Commitments to climate action may be waning in some quarters. From the Pacific Northwest, The Russell Family Foundation is modeling a local strategy to crowd in additional capital and mount a comprehensive response to the challenge.
The Gig Harbor, Wash.-based foundation launched a Catalytic Climate Finance program four years ago that leverages its entire balance sheet, representing about $100 million in assets.
“We are activating every tool at our disposal—investments, grants, convenings, and advocacy—to advance climate solutions that are both impactful and just,” the foundation’s Kathleen Simpson and Sarah Cleveland write in a new progress report that shares lessons from the journey.
The foundation hopes to inspire other foundations and asset owners to take more risk and lean into climate commitments. Family foundations and family offices may have smaller pools of capital compared to pension and insurance and other institutional investors, but they can be more nimble and flexible with a wider variety of tools to support their missions.
Already, TRFF has shifted 95% of its investment portfolio to mission-aligned investments. It has channeled investment capital to companies addressing its twin themes of decarbonization and nature-based solutions, alongside grants to local and community-based groups. And it has convened other asset owners around setting and achieving net-zero goals.
“Philanthropy has tended to lead with grant making, particularly for climate, where grant allocations are directed toward driving solutions. We are flipping the script with Catalytic Climate Finance, leading with our investments and then supporting that with grant making,” Simpson has said. While its grantmaking is local, TRFF’s investment strategy is global.
Climate aspirations
In decarbonization tech, TRFF has invested in solutions that address top-emitting sectors, such as energy, buildings and industry. Those investments have mostly come through intermediaries. It has invested in Jonathan Rose Companies, a developer and owners of green, affordable mixed use buildings, as well as funds from Generate Capital, Vision Ridge. Energy Impact Partners and SOSV.
Being based in the Pacific Northwest, TRFF has a strong interest in regenerative forestry. The foundation has invested in forest conservation and regeneration groups such as BTG Pactual Timberland Investment Group, Lyme Timber and EFM Investments and Advisory.
To push further, the foundation has carved out an “aspirational” category of investments. The allocation earmarked for higher-risk, but high-impact, catalytic investments. These deals are sourced and vetted by the foundation’s own staff, versus its outsourced chief investment officer, or OCIO firm, said Simpson.
The aspirational category “is designed to support newer, developing climate solutions and to make catalytic investments that can unlock outcomes — or third-party capital — that might not happen otherwise,” Simpson tells ImpactAlpha.
For example, the foundation made a $500,000 direct investment in Organically Grown, a Portland, Ore.-based purpose driven trust that supports organic farmers (for background see, “Organically Grown Co.: This is what stakeholder capitalism looks like”).
TRFF made a similarly aspirational investment of $250,000 in Dirt Capital Partners, a fund that supports regenerative farmers by helping them acquire land and expand their businesses through long-term, secure land access. That can take the form of long-term lease-to-own arrangements, joint ventures, or land transfers.
Another aspirational investment: Forterra’s Strong Communities Fund. The Seattle-based organization started as a land trust looking to preserve wild land and has expanded into a nonprofit that buys working land to keep it in the community.
The Strong Communities Fund acquired property in Tacoma’s historically Black Hilltop neighborhood to facilitate development that addresses community needs such as housing and community spaces. In Hamilton, Wash., it is looking to build housing on a 48-acre parcel that would enable residents in a flood plain on the banks of the Skagit River to move to safety ground while restoring habitat for salmon.
TRFF’s aspirational and catalytic investments include local credit unions, community banks and community lenders.
The impact pathway for these aspirational investments is straightforward, says Simpson. “These investments can get underfunded solutions off the ground, help innovative businesses reduce emissions by changing carbon-intensive processes, and mobilize support for nature-based projects with benefits for ecosystems, biodiversity, and local socioeconomic health.”
Staying true
In public markets, TRFF last year allocated $19.3 million with three sustainably-minded managers: US fixed-income manager Breckinridge, global equity manager Terra Alpha, and Xponance, a diverse-owned investment firm that advances both decarbonization and diversity. TRFF last year also became the first foundation to commit to Galvanize’s energy transition-focused public equities fund, Galvanize Global Equities.
What’s next for the foundation’s catalytic climate investing? Simpson says that decarbonizing sectors that are harder to abate or decarbonize “may prove to have the greatest real-world impact.” She points to breakthroughs on the horizon, such as geothermal and fusion energy. AI holds promise for climate modelling and resource optimization, she says, and the foundation is even taking a look at climate litigation funding.
TRFF’s climate strategy is just one approach, stresses Simpson. But she hopes other foundations and family offices draw from it “permission to start, even amid uncertainty; a commitment to share progress and challenges openly; and a sense that foundations with flexible asset pools can move quickly, collaborate, and help bridge climate finance gaps.”
“At this moment in time when you’re seeing a lot of pullback, our board has said it’s important that we stay true to our values,” she says.