So You Think Spending $10 Billion on Climate Change Is Easy? Think Again.
Why managing the Bezos Earth Fund will be more challenging than it seems
This is the second article in a two-part series on Jeff Bezos’s announcement to pledge $10 billion toward safeguarding the Earth’s climate. Part I offers an opinion about what the Bezos Earth Fund should spend its money on.
How do you spend $10 billion to address climate change? Many have weighed in on this question in the wake of Jeff Bezos’s gargantuan climate pledge. Most comments focused on the issue of what to spend that money on, mine included. Yet there is another, equally important, issue:
How, exactly, should the Bezos Earth Fund go about deploying its endowment?
In structuring and managing Bezos’s initiative, the stakes are high. Get it wrong and your $10 billion will be a mere footnote in the history books on climate action. Get it right and you might catalyze the most effective response to global warming the world has ever seen.
In this article, I draw on my experience as a member of the leadership team of the Climate Knowledge and Innovation Community (Climate-KIC), the EU’s primary climate innovation initiative. For years, my colleagues and I have been tinkering with different approaches to managing grant money in service of climate action. Here’s what we have learned.
Choosing the Right Intervention Model
At first, the stewards of Bezos’s pledge must choose an intervention model, the high-level grant-making strategy of the Earth Fund.
Traditional grant-making follows the point-solutions paradigm. It selects initiatives in isolation and convenes consortia for one-off collaborations. It uses accountability frameworks that focus on quantitative, output-related KPIs but ignore system-level outcomes. And it rarely invests in systematic learning.
Many in the social impact community have started to recognize the limitations of this approach for addressing complex systemic issues. In response, an increasing number of organizations — including UNDP and Finland’s national innovation fund Sitra — are now turning to a new model: the portfolio approach.
“Portfolios” are deliberately composed clusters of joined-up initiatives that enhance each other and enable learning at the system’s level. Well-composed portfolios exhibit diversity in terms of change levers, geographic spread, and risk profiles. They leverage existing networks and communities and involve not only solution providers but also “problem owners” such as national governments, mayors, and corporate executives.
Central to the portfolio approach is the practice of learning and sensemaking. Its purpose is to generate intelligence to direct additional resources to those interventions that work.
Structure & Organization
In a portfolio approach, the Bezos Earth Fund would operate as a “backbone organization”. It would orchestrate the portfolio composition and management process. It would convene, engage, and empower a climate action community. And it would monitor the progress of individual activities and of the whole portfolio to generate and disseminate learning.
Yet the sheer size of Jeff Bezos’s climate pledge creates a dilemma for structuring such a backbone organization.
On the one hand, direct grant-making at the billion-dollar scale is resource-intensive. The Bill & Melinda Gates Foundation, which grants about $5 billion per year, has close to 1’500 employees. If the Bezos Earth Fund were to copy this model, it would have to hire hundreds of people.
On the other hand, the number of climate-oriented organizations that could act as intermediaries is small. Not many have experience handling even a fraction of a $10 billion budget. For comparison, Climate-KIC grants approximately €80 million per year. And the “largest-ever philanthropic investment” in climate action — a combined $4 billion over 5 years pledged by a coalition of international foundations — equates to an annual $28 million per organization.
So is the solution to issue a small number of mega grants?
Not necessarily. Large projects tend to suffer from coordination problems and wasteful spending, as shown by the EU’s €1.2-billion Human Brain Project. And whilst “moonshot projects” may capture the public’s imagination and the media’s attention, they are extremely difficult to pull off. Just consider the struggles of Google X to bring products to market or the scaling challenges of the Rockefeller Foundation’s 100 Resilient Cities program.
In addition, the complexity of climate change — and of the cultural, economic, and political contexts in which climate action takes place — warrants prioritizing breadth over depth, as captured in Bill McKibben’s famous “silver buckshot” metaphor. Many in the climate community have thus started to embrace a “mushroom approach” (or mycelial thinking) as a mental model for conceptualizing climate action.
There are also practical reasons for why mushrooms beat moonshots in our fight against global warming. According to David Snowden, the intellectual father of the Cynefin Framework, conducting fail-to-safe experiments — probing, sensing, and responding to what emerges — is the most effective strategy for addressing complex challenges. So grant-making for systems change often begins as a game of small sums. For instance, when Climate-KIC set out to explore the relevance of distributed ledger technology for climate change — a seemingly vast topic — the first step was to commission five studies of potential use cases for €50’000 apiece.
Further, few actors in the climate action community — researchers, innovators, lobbyists, entrepreneurs, activists — are organized to handle large grants. Most are used to operate with sums ranging from a few hundred thousand to several million. For example, the average size of a grant from ARPA-E — the US government’s main renewable energy research initiative — is $2.7 million. For many recipients, more money won’t mean more impact.
By definition, dilemmas have no right answers. So the Bezos Earth Fund faces an optimization problem spanning questions of efficiency, effectiveness, and scale. Solving for it has important implications for how the Fund needs to be structured and managed.
When spending a fortune to address the biggest threat to humanity, it would be easy to downplay the importance of operations. Yet getting operations right is critical.
The key tension sits between administration and accountability. A light-touch administrative approach is efficient but increases the risk of imprudent and wasteful spending. A heavy-handed set-up with lengthy application procedures and detailed reporting requirements promotes quality but spooks many of the most intriguing innovators.
Fortunately, few people are better positioned to resolve this trade-off than the founder of the world’s largest e-commerce company. Yet grant-making is a discipline of its own. Effective organizations…
- operate with multi-year funding cycles and front-loaded cash disbursement,
- leverage smart algorithms to (partially) automate the proposal evaluation and selection process,
- pursue a “sampling approach” to reporting, with a single-stage audit regime,
- collect data in a user-friendly grant management system,
- crowd-in other sources of public and private funding, and
- maintain a diverse toolbox of different granting and investment mechanisms and match these carefully to individual initiatives based on the nature and risk profile of the intervention.
Geographic proximity is critical, too. An organization emphasizing learning and cross-disciplinary collaboration will find it easier to deliver on its mission if its people share the same physical space.
Another critical issue is the design of a useful impact measurement framework. Traditional grantors and impact investors tend to focus on unit-level impact potentials, such as CO2 emissions savings. Yet climate change is a problem that exists in the aggregate, so what matters are outcomes at the level of whole systems.
What should a systemic impact model for the Bezos Earth Fund look like?
It’s not clear. At Climate-KIC, we have been grappling with this question for years. What is clear is that such an impact framework must build on plausible theories of change, measure systems-level dynamics and outcomes, and use a blend of quantitative metrics and impact narratives.
Leadership, Competencies, and Culture
Managing a mission-oriented backbone organization comes with extraordinary demands on leadership. Every function in the organization is of strategic importance, every member of staff is a variable in the initiative’s impact equation. The philosophies and tools of leadership must be attuned to the nature of the complex challenge at hand — and that’s a very different context for leadership than the linear, predictable world of e-commerce.
The ultimate task for the Earth Fund’s management team is to cultivate the right social, learning, and decision-making dynamics needed to enable the portfolio approach. Specifically, it must invest in a set of core competencies and mindsets that include qualitative reasoning, curiosity, active listening, visual representation, systems thinking and pattern recognition, action learning, reflective questioning, and transdisciplinarity.
No organization embodies this quality of leadership, competency, and culture from the outset. So the first day of the Earth Fund’s operation will mark the start of a multi-year organizational development journey.
Designing a vehicle fit for spending $10 billion in service of climate action is hard. Trade-offs abound and there are no obvious solutions. Fortunately, there are dozens of initiatives that have tinkered with different models. Some work, some don’t. The Bezos Earth Fund should not only build on the experience and assets of existing initiatives. It should also seize the opportunity to push the boundaries of what’s possible in our struggle to safeguard human civilization as we know it.