- Finance and funding are unlikely to make up a large part of an arts organisation’s measurable carbon footprint. But their impact on the wider world is very real, and there is public scrutiny of the choices that public-facing organisations make about where their money comes from, and where it goes.
- Decarbonising your finances can send a strong positive signal to the world – while working with high-carbon banks and industries can create significant reputational risk.
- As this climate crisis hits ever harder, the role of the arts in promoting and supporting the companies who are driving it will come under ever greater scrutiny. This comes in the wake of other arts funding controversies, such as the involvement of the Sackler family in the US opioid crisis, which caused a major outcry from artists, visitors and culture workers, leading to the removal of the Sackler name from many arts institutions that they had previously funded.
Financial Assets & Fossil Fuels
There are three main areas where arts organisations may - perhaps unknowingly - have financial assets which are impacting the climate:
- Staff pensions
- Day-to-day banking
- Investment of cash reserves
Some art sector businesses may hold other direct investments or shares, which should also be examined, but the three categories above are likely to cover the majority of financial assets of most art organisations.
In most cases, staff pensions will be the most significant of these with regard to the amount of money invested. However, the choice of bank for day-to-day banking – while perhaps the smallest with regard to the actual amounts of money involved – is likely to be the most visible, via invoices and fundraising materials.
How big an issue is this for the art sector?
Over the last ten years, the global movement for fossil fuel divestment has persuaded over 1500 institutions – representing more than US$40 trillion – to remove or exclude fossil fuel companies from their investments. This includes universities, councils, pension funds, religious bodies, and major investment funds. This has raised the cost of borrowing for the fossil fuel industry, made it more difficult for oil, gas and coal companies to open up new extraction sites, and has almost certainly helped to keep large amounts of fossil fuels in the ground.
While the amounts of money held or controlled by arts organisations may not be huge compared to councils or universities, they still have the potential to be very significant because:
- We’re in a climate emergency. Every penny taken out of fossil fuel extraction, deforestation and other polluting projects can make a difference and is worth doing right now.
- Banks, pension providers and investment funds are under growing pressure to provide more low carbon, fossil-free and climate-friendly investment options. If art organisations add their voices to this pressure – especially in a public way – this could help to stimulate the market, bring more organisations on board and create more low-carbon financial options for everyone.
- The reputational risks of holding investments in high-carbon industries will only grow, especially if arts organisation are making public commitments to decarbonising other parts of their operations.
What should I avoid?
The default financial products of most banks, pension providers and investment funds make little or no discrimination when it comes to climate impact. This means that, unless you have specifically chosen an ethical bank or made specific instructions to your pension provider, some of your money is almost certainly invested in fossil fuels and other polluting and destructive industries.
Some banks and investment funds are particularly notorious for funding the fossil fuel industry, with JP Morgan Chase, Citi and Bank of America at the top of the pile. Other well-known banks with major fossil fuel holdings include Barclays, HSBC, BNP Paribas, RBC and Deutsche Bank – which is not to say that many banks have a clean record here. Despite high-profile “net zero” targets and long-term pledges, most of the banking and finance sector are still investing in coal, oil, gas and other high carbon industries.
You can check your bank's involvement in fossil fuel finance via this useful tool.
What are the alternatives?
The financial needs of every arts organisation will be different, and each GCC member will need to seek out the low-carbon financial products that are right for them, working together with their pension providers and qualified financial advisors.
However, to genuinely decarbonise your pension it’s important to have a discussion with your pension provider and ensure that any “ethical” or “sustainable” fund they recommend is genuinely free of investments in carbon-intensive sectors and other unethical industries that you may wish to avoid, such as tobacco or arms. Many supposedly “sustainable” funds have fairly weak criteria and still invest in fossil fuels, so it’s always worth checking!
You can find a list of UK based reccomended providers on the GCC London page (you will have to be a member to view this). For more details on banking and pension options, it may be worth subscribing to Ethical Consumer Magazine (which also has environmental and ethical ratings for a huge range of other types of products and services).
My pension provider says their “green fund” doesn’t divest entirely from polluting industries, they prefer to choose “best in class” companies and influence the market….
Providers have been doing this for decades and it’s not made the difference we need in corporate behaviour. It has driven some improvements in reporting and helped to stop a few polluting projects, but has created nowhere near the change we need in these company’s business models or on-the-ground operations. The fossil fuel industry isn’t going to change itself, at least not in time to avoid climate breakdown. We need to take our money out of the worst activities and put it into solutions.
Should I include the impact of our finances in our carbon footprint reporting?
We wouldn’t expect any of our members to do this, as it’s difficult to calculate and unlikely to be a significant part of your annual footprint unless you have particularly large financial holdings. The impact of moving away from fossil fuel investments and banking is much more about creating a wider shift in the markets to make fossil fuel extraction harder to finance (something that can’t really be summed up with an annual carbon number), and also to protect your reputation as the scrutiny of arts investments and funding grows stronger.
Ethical Funding & Sponsorship
Where we take money from is another important consideration – especially when it comes to sponsorships and endorsements. There has been huge controversy in recent years over the concept of “artwashing” – polluting companies attempting to clean up their image and burnish their brand by sponsoring arts and culture. For example, the oil giant BP successfully used sponsorship of the 2012 Olympics and Cultural Olympiad to boost its public image after the 2010 Deepwater Horizon disaster. Ten years later, most UK arts organisations and events have now moved away from fossil fuel sponsorship, with the National Portrait Gallery and Scottish Ballet as the most recent examples to end their promotional deals with BP. Only a handful of cultural organisations still partner with oil and coal companies – and they are facing serious backlashfrom their stakeholders for doing so. It’s not just fossil fuel companies themselves, though: Sadlers Wells dance theatre has faced protest from actors and campaigners for partnering with Barclays, a bank with major investments in fossil fuels.
The importance of an ethical funding policy
Avoiding these kinds of scandals – and being confident that your funding partnerships are in line with the values of your key stakeholders - means making ethical decisions about funding sources. This can be very challenging. The companies with the most controversial business practices are often the ones keenest to spend money on arts sponsorship, to help boost their brand, fend off public criticism and gain valuable access to elite audiences and decision-makers.
However, just because it is challenging doesn’t mean it isn’t possible to draw some red lines. A growing number of arts organisations have now created an ethical fundraising policy – a vital tool to guide your decision-making around funding and sponsorship. Rather than wait until faced with a funding dilemma, if you draft up a policy – in partnership with staff and key stakeholders – that lays out which kinds of funding partners you will and won’t work with, that will make those decisions far easier when you do need to make them. Your policy can take account of the values of the organisation and the people who work there – ensuring that your team are comfortable with any funding partnerships you might form – while also being responsive to broader social issues and reputational risks.
Examples and starting points
GCC’s own ethical fundraising policy can be seen here. As an environmental charity we need to be especially careful who we do and don’t partner with, to ensure we aren’t supporting any heavily polluting organisations or damaging our credibility as an environmental voice in the arts world. Our criteria are therefore especially firm. However, we know that every arts organisation will be in a different position and will need to set their own funding criteria based on their own needs and values.
The process of creating the policy can be just as valuable as the policy itself – it’s a way to have a discussion and find agreement within your organisation, and with key partners and stakeholders, over your shared values, red lines, and assessment of reputational risk.
For more detailed advice on drawing up a fundraising policy and examples of other organisations’ policies, we’d recommend these resources from Culture Unstained and InsightX.
- Assess your current investments and which bank you use.
- Investigate switching to a more ethical bank, especially if your current bank is one of the more carbon-intensive lenders mentioned above.
- Talk to your funds manager/pension provider about options available with your existing pension providers/partners. If they don’t offer anything low-carbon enough then investigate other options.
- Seek professional financial advice before making any major changes to your financial position or investments. While many ethical investments do, in fact, perform as well (or better) than fossil-fuelled funds overall, and may well become a safer bet than oil, gas and coal as more climate regulations kick in around the world, not all ethical funds will perform equally and there are risks and challenges with every investment. It’s important to understand all the implications of this before making a final decision.
- Maximise the impact of these changes by letting your stakeholders and partners know what you’ve done, and why.
- Produce an Ethical Fundriasing Policy for your organisation. For more detailed advice on drawing up a fundraising policy and examples of other organisations’ policies, we’d recommend these resources from Culture Unstained and InsightX.