For years, environmental justice organizations working with their communities — such as the Deep South Center for Environmental Justice, the Harambee House, WE ACT For Environmental Justice and the West Oakland Environmental Indicators Project — have catalyzed climate action and environmental equity, with scarce resources from the philanthropic sector.
For example, in California, environmental justice strategizing and organizing was critical to saving the state’s landmark climate law in the face of powerful opposition. Across the country, environmental justice organizations influence policy and teach policymakers, businesses and large nongovernmental organizations how to partner with communities effectively.
In California, the West Oakland Environmental Indicators Project (WOEIP) led the creation of the “Owning Our Air” Community Action Plan with community members and air regulators. The plan uses modernized air monitoring to develop data-driven plans to reduce transportation, industrial and port emissions, and their negative health impacts. While WOEIP’s capacity to use new technology and policy innovation to unlock systemic change is proven, there is no funding to help scale and replicate its success in impacted communities.
This is a climate crisis. Now is the time for the largest philanthropic organizations to step up and commit to progress and accelerate climate action. Philanthropy is the highest form of risk capital, intended to invest both in the most difficult challenges facing society and in boundary-breaking pioneers who can invent the solutions necessary to save the planet. To move forward equitably — and have even an outside chance of adapting to accelerating climate change — top foundations must consciously and intentionally invest in climate action led by diverse communities.
We can simultaneously reinvigorate local economies, create jobs, mitigate the climate crisis and address the systemic inequities that undermine the basic foundations of our society.
Committing to justice-centered climate funding and investment isn’t just the right thing to do. It is the only economically, socially and politically viable path to a livable planet.