The European Responsible Investment Network (ERIN) has become the latest sustainable finance initiative to have its funding cut.
Set up in 2016, ERIN coordinates the efforts of more than 30 civil society organisations, including InfluenceMap, 2 Degrees Investing Initiative, E3G and Greenpeace.
It has been financed by grants from the Laudes Foundation for the past three years, but has failed to secure enough money to continue.
“Unfortunately challenges in the funding landscape are impacting NGOs across the board, leaving them with hard choices to make in order to best continue their efforts to drive change,” says Deborah Gilbert, the director of development, communications and engagement at ShareAction, which convenes ERIN.
She said that, despite a “short-sighted and dangerous” clampdown on sustainability, ShareAction is working to find another secretariat for ERIN, so it can continue to coordinate NGOs in the space.
It’s not the only non-profit project under threat. IPE understands that Imperial College’s Centre for Climate Finance and Investment is also winding down after failing to secure funding.
A spokesperson for the university declined to speak on the record, but multiple sources close to the Centre told IPE it had terminated most of its staff over the summer, with one saying it “still exists, but in name only”.
Just last week, Theia Finance Labs asked its networks to sign a letter of support for its work.
The German climate think-tank says “the honest truth” was that “fundraising has never been harder” and it needed to demonstrate to its potential backers that the market remains interested in its work.
Mark Campanale, founder of civil society stalwart Carbon Tracker, says many advocacy groups are facing funding cuts of between 20 and 40% – often with no explanation.
“[A] reason is because of the ESG pushback in the US, which is especially difficult for foundations with living donors who are funding this work,” he tells IPE.
A number of philanthropists who have historically bankrolled sustainable finance’s non-profits are still active in the US, and nervous about antagonising president Donald Trump and his allies, who are fighting to stop net zero and diversity initiatives.
But politics isn’t the only driver of the funding cuts. “There’s been a change in attitude, too,” says Campanale.
Many grant programmes are now run by finance professionals, who “don’t have a lot of curiosity” about new ways for civil society to affect change, he says.
“They often see their role as consolidating and controlling the NGO landscape, rather than co-developing projects as genuine partners interested in making progress collectively.”
Jakob Thomae, founder of Theia Finance Labs, said funders are taking “bigger bets” on fewer organisations, at the expense of many of the smaller projects and pilots that used to exist in sustainable finance.
“We need to explore new frontiers, but few funders want to pay for NGOs to be one step ahead of investors anymore – funding tends to go to established ideas, like transition plans, rather than innovation,” he says.
“We need to explore new frontiers, but few funders want to pay for NGOs to be one step ahead of investors”
Jakob Thomae, founder of Theia Finance Labs
What’s at risk is civil society’s ability to help solve investors’ shared challenges, Thomae believes.
In the past, these groups have had a role in everything from developing data sets and emissions accounting rules, to coordinating shareholder campaigns and collaborations.
“I think investors will have to get used to taking some of those innovations in-house if they want them to happen in the future,” Thomae says, adding that this could be costly and inefficient.
Campanale suggests that asset owners should think about funding some of the more pioneering civil-society work themselves – particularly on climate policy – to ensure a supportive landscape.
Thomae believes it will take a couple of years before it’s clear just how existential the current changes are.
“Once the latest funding cycle is done, we’ll see what the next one looks like: whether it continues to take a few big bets, whether it reverts back to a more diverse set of projects, or whether there is a complete withdrawal because the financial sector is seen as a dead end from a philanthropic perspective.
“But one thing is clear: the financial system isn’t sustainable, which means our work isn’t done.”
Read the digital edition of IPE’s latest magazine
