Key Takeaways

• In September, Patagonia Founder Yvon Chouinard donated the company by giving 98% of non-voting shares to a 501(c)(4) — the Holdfast Collective — meaning all profits will go to the Collective in order to fight climate change. 2% of voting shares were transferred to a private trust — the Patagonia Purpose Trust — allowing the Chouinard family to retain control of the company.
• Global Giving states that "estimates of how much money it would take to end global climate change range between $300 billion and $50 trillion over the next two decades." Other estimates range from $300 billion to $131 trillion.  
• Experts argue that the Holdfast Collective could best utilize the funds to fight climate change by influencing political leaders, giving directly to grassroots organizations and frontline communities, and investing in technologies to fight climate change.

Introduction

Patagonia To Donate All Profits

• On September 14, 2022, Patagonia Founder Yvon Chouinard announced he was giving the company away, stating: "we are going to give away the maximum amount of money to people who are actively working on saving this planet."

• In the arrangement, "Chouinard donated 98% of his non-voting shares in the company to a nonprofit, the Holdfast Collective. However, 2% of the shares -- which make up all of the company's voting shares -- will be retained in the Patagonia Purpose Trust," allowing the Chouinard family to retain total control of the company.
• The Holdfast Collective is structured as a 501(c)(4), allowing the nonprofit to dodge income taxes but also to participate in politics. By donating the company to a purpose-created entity, the transaction will avoid a tax bill of $1.2 billion and instead pay just $17.5 million in taxes.
• The donation is valued at more than $3 billion, which is significantly less than other billionaires have donated in the past.
• Chouinard states that the motivation for donating the company was his being listed as a Forbes billionaire as well as the COVID-19 pandemic.
• While Chouinard did not state exactly how the Holdfast Collective would use the funds, he did state that the "focus will be on nature-based climate solutions such as preserving wild lands...[and] will also be able to build on Patagonia’s history of funding grass roots activists but it could also lobby and donate to political campaigns."
• Overall, experts state that "the unprecedented move itself won't be enough to make significant strides in curbing emissions and the rise in global temperatures. But the domino effect that results from inspiring future philanthropists to make similar donations could reverberate throughout the climate fight."

Cost to Solve Climate Change

• The Climate Policy Initiative estimates that global spending to combat climate change would need to amount to $4.13 trillion per year in order to keep temperatures from rising more than 1.5 degrees Celsius.
• Global Giving states that "estimates of how much money it would take to end global climate change range between $300 billion and $50 trillion over the next two decades." Other estimates range from $300 billion to $131 trillion.  
• Bank of the West reports that "the annual global climate investment averaged a meager $632 billion per year over 2019 and 2020," which "accounts for direct investment in things like infrastructure, energy efficiency, and other big-ticket initiatives around systemic change to mitigate or adapt to climate change. (The numbers don’t include donations or the funding of things like research and development or public information campaigns.)"

 

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• According to Climate Works, in 2020, an estimated $6 billion to $10 billion in philanthropic giving was designated for climate change mitigation. This was an increase of 14% from 2019.

 

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• Of the total $6-$10 billion, climate foundations donated an estimated $1.9 billion, while the rest ($4-$8 billion) came from individual giving.

 

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Putting the Patagonia Donation Towards Political Action

• Some experts recommend that the $3 billion Patagonia donation should be used to directly influence politics, in order to have the most far-reaching affect. Daniel Hemel, a law professor at New York University, states: "What the Chouinards realize is that effective action to protect the planet from climate change is going to need to be government action. Three billion dollars potentially can make a difference in elections....they could be leveraging that fraction of $3 billion into hundreds of billions in additional climate investment."
• Ashok Swain, editor-in-chief of the journal Environment and Security, argues in favor of using the funds for political action; specifically to "leverage influence among world leaders of some of the most important countries in the climate discussion — namely the U.S., China and Russia." He states: "We need to counter the political actors who are being bought by big companies."
• According to McKinsey, one "promising focus area" for climate change donations is "fostering policy environments and civil societies driven to fight climate change." McKinsey recommends teaching public servants about climate change and how to fight it, funding community and national advocacy groups to influence policymakers and staging public awareness campaigns.

Putting the Patagonia Donation Towards Frontline and Marginalized Communities

• Experts also recommend that the Patagonia donation go towards marginalized and frontline communities where the effects are often the greatest. Rachel Cleetus, policy director and lead economist at the Union of Concerned Scientists' climate and energy program, states: "It's often Black and brown and indigenous communities and very low-income communities -- so seeing where the needs are most acute. Very often, there are also communities that are bearing the brunt of pollution from fossil fuels and have for a long time."
•  Peter Galvin, co-founder of the Center for Biological Diversity, supports giving the money directly to grassroots organizations. This would be in-line with the company's charitable history, as well as have the potential to sway political leaders via public pressure.
• McKinsey emphasizes the importance of this approach, stating: "Climate change is expected to adversely impact vulnerable communities around the world... Philanthropies can help communities to cope with the socioeconomic impacts of climate change and the net-zero transition by building resilience and supporting environmental-justice efforts."

Putting the Patagonia Donation Towards Technology

• Experts also state that the funds could be used to invest in technologies that fight climate change, such as batteries and renewable power.
• McKinsey highlights the importance of philanthropies "investing in climate solutions that lack market support," as philanthropies can handle the higher level of risk that come with these types of investments.
• McKinsey states that increased investment in these areas is need if warming will be kept under 1.5 degrees Celsius specifically in the areas of wind power, solar power, electric vehicles, green hydrogen and CCUS.

 

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Research Strategy