In January 2020, Larry Fink, CEO of BlackRock, sent a shockwave through the financial world. In his highly anticipated annual letter to executives, he characterized climate risk as “investment risk” and committed to transition the company, which manages US$7.81 trillion in assets, away from fossil fuels. The New York Times called the moment “a watershed,” but to climate strategist John Hepburn, it was a long time coming. Behind the scenes, Hepburn and his coalition had pressured BlackRock on climate change since 2017.
In that same span of time, Hepburn’s coalition had also compelled roughly half of the global reinsurance industry to stop underwriting coal, cutting off access to the insurance most coal projects need to operate. With Hepburn at the helm, a small band of climate organizations was quite literally rewriting the rules of global finance. But just three years prior, Hepburn and his organization, the Sunrise Project, had focused primarily on Australia’s clean energy transition. His sudden shift in scale and approach was not random: it was catalyzed by a Climate Breakthrough Award.
The Climate Breakthrough Project launched in 2016, with John Hepburn as its first awardee. An initiative conceived by the Packard Foundation, Climate Breakthrough’s mandate was to test an innovative funding model in climate philanthropy. Recognizing that the urgency of the climate crisis was not being met with current grantmaking approaches, Climate Breakthrough would invert the traditional proposal process – scouting for talented climate strategists rather than asking for proposals. The project would then give awardees the space, time, and resources to create and scale bold climate mitigation strategies. With a track record of creativity and outsized impact, John Hepburn was the perfect fit for the program’s first award.
The Climate Breakthrough Project launched in 2016, with John Hepburn as its first awardee. An initiative conceived by the Packard Foundation, Climate Breakthrough’s mandate was to test an innovative funding model in climate philanthropy. Recognizing that the urgency of the climate crisis was not being met with current grantmaking approaches, Climate Breakthrough would invert the traditional proposal process – scouting for talented climate strategists rather than asking for proposals. The project would then give awardees the space, time, and resources to create and scale bold climate mitigation strategies. With a track record of creativity and outsized impact, John Hepburn was the perfect fit for the program’s first award.
Climate Breakthrough encouraged Hepburn to think beyond Australia and his existing programs, giving him both significant funding — $5 million dollars over three years — and personalized support as he developed and rolled out his strategy. After months of research and gathering input from experts around the world, Hepburn unveiled his global finance-focused approach, targeting both asset managers like BlackRock and the reinsurance industry. Despite early skepticism from some finance professionals, Hepburn soon learned that his strategy was right on target. His coalition quickly found a foothold in the finance sector.
While Hepburn exited the three-year Climate Breakthrough program in late 2019, he continues to campaign in climate finance. Through the Insure Our Future coalition (formerly Unfriend Coal), his organization and its partners are now persuading insurers to avoid insuring all new fossil fuel projects, not just coal. The BlackRock’s Big Problem coalition also continues to hold BlackRock accountable to its climate promises, and the Sunrise Project is now expanding its campaign to convince private banks, activist investors, and other financial players to act. With early successes under his belt, Hepburn has attracted additional funders to support not only his work but the climate finance field more broadly.
We knew that we were taking a risk in launching the Climate Breakthrough Project, but we had to act on the evidence. Traditional approaches to funding climate change make an impact, but they also can overlook powerful ideas and incredible leaders.
Director of the Conservation and Science Program at the Packard Foundation
In early 2016, John Hepburn was in the thick of a campaign targeting the coal industry in Australia. Although his opponents saw coal as a bedrock of the Australian economy, Hepburn saw the possibility for change. Through his organization the Sunrise Project, he developed a social movement strategy to transition Australia from coal to renewables. In just a few years, Sunrise had supported dozens of communities in Australia looking to move to renewable energy, stop coal mines, and protect fragile ecosystems. While Hepburn had even more audacious ideas to tackle climate change, this approach was gaining ground in Australia, and it consumed his every minute.
On the other side of the globe, the Climate Breakthrough Project was taking shape. A new report, commissioned by the Packard Foundation, had identified serious holes in existing philanthropic funding for climate projects. In interviews with dozens of climate leaders around the world, a clear theme emerged: there was a dangerous mismatch between the urgent, complex nature of climate change and the siloed, restricted, and small funding opportunities that existed – no matter the climate issue area. “The problem wasn’t so much what we were funding but how we were funding,” said Climate Breakthrough Executive Director Savanna Ferguson, who helped lead the research. In response to these findings, the Packard, Oak, and Good Energies foundations decided to trial a new theory of change: they would seek out extraordinary climate leaders and give them the time, space, and resources to develop and implement breakthrough strategies for the climate, rather than requesting proposals upfront. “We knew that we were taking a risk in launching the Climate Breakthrough Project, but we had to act on the evidence. Traditional approaches to funding climate change make an impact, but they also can overlook powerful ideas and incredible leaders,” said Walt Reid, Director of the Conservation and Science Program at the Packard Foundation and founding board chair of Climate Breakthrough.
Late in 2016, the Climate Breakthrough team selected John as its first awardee. Hepburn didn’t submit a proposal to receive the award, nor did he apply to receive the $5 million award from Climate Breakthrough.
HEPBURN’S STRATEGY TAKES PLACE
Once he became an awardee, Hepburn’s first challenge was to think beyond the institutions with which he had built his expertise. The Climate Breakthrough team encouraged him to create something new at a scale he had not previously attempted – something that rose to meet the urgency of the climate crisis. This encouragement was also backed with funding. At $5 million USD, Hepburn’s award was more than the total annual revenue of the Sunrise Project in a year, allowing him to think beyond the previous boundaries his organization faced.
Hepburn had spent years at the Sunrise Project and a decade with Greenpeace Australia Pacific focused on coal in Australia alone. Now he was able to set aside the restrictions of his past projects. Instead of looking for cracks in the hold coal had on Australia, he could chip away at the structures that buttress coal all over the world. While he and his core advisors scoped many possibilities, they were drawn to the ways the financial sector underpins fossil fuel production. They decided to dig deeper.
To inform his thinking, Hepburn gathered minds from across the financial sector – insurers, venture capitalists, hedge fund managers, bankers – and brought them together with some of the smartest, most disruptive activists he knew. He asked them all the same questions: how does the global finance system work, and how do you catalyze a shift in the finance sector out of fossil fuels and into clean energy? The unlikely group hammered out a power map of coal’s connections to finance. Then they identified possible areas for catalytic interventions, which ultimately became the pillars of Hepburn’s strategy. After the meeting, it was clear to all involved there was breakthrough potential a new approach.
HEPBURN’S STRATEGY TAKES PLACE
After months of research, conversations, and support from the Climate Breakthrough team, Hepburn settled on targeting two powerful finance forces to phase out coal: insurance companies and asset managers.
Simultaneously, Hepburn saw potential in pressuring asset managers — responsible for managing trillions of dollars of client investments — to take climate change seriously. Asset managers are frequently the largest shareholders in major corporations and wield incredible power and influence in the market. If they were to shift investment away from coal and demand climate commitments from the companies they invest in, it could have a profound effect on the financial outlook of coal. The w
To execute each of these strategies, Hepburn and his team at the Sunrise Project took a lesson from their work in Australia, building out and coordinating a coalition of like-minded organizations rather than going it alone. Climate Breakthrough’s funding allowed the Sunrise Project to regrant to ally organizations so they had capacity for coalition work. Together, these groups became Unfriend Coal (now Insure Our Future) and BlackRock’s Big Problem.
There’s no one in the finance sector that woke up after [BlackRock’s] announcement and thought that coal has a future.
John hepburn
breakthrough impact
The finance industry experts who Hepburn consulted during his strategy development were not confident he would be able to convince insurers to sideline coal. The proposition simply didn’t benefit insurance companies financially. But Hepburn wasn’t relying on financial analysis to convince insurers – his argument was centered on ethics and self-identity. His plan began to work almost immediately.
By the end of 2017, 15 major insurers had divested US$20 billion in assets from coal. The momentum kept building. By 2020, Hepburn explains, “We shifted basically half of the global reinsurance industry to adopt policies to stop underwriting coal projects, which is something that people said was impossible. Now we’ll push them on oil and gas as well, and that momentum is real, it is sustained, and it’s going to keep on building.”
Meanwhile, the BlackRock’s Big Problem coalition was relentlessly campaigning for BlackRock and CEO Larry Fink to act. Finally, in January 2020, both the company and Fink relented. In his annual letter to CEOs, he proclaimed “a fundamental reshaping of finance” due to climate change. He then outlined a suite of more tangible commitments, including removing companies that generate more than 25% of their revenues from thermal coal production from their actively managed funds and offering new sustainable versions of their indexes. Hepburn reflects, “I think we’ll see the BlackRock decision in the future as a key milestone in the global transition of the finance sector out of fossil fuels, because they are the largest asset manager on the planet.”
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Hepburn’s work has also dramatically shaped the funding landscape for finance-focused approaches to climate change mitigation. Funders who were once hesitant to back untested finance-focused campaigns are now supporting new initiatives in the space, including the work of Hepburn’s coalition partners. Hepburn was able to secure funding for his organization to continue to scale his work after his time with the Climate Breakthrough Project had come to an end. Now he sees an opportunity to grow where there was once a fundraising dead-end. “The ripple effect of John’s work within the funding community is a testament to the power of a truly breakthrough idea,” said Walt Reid.
Hepburn’s success represents a seismic shift in business as usual within the finance sector, and an opening up of space and creativity for climate advocacy organizations. However, it is nearly impossible to quantify the impact in the terms climate philanthropy is used to: how many tons of carbon will stay in the ground. The Climate Breakthrough Project intentionally pushes for non-linear, systems-level strategies to meet the urgency of the climate crisis, even though they are difficult to measure. It is dedicated to tracking the ripple effects of Hepburn’s work, and all awardee strategies, long after they leave the program. The quantifiable emissions impact of their work will likely only be visible years from now.
Project update 4/30/22
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