Philanthropy: the Untapped Trillion-Dollar Climate Opportunity

by Adam Fraser , CEO at Terraset

Before you read this article, try a quick experiment. Ask someone—a colleague in the office, the person on your next call, or even just yourself—what percentage of philanthropic giving goes to tackling climate change??

Actually, let’s broaden that out. When you factor in everything you can think of in terms of nature, conservation, animal welfare, reforestation, biodiversity - absolutely anything that could be thought of as climate-adjacent: what percentage of philanthropic giving do you think goes to support it?

I’ve heard people guess as high as 50% and as low as 20%. I’ve never heard anyone guess as low as the correct answer: 2%. If you got it right, congratulations! However, that’s probably not something to celebrate. The climate crisis—the biggest issue facing humanity—is not an issue that we want people or organizations to ignore when they’re considering which nonprofits to support.

The number is slightly better if we look solely at the US (the world’s largest philanthropic market, by some distance). Here, according to GivingUSA’s 2023 Annual Report on Philanthropy, in the largest economy and most generous philanthropic sector on earth, we all collectively managed to bump that percentage… to 3%.?

If you’re curious, that compares to 5% for arts, culture and humanities; 10% for health; 13% for education and 27% for religion. Worryingly, giving to ‘environmental and animal organizations’ (the broad category of ‘everything climate-related you can possibly think of’) decreased 1.6 percent between 2021 and 2022. Adjusted for inflation, notes the report, donations to the environment/animals subsector declined by 8.9 percent.

At Terraset, we spend a lot of time asking ourselves why this is the case. The two most frequent answers we’ve come up with are linked.?

First, a lot of people see the climate crisis as someone else’s responsibility.?

They assume the government will figure it out. The private sector will find an answer. The markets will move as clean energy becomes cheaper and fossil fuels become pariah. It’ll all be OK in the end. And even if it won’t, it wasn’t my fault, so why should I have to clean it up while the bad guys just keep on doing their thing?

Second, people often can’t see the way that their philanthropic donations can make a difference, even on an issue they care about.?

That might be because they have lost a certain amount of hope—and we believe that hope is a greater driver than despair. Or, even more simply, it might be because solutions just don’t exist to empower their involvement. To tackle the former, we need to make sure we tell consistent and engaging stories of genuine change and impact, backed up by transparent, measurable data. To tackle the latter, we need powerful, innovative solutions to be created in ways that can have catalytic, outsize impact.?

Take our own focus, carbon removal, as an example of that. The sector has significant tailwinds—and it needs them because the global CDR market is still smaller than the market for nail clippers. However, the relative lack of buyers remains a missing piece of the puzzle. There are not (yet) enough customers buying removals for CDR companies to scale in the way that we all need them to. There are a number of companies, organizations and advocates looking to change this, with the likes of Microsoft, Frontier and Shopify amongst the most publicized and with the biggest purchases. But before we created Terraset, an easily available way to use philanthropic capital to purchase carbon removal simply didn’t exist.?

In fact, if the 2% of global philanthropy going to climate as a whole is represented as the orange dots in this image, the percentage going to CDR—in any form, not just purchases—can be seen as the single white dot. Just 2% of 2%.?

That’s a concern. Carbon removal is one of the biggest challenges facing humanity today, yet only a fraction of philanthropic giving is making its way into this space. This pattern is seen across all climate-related causes.?

The reason that matters isn’t that philanthropy alone can solve the wider climate crisis, but because it plays a crucial role within the capital stack. The US philanthropic market is $499 billion annually and growing. Globally it exceeds $800 billion, and can reasonably be expected to surpass a trillion dollars in the next few years. Ignoring any trillion-dollar market in our efforts to solve the climate crisis would be a missed opportunity.

We also risk missing out on the unique things that philanthropic capital brings to the table. Take CDR as our example again: we need it to scale, fast. We don’t just need this to happen eventually, we need to make progress right now. We need more high-quality carbon removal projects, delivering greater volumes, and we need them as soon as possible. Carbon removed today is worth significantly more than carbon removed in five or ten years. So if the risks and challenges of an early-stage sector mean it isn’t something that makes sense for someone to support with their investment capital, or as part of their business’ sustainability strategy, then philanthropic giving can still allow them to play a key role in this essential space at this critical time. Maybe you don’t need credits, but you can still play a role in directly removing greenhouse gases from the atmosphere. Every philanthropic dollar given right now can go a long way towards eventually removing gigatons of carbon.?

And on a broader basis, when we step back out to look at climate as a whole, the same is true. There are solutions that need investment now, whether in adaptation, reduction or mitigation. They might not be ready for the market and they might need time to develop further, but they are there—in a lab, on a concept note, out in the real world or still in someone’s head. Let’s work together to bring them to life and, to help do so, let’s make sure we unlock far more than 2% of that trillion-dollar market. The most pressing issue facing the planet deserves it.