Patagonia will donate $100 million a year to fight climate change. What can this money accomplish?
On September 14, one of the most influential business owners in the outdoor space made a decision that stunned the world. Yvon Chouinard, founder of clothing brand Patagonia, announced he had voluntarily divested his $3 billion business, placing ownership in a trust and pledging to dedicate all future profits to environmental causes. A Patagonia spokesperson said the move would generate about $100 million each year for the fight against climate change.
The decision wrote its own headlines. The outputs of New York Times at Forbes on this website have posted stories highlighting the unorthodox movement and its potential to do good for the planet. Everyone from economists to climbers weighed in.
A month into the restructuring, however, questions persist. One of the most pressing questions is what, exactly, $100 million a year can accomplish in the world of environmental philanthropy.
The short answer: a lot, depending on where the money goes.
“With $100 million, in places like Namibia or Australia, you can get huge protection,” said David Banks, conservation manager at The Nature Conservancy. “A hundred million dollars doesn’t go very far in New Hampshire or Rhode Island.”
As Patagonia begins to make philanthropic decisions under its new business model, we asked experts about what money can do for the environment, and how it compares to other paths taken by corporations and billionaires who want to do good.
What can $100 million a year really do?
To predict Patagonia’s philanthropic potential, it is first important to understand the new corporate structure. When Chouinard and his family changed Patagonia’s ownership model, they wanted to make sure the company maintained its current growth trajectory, but started sending all profits to the environment. To achieve this dual purpose, they created a trust called Patagonia Purpose and donated 100% of the company’s voting stock to it, to oversee the brand’s strategic direction. The non-voting shares — approximately 98% of Patagonia’s private equity — were donated to a new 501(c)(4) nonprofit organization called Holdfast Collective.
The Chouinards will sit on the company’s board and guide the trust, but now all Patagonia profits not reinvested in the company will go directly to the Holdfast Collective, and from there to environmental causes and political action. .
A hundred million dollars sounds like a lot of money, but when it comes to tackling a global crisis like climate change, it might not go as far as most people think. Many organizations are already spending annual sums on climate work that dwarf the dollars pledged by Patagonia.
The Nature Conservancy, for example, the world’s largest nonprofit organization dedicated to land and biodiversity conservation, spent more than $156 million in 2020 on land and easement purchases worldwide, and nearly $700 million in total efforts, according to the organization’s financial reports.
According to Banks, any group focused on natural solutions to climate change must look at high-value areas like the Amazon and Congo basins, which are seriously threatened by industrial logging and deforestation for agriculture. , and will be extremely expensive to protect in perpetuity. Banks estimate it will cost around $500 billion a year to create an all-natural climate solution that keeps global warming below 2 degrees Celsius above pre-industrial times, the target set by the Climate Change Accord. Paris and other experts.
“When you think about $100 million versus that, that’s not a lot,” he said. “But if you can use that $100 million not just to influence policy, but to demonstrate real victories…then others can start to get on board.”
One high-value way, according to Banks, is to support state and local bond initiatives that fund land protection. “You can invest $1 million in a local bond initiative that [might] generate $20, $30, or $100 million a year in land protection funding,” he said.
The Nature Conservancy calculates that over the past decade it has generated about 2,000 conservation dollars for every dollar spent to support ballot measures. In 2019, the group spent $18,000 campaigning for a bond initiative in King County, Washington, which ultimately generated $810 million for open spaces, parks and trails.
And Patagonia could count on the Holdfast collective to dive even deeper into politics, if it chooses. A traditional nonprofit filed with the IRS as a 501(c)(3) has significant restrictions on political donations, but a 501(c)(4) — the legal designation for the Holdfast Collective — does not. does not.
The Holdfast Collective’s new executive director, Greg Curtis, declined to comment on the nonprofit’s future political funding. But if any organization cares about fighting climate change, part of that certainly depends on lobbying in Washington and supporting ballot measures, said David Callahan, founder and editor of Inside Philanthropy, a publication dedicated to tracking the world of charitable giving. And Patagonia hasn’t shied away from political activism in the past. He used to sell shorts with tags that said “Vote assholes.”
Wherever the Holdfast Collective money goes, it will undoubtedly figure prominently in the world of 501(c)(4) fighting for environmental change. There are fewer 501(c)(4)s than traditional nonprofits in the climate space, and most are orders of magnitude smaller than the Holdfast collective. The Citizens’ Climate Lobby, for example, had a budget of just over $2.3 million in 2022.
Unsurprisingly, the competition from the other side of the climate fight is fierce and well-funded.
The oil and gas industry spent more than $81.9 million on lobbying in the first three quarters of 2021, according to watchdog website Opensecrets.org. In the first quarter of 2022, the country’s major oil and gas companies spent $12.4 million on lobbying.
“During the first three months of 2022, [those] companies have spent millions lobbying congress on a range of issues and bills, including Biden’s stalled legislation to build back better, carbon capture and sequestration, and federal oil and gas leases , according to filings,” opensecrets.org reported.
“We’re seeing a kind of arms race between left-wing and right-wing mega-donors,” Callahan said.
All of this has some experts wondering: Could other routes have made Patagonia’s dollars more worthwhile?
This is a difficult question to answer. The decision to pursue this new corporate structure was, admittedly, “highly unusual,” according to Callahan. “There are many examples of billionaires who gave away most of their wealth, and few examples of companies that got into this type of nonprofit,” he said.
Perhaps the only comparable example in recent memory is Republican donor and billionaire Barre Seid’s decision to divest his $1.6 billion electronics company to a dedicated conservative nonprofit, among other things, to the fight against climate change legislation.
In contrast, there are many recent examples of billionaires taking the more conventional route of corporate activism: the Bezos Earth Fund, named after the Amazon founder, committed $10 billion in grants over 10 years to fight climate change, and announced in 2021 it had awarded $443 million in grants to organizations focused on climate and conservation. REI, Jumping into the 501(c)(3) space, recently launched a public charity called REI Cooperative Action Fund, which gave $1.4 million to 19 nonprofits working to build a more equitable and inclusive outdoor culture. And Cotopaxi, Patagonia’s outdoor brand, operates under what it calls an “equipment for good” model, in which it donates a certain percentage of its annual revenue to the Cotopaxi Foundation, which then distributes it to charitable causes. Since 2013, the foundation has distributed more than $3 million to programs aimed at promoting education and lifting people out of poverty.
The Chouinards could also have simply sold the business, as Doug Tompkins, founder of The North Face and Esprit, did. Tompkins then used the profits for environmental causes. But Chouinard wrote in a public letter that he rejected the idea because he wants to ensure the company maintains its core values in the future. A sale, he writes, would not offer this guarantee.
Capitalism for good
Patagonia has, for years, struggled with its role as a multi-billion dollar global company in a world plagued by climate change, overconsumption and pollution.
“We haven’t figured out how to make a jacket in a way that gives back to the planet,” said Corley Kenna, Patagonia’s communications and policy manager. “That’s one of the reasons we’re investing in the food business now, because you can absolutely grow food in a way that gives back to the planet.”
It is this willingness to publicly discuss tensions over capitalism and the environment that will give Patagonia credibility in the philanthropic space, according to Banks. (Compare that to a company like Walmart, which faced criticism for running a hunger campaign while paying employees barely more than minimum wage.) Patagonia can dive aggressively into climate work with a name that carries weight, Banks said.
“They can be the real leaders showing how it can be done.”