How philanthropy can drive systematic climate risk reduction
Special thanks to Ashley Neff, Luisa Sandkühler, Violet Buxton-Walsh, Mikolaj Bakalarz and Macarena López.
At Founders Pledge, we’re always asking, “what is the most impactful thing we can do?” Our Climate Lead, Johannes Ackva, shares a way to answer this for our climate work.
Watch his presentation or read an adaptation of his talk below.
Today I want to share one framing to answer this question (what is the most impactful thing we can do?) for climate: systematic risk reduction. There are different ways to approach an answer, this is just one way to think about it and frame what we’re doing.
So, how do we systematically reduce climate risk and why is it important?
The challenge: Damage, uncertainty, and climate risk
Let’s begin with what we mean by climate risk. What are we actually talking about? When we talk about this we mean how climate damage – the harms that climate change imposes on humans and animals – is distributed across different potential futures we are uncertain about and, in particular, across future conditions we have limited impact on.
To get a sense of how climate risk looks like we need to look at its two components, how bad and how likely different potential futures are. Let’s tackle each in turn and then we’ll combine them to get at climate risk. (For readers wanting a more technical and detailed introduction to this topic, I talked about this at the Stanford Existential Risk Initiative Conference available here.)
The badness of different futures
To get a sense of the badness of different climate futures, let us look at the canonical source, the recent report by the Intergovernmental Panel on Climate Change (IPCC). They have created some really detailed graphs with lots of data, based on aggregating hundreds and hundreds of studies. They’re trying to show the climate damage sustained at different temperature levels:
We can begin to see some patterns. It’s clear that as things are getting warmer, the damage gets disproportionately worse. As the IPCC puts it: “Projected estimates of global aggregate net economic damages generally increase non-linearly with global warming levels.”
The key takeaway here is that 3 degrees of warming is not twice as bad as 1.5 degrees. It's much worse than twice as bad. And it gets worse and more nonlinear with more warming.
To get a clearer picture of the signal, we are distilling these data points a bit more: If we look at different levels of warming, right now we're at about one degree over pre-industrial temperature. So we can use this as the benchmark and compare the badness of different futures against this baseline. And you can see there are different ways to model this, but across most of them, it's clear it has a strong nonlinear shape:
When we aggregate this and group it into different temperature buckets (exemplifying different climate futures), we get the following graph:
The likelihood of different futures
If we're talking about risk, we also need to ask ourselves: “How likely are we going to be in that world?” There's a second stream of literature exploring how much warming we will actually have by 2100, which is usually the end date for most climate studies.
We can refer to the most up-to-date study on this topic, from Venmans and Carr (2024, original working paper from 2022; results would be very similar if using any of the other recent studies, such as Liu & Raftery 2021 and Pielke et al. 2022). Across different models, the highest probability of warming is between 2 and 3 degrees. And the probability decreases sharply towards the extremes, with similar low probabilities of warming exceeding 4 degrees as below 1 degree (current warming).
We can re-visualize this to more clearly see the probability spread and how likely these different futures are.
Expected climate damage
Having mapped damage and probability, we can now think about expected damage. How do these two elements – the likelihood of different futures and how bad they are – combine?
We can use this view of expected damage to begin thinking about what could and should be done. What should we be willing to pay to reduce one tonne of emissions in a given warming scenario?
We can see that we should be willing to pay the most for avoiding emissions in those worlds that are between 2 to 3 degrees because those worlds are both relatively likely and relatively damaging. The higher warming worlds are much more damaging, but we can see that they are much less likely to happen and that this low likelihood dominates the higher damage. The worlds that are quite good – those close to 1 to 1.5 degrees of warming – require that there is no more warming this century, which seems really unlikely and, when they occur, additional emissions reductions are not that valuable. Thus, by virtue of being unlikely and less damaging, those are relatively less important to focus on.
Taking action: systematic risk reduction
Until now, this might all sound academic. Why does any of this matter for philanthropists allocating money to reduce damage from climate change? The reason is that, ultimately, what happens with climate change is related to a lot of really important external drivers. Let’s look at three news headlines for some examples.
- “Russia’s war in Ukraine is undermining global efforts to tackle the climate crisis, new report finds.” Russia's war in Ukraine is not something that climate philanthropists can plausibly influence, but it obviously has a massive effect on geopolitics, energy supply, and lots of different factors.
- “Election of Donald Trump ‘could put world’s climate goals at risk’.” While obviously important for climate outcomes (see below), election outcomes cannot be affected by philanthropists and spending and broader effort are much larger than all of global climate philanthropy.
- “AI brings soaring emissions for Google and Microsoft, a major contributor to climate change.” We’re seeing now, for the first time in many decades, that electricity demand is actually increasing in advanced economies as a result of AI, changing the conversation and investment patterns.
These are really important factors that can impact climate. They're not really shaped by what climate philanthropists do. They are big macro conditions. And we're uncertain about all of them.
The key point is that we're uncertain about a lot of things, many of which we cannot affect but which we know have massive implications for our climate future. But we do know something about the structure of climate damage and about the question of how those uncertainties resolve relates to likely futures. And if we put those things together, we actually know a lot more, even though we're still very uncertain.
Consider the following stylized examples describing some of our key uncertainties (in July) – whether Biden will win re-election, whether renewables will continue to exceed expectations, and whether emerging economies will avoid energy-intensive growth.
All of these are very uncertain and the latter two of them will not resolve in time to await grantmaking decisions. We need to make decisions under uncertainty.
However, we do know some things, and we can learn from "future failure." In particular, we know that if we end up in the worlds we should pay more attention to where more of the climate damage is, then certain things are likely to have happened, right? If emissions in the 2030s are high, we can say it's more likely than not that Trump won the re-election in 2024. If emissions are really high in the 2040s, we imagine that the most optimistic scenarios of renewables probably did not work out.
We know that something must be true in those cases where it matters the most. And this hugely matters for taking action. How can we use these insights to take action and what should we do?
Political risks
For the first uncertainty and associated risk, let’s focus on U.S. politics and work through the example of Trump being reelected. A study from Carbon Brief shows what they expect future emissions to be based on different outcomes of the election. We don’t necessarily agree with all of their assumptions, but it’s a useful illustration of how the outcome in November will have implications for many decades and meaningfully shape the U.S. emissions trajectory, what happens to technological innovation, etc. The broader point is this: whoever holds the White House really matters for climate.
So the question is what can we do? We could try to change the election outcome. This isn’t an option for philanthropic action (it would be political spending). Plus, there’s already more than $15 billion trying to influence it, making it extremely unlikely that additional contributions could make a significant difference.
But there is something else that we can do: finding solutions that are robust to different political scenarios and, ideally, that are even more effective in those scenarios where it matters more.
Depending on the scenario of who holds the Presidency and Congress after the election, different opportunities to make progress on climate might exist. Yet, what all of them have in common is that what happens will depend on how a relatively small number of lawmakers, often Congressional Republicans, behave given how tight Congressional majorities are expected to be.
In a Republican-leaning scenario, Congressional Republicans might be key to protecting provisions of the Inflation Reduction Act that are otherwise threatened – see e.g. the recent letter of 18 House Republicans arguing against IRA repeal. This is similar to the first Trump administration where Republican Senators were key to protecting the US energy innovation system.
Irrespective of who holds the White House, a key priority on energy and climate will probably be on permitting reform and transmission such as the recently proposed permitting and transmission bill which is unlikely to pass in this Congress but could pass in the next. Those are issues where Republicans that are engaged in climate can play a pivotal role, because it is a situation where “natural” Republican priorities, such as reducing administrative burden, overlap with a critical problem in the clean energy transition.
That’s how we can think through the different scenarios and what could be done. And then the question becomes, who else is doing that? How could we work on that?
One way to develop it is to support civil society actors on the right (the Ecoright or right-of-center pro-climate groups in the U.S). Their current funding is $30 million. Their progressive peers on the left receive over $300 million in funding, at least 10x the amount. Below we can compare right- and left-of-center, and compare them to climate philanthropy at large. (In the second slide the Ecoright is not fully to scale because we couldn’t see it otherwise.) We’ve also included an estimate of the amount that will be spent on changing the outcome of the election.
The Ecoright is the only spending that's really focused on changing what happens with climate in a Republican win scenario. It makes sense to spend a lot there given everything we talked about. But even zooming out, given that climate is a multi-decadal problem and the US will remain a polity where two parties compete for dominance and most policy is decided by close margins and bipartisan, overcoming the asymmetric civil society development on climate could be a key strategy in increasing robustness of the US climate effort.
This is one strategy we’re pursuing, mainly through DEPLOY/US, a re-granting organization. We began supporting them last November, when there was ~60% probability that Democrats would win reelection for the presidency. Now, it's maybe more like 30% (Note: this talk was given in the week before Biden dropped out, at the time of publishing it is more like 55% again). This is an example where investing early and hedging early has paid off. Because we're investing in growing the movement, we collectively will benefit from this existing in the world.
DEPLOY/US fund organizations, build the Ecoright, organize, make policy asks, and create a culture where Republicans can be pro-climate. So this is both putting pressure on Republicans and also applauding when Republican lawmakers are doing things right.
Why is that important? Regardless of how the election goes, Congress will likely be more Republican. Right now, the U.S. innovation response and the U.S. climate policy system is probably the most important determinant of future climate progress. Because it has grown so much in the last four years under Biden, protecting the overall system is of the utmost importance.
Technological Risks
Another uncertainty is how far intermittent renewables will go in decarbonizing the global energy supply with the risk that they will not go as far as expected and alternatives not having been sufficiently pursued. Intermittent sources like solar and wind will not get to 100% of global energy supply. Up to now, they’ve been exceeding all expectations, so why should we expect them to not fail?
Below is a graph showing the expectations for solar and, essentially, solar has beaten the expectations and grown exponentially every year. We should expect that wind and solar will play a really important part in the future energy system. So when we say they might "fail," we don't mean that they will not grow a lot. We mean they will not go to 100%. They won’t reach the final goal of climate policy – decarbonizing all of energy production, all of industry, all of human emissions. This could happen despite renewables being very cheap, for reasons such as the difficulty of building sufficient transmission, a lack of energy density, and the difficulties associated with long-term and seasonal storage.
There are ways to hedge against this. The primary hedge against intermittent renewables failing is to focus on clean firm power, on energy sources that are very concentrated and that provide 24/7 energy. Advanced nuclear and next-generation geothermal are some of those opportunities. So investing in those bets, even when it seems like we're probably going to get very far with renewables, is also really important. We've been very strongly investing in a broad range of organizations in those spaces (nuclear, geothermal, and other solutions) for years, including Clean Air Task Force, Terra Praxis, QuantifiedCarbon and Cascade Institute.
Economic risks
The third important uncertainty, where we can systematically reduce risk, is energy-intensive growth in emerging economies. If you look at the ways that climate futures are modeled, it's often assumed that people in emerging economies will never reach the living standards or the energy consumption that more developed economies enjoy and/or that they will simply "leapfrog" the growth model of existing industrialized economies and grow in a low-emissions trajectory. And that is obviously an optimistic assumption. We can already see that emerging economies have the largest share of energy demand growth. And we should expect this will continue.
Above is a 2021 study of Africa’s generation mix, which finds it is mostly fossil fuels (gas, coal, oil). When people talk about Africa, there's often an idea that Africa will just build lots and lots of solar and essentially leapfrog fossil fuels and will get rich and energy secure in a way that essentially no other continent and no other place has. The study tried to look at what we should actually expect based on what's happening on the ground. The central prediction for 2030 is that there will be 11% renewables capacity. That is not a world which has radically transformed. The study is predicting less than 10% intermittent renewables by 2030. Africa is not as important for near-term emissions, but the trajectory hugely matters for future emissions because Africa is going to be growing the most in terms of population, and hopefully GDP per capita. This underlines that not only will emerging economies dominate future emissions, they are the largest source of uncertainty and, consequently, risk.
An organization we're supporting in this context is Energy for Growth Hub. We're specifically supporting a project focused on making it easier to build the existing clean energy sources that we already have (mostly wind and solar) by reducing regulatory hurdles that make it hard to adopt renewable energy in the face of untransparent regulation and pricing that biases against new entrants and in favor of fossil incumbents. This addresses a counterintuitive situation: many very sunny or windy places in the Global South are not adding a lot of renewables right now.
Bringing it all together
Let’s review these three uncertainties, their associated climate risk, and the philanthropic risk mitigation strategies.
The first uncertainty is with the US election. Which party will win? The result is obviously very important for future climate outcomes. The related climate risk is that while Trump wins re-election he gets rid of a lot of the existing climate policy and prioritizes fossil fuels. Risk mitigation here is trying to work on solutions that help in those worlds. And we do this philanthropically by supporting DEPLOY/US.
The second uncertainty is that intermittent renewables might not go all the way. So how far will they go? The risk is that they don't fully decarbonize global energy supply and that we're not prepared for it and don’t have other solutions ready. The risk mitigation strategy is making bets on clean firm power sources such as advanced nuclear, next-generation geothermal, etc. We're doing this by supporting a variety of organizations pushing those technologies further.
The third uncertainty is around energy demand growth in emerging economies. How much will they grow? Will they grow considerably faster and stronger than most of the successful climate models would predict? Significant growth would increase the risk of missing climate targets. One way to mitigate this is by making sure that growth is clean, even if there is high economic growth. To achieve this, it needs to be easier to adopt clean energy in emerging economies where it matters most. One way we're doing this is by supporting for Energy for Growth Hub.
This is how we work. We begin with a big uncertainty, but we can identify a risk mitigation strategy and find charities to support that help mitigate the risks.
We’ve demonstrated that systematic climate risk reduction is possible. And it's very necessary, because climate risk is the main problem with climate. We need to avoid the worst-case scenarios.
This means we're focusing on philanthropic bets that minimize expected damage. Not minimizing emissions, but minimizing expected damage, hedging and taking into account that climate damage is non-linear which puts a premium on risk mitigation. Another way to say this is that robustness to bad futures is immensely valuable. Or, the more colorful way to put it, we are focusing on what works when shit hits the fan.
