McKnight to Leverage its $3 Billion Endowment to Address Climate Change

McKnight to Leverage its $3 Billion Endowment to Address Climate Change

The foundation wants to achieve ‘net zero greenhouse gas emissions’ across its endowment by 2050.

Just days ahead of a United Nations Climate Change Conference, the McKnight Foundation announced Monday that it wants to make a bigger impact on climate change by fully leveraging its $3 billion endowment.

The private foundation pledged to “achieving net zero greenhouse gas emissions” across its $3 billion endowment by 2050 at the latest.

The Minneapolis-based foundation, founded in 1953 by 3M executive William McKnight and his wife, Maude, has been a major grantmaker in tackling global warming. But this latest endowment commitment elevates McKnight’s role in the climate change arena.

In a statement, the foundation said that it already has $500 million “committed to public and private impact investments that provide the ideas, technology, software, and services to decarbonize the economy.” But McKnight leaders explained that they concluded their large endowment provided an opportunity to have a greater impact.

McKnight President Tonya Allen said the foundation chose to take deliberate action, because of the “magnitude of the climate crisis.” She called on other foundations to join McKnight in its investment commitment.

“We have seen how bold, market-rate investments in climate solutions have spurred innovation, grown our endowment, and allowed us to increase our grantmaking,” said veteran McKnight board member Ted Staryk, who chairs McKnight’s Mission Investing Committee. “This is the experience that will guide us on the path to net zero.”

Beyond setting targets for achieving its ultimate goal, McKnight plans to take two strategic steps.

It characterized one of those steps as investing in solutions. The foundation said it would: “Continue to capitalize on investments profiting from the climate transition, and seek opportunities to drive climate risk management and greenhouse gas reductions through existing conventional investments.”

The other major step is labeled as engaging counterparts. The foundation described this strategy through three types of engagement:

  • Work with investment advisers to understand the greenhouse gas emissions of each fund manager.
  • Cooperate with asset owners and experts to identify data and carbon accounting options to reliably assess endowment emissions.
  • Engage with public companies, in which McKnight has shares, to ensure they are setting meaningful greenhouse gas reduction targets and pivoting to profitable strategies.

McKnight’s announcement comes in advance of the United Nations climate change summit that begins Oct. 31 in Glasgow.

It also comes as members of Congress are attempting to reach agreement on a major spending bill. President Biden and key Democrats are advocating for climate change provisions in that bill.

Minnesota U.S. Sen. Tina Smith, a Democrat, is the chief sponsor of a clean electricity program. Smith has been advocating for a clean energy standard. It would require utility providers to incorporate more clean energy over time. Smith also favors grants and tax incentives to accelerate the move to clean energy.

While U.S. Sen. Joe Manchin, a West Virginia Democrat, opposes Smith’s plan, she told The New York Times that the Build Back Better bill must include strong climate elements to win her support for the legislation.

The current battles in Congress illustrate the difficulty of reaching consensus on climate change strategy and solutions. However, several businesses and nonprofits are moving forward on this topic, because many scientists argue the world’s population is running out of time to slow climate change and reduce its harmful effects.

The Business Roundtable, which represents large companies including 3M, Best Buy, and Land O’Lakes, states that “corporations should lead by example” on climate change. It further argues the United States should “adopt a more comprehensive, coordinated and market-based approach to reduce emissions.”

The Roundtable notes that progress has been made in reducing greenhouse gas emissions, but said “the existing patchwork of federal and state regulations, tax incentives, subsidies, and other policies is inefficient.”

As corporations reduce their carbon footprints, companies that are innovative in deploying climate change solutions are becoming more attractive to many consumers and investors.

McKnight has embraced that trend in its investing approach.

“With the rush among investors to get into climate solutions, the size and number of opportunities will grow quickly, and McKnight will continue to be on the leading edge of the opportunity set,” said Roger Sit, McKnight board member and chair of the foundation’s Investment Committee. “We’re confident we can accomplish net zero with positive impacts on the planet and our portfolio.”

Elizabeth McGeveran, McKnight’s director of investments, said: “Science is clear about the economy we must create in order to thrive, and every endowment dollar offers immediate and powerful opportunities to advance a low-carbon future together.”