Finance
Investments + Divestments
Nonprofit organizations are no longer limited in achieving their mission through programming alone. Increasingly, investment committees of museum boards look to their endowments to affect social change by investing in companies that align with their values and mission.
This approach can start with choosing to divest from fossil fuels and other investment areas or more proactively choosing ESG (environmental, social, and governance) investments. At the Wild Center, our staff and Finance Committee have begun the process of board education and support for selecting some ESG investments in our endowment portfolio. This Promising Practice provides a glimpse of that work and supporting resources to get you started.
Photo description
Attribution: Lemon Brooke
Where we were/what started this process
Nonprofit organizations are no longer limited in achieving their mission through programming alone. Increasingly, investment committees of museum boards look to their endowments to affect social change by investing in companies that align with their values and mission. This approach can start with choosing to divest from fossil fuels and other investment areas or more proactively choosing ESG (environmental, social, and governance) investments. ESG investments are scored and screened based on corporate policies that encourage companies to act responsibly. How is the company protecting the environment? How is the company managing relationships with the community, employees, suppliers, and customers? Governance measures a company's leadership including diversity at the board level as well as executive pay, audits, internal controls, and shareholder rights.
In some cases, depending on the organization's mission, divesting of certain specific investments such as fossil fuels, gun manufacturing, or use of animal testing provide clear examples of how that policy aligns with the museum's mission.
What we are doing
At the Wild Center, our staff and Finance Committee have begun the process of board education and support for selecting some ESG investments in our endowment portfolio. To start this process a portion of our portfolio is devoted to ESG investments and will be compared to traditional investments over time with the goal of shifting more funds to ESG if returns are acceptable.
There is a widely held misconception that ESG products and offerings do not perform as well as traditional investments. There is growing evidence that sustainable investments, including renewable energy, clean technology, and conservation initiatives, can provide competitive or even superior financial returns compared to fossil fuel investments. Boards, with their fiduciary responsibility, are typically inherently conservative when managing organizational funds. They might argue that prioritizing ethical or environmental considerations over financial performance could breach this responsibility. Prepare a counter argument with relevant research and industry trends.
In order to embrace ESG investing, portfolio managers need to have expertise in the area and continually educate boards and staff about current trends and expectations. The opportune time to seek this expertise or to change portfolio managers is when issuing RFPs (request for proposal) for the service. This opportunity may only present itself every three years or so. Potential investment managers will need to demonstrate their expertise in this area and this requirement should be clearly stated in the RFP language.
To start this conversation in the museum setting first educate yourself on ESG and divesting. Find a Finance Committee ally to work with and explore the process and policy change for your organization. Strive to find consensus across the finance and larger board governance structures. This is not an activity that can be achieved by staff alone and may require many rounds of discussion at the board level.
There are excellent resources written on this topic. It is most important for museums to consult those after reading this introduction. See links below.
Where we want to go
As we compare traditional investments to our ESG investments over time, our goal will be to shift more funds to ESG if returns are acceptable.
Attachment list and links
Sustainable Investing: A Practical Guide for Museums (American Alliance of Museums): https://climatetoolkit.org/category/investments/#:~:text=Resources%3A-,Sustainable%20Investing%3A%20A%20Practical%20Guide%20for%20Museums%20(American%20Alliance%20of%20Museums),-Climate%20Toolkit%20Webinar
Sustainable Investing Part 3: Case Study of the Phipps Conservatory and Botanical Gardens: https://www.aam-us.org/2020/01/14/sustainable-investing-part-3-case-study-of-the-phipps-conservatory-and-botanical-gardens/
Investments information from The Climate Toolkit: https://climatetoolkit.org/category/investments/
Climate Toolkit Webinar 7 “Divesting from Fossil Fuels and Responsible Investing”: https://www.youtube.com/watch?v=vl7avCPntKI
Investing in Fossil Free Funds: https://fossilfreefunds.org/
Cost Benefit Analysis
A cost-benefit analysis is the process of comparing the estimated costs and benefits associated with a project to inform decision making. The basic principles and framework can be applied to virtually any decision-making process, including efforts to reduce the carbon footprint of a facility.
All anticipated project costs are tallied up and subtracted from the total anticipated benefits. This value can then be represented as a ratio or chart. If the projected benefits outweigh the costs, you could argue that the decision is a good one to make. If the costs outweigh the benefits, then you may want to rethink the project. There are enormous economic benefits to running this kind of analysis before making significant decisions.
In this Promising Practice, explore a few examples of how we’re using cost-benefit analysis to support carbon reduction efforts at Chicago Children’s Museum.
New Air Handling Unit installed at Chicago Children’s Museum
Attribution: © 2023 Chicago Children’s Museum
Where we were/what started this process
Chicago Children’s Museum (CCM) operates 61,000 gross square feet of leased space at Navy Pier on Lake Michigan. We have three floors of exhibits and a mezzanine office level. This location was built in 1995 inside the historic Navy Pier, which itself was built in 1916.
Throughout the museum’s existence, it had several exhibits and programs that used recycled and reused materials. One such exhibit was Stinking Truth About Garbage. It included a large landfill hill with tunnels, worm gardens, and a recycled arts station where guests assembled small artworks with assorted cast offs from Chicago’s disappearing manufacturing industry.
In creating exhibits, CCM generally tried to be green through the lens of visitor and staff safety. We used low or zero VOC (volatile organic compounds) paints and adhesives, wood products without added formaldehyde, and natural materials where possible.
Efforts to reduce electric energy use were small in scale such as installing occupancy sensors in staff only rooms. For years, the museum consumed over 1.5 million kWh of electricity annually.
Starting in 2012, an effort began to reduce energy consumption through energy efficiency improvements and equipment replacements.
What we are doing
Energy efficiency is the use of less energy to perform the same task or produce the same result. It is one of the easiest and most cost-effective ways to combat climate change and reduce energy costs. Energy efficiency is also a vital component in achieving net-zero emissions of carbon dioxide through decarbonization. Energy efficiency saves money, increases the resilience and reliability of the electric grid, and provides environmental, community, and health benefits.
In 2012, CCM was using approximately 750 PAR38 halogen flood lights, each burning 93 watts of electricity 12–16 hours per day, at an annual cost of over $30,000. Finally, the purchase price of LED replacements came down to $50 each, making it affordable for CCM to replace the halogens and pay for it in electrical savings in 18 months. We knew this by using cost-benefit analysis, factoring purchase price, installation labor, and annual electric costs. Overall, we saw a reduction of 330,000 kWh in electricity and total dollar savings of over $36,000 per year. Today, comparable LED flood lamps cost much less.
In 2013, CCM began planning a renovation to 40% of the museum. This gave us an opportunity to make several changes to reduce our carbon footprint further, so we looked at our HVAC system and light fixtures. After years of planning and budgeting, the museum finished this renovation in 2018, having replaced 85 light fixtures, converting lighting to LED, and reducing electric consumption in this area by 68%.
In 2020, like many facilities, CCM was trying to understand how to provide a safe environment during a pandemic. We considered several modifications within our HVAC system, but those did not address the air within the local environments and were rather costly. Using cost-benefit analysis along with a commitment to safety, the museum chose to install localized air purification systems within closed rooms. These systems, known by the brand name UV Angle, continually purify the air and surfaces using UV3 light and use only 27 watts of electricity.
In February 2023, CCM opened a new water play exhibit using high efficiency pumps in a recirculating water purification system. It uses 336 fewer gallons of water than our previous exhibit, which was routinely drained.
In late 2023, CCM completed a long process to replace two 80-ton Mammoth Air Handling Units (AHUs). This improvement to our HVAC system is expected to reduce electrical energy use in this area by 30%, by using an array of variable speed drive fans, instead of one large single speed fan. The compressors are more efficient, and we get better indoor air quality by using MERV 13 filters instead of MERV 8 as the previous AHUs did.
Where we want to go
Chicago Children’s Museum is planning to work on a process of decarbonization with Verdis Group. This will include a Climate Action and Resilience plan, and hopefully a NetZero Pathway going forward for CCM. We don’t really know what this will entail. We can look at purchasing electrical energy from sustainable sources, but we don’t likely have much opportunity for onsite generation, being a tenant of a larger facility. A big part of our carbon footprint probably results from being a destination that people travel to. How we address this will be one of many things we look forward to finding solutions to.
Attachment list and links
ROI & Energy Savings Calculator https://www.electricalmarketplace.com/pages/roi-energy-analysis
Cost Benefit Analysis Template: Cost Benefit Analysis Template.xlsx
Nicer charts coming
Fundraising
The importance of getting children outdoors and playing in nature was a highlight of Discovery Museum’s 2013–2017 capital campaign, which funded the Discovery Woods nature playscape.
Since then, we have refined our fundraising message around outdoor and environmental education and sustainability, anchored around capital projects and adapting to changes in funder interests through and beyond the COVID-19 Pandemic.
Discovery Museum’s wheels-accessible treehouse.
Attribution: Mitchell Green
Where we were/what started this process
As a museum that was never considered a destination for outdoor or nature-based play, Discovery Museum did not have a donor base poised to support a significant investment in outdoor education. However, with a 4.5-acre property in a residential neighborhood and abutting a large tract of town-owned conservation land, this new aspect of our work made sense to the community. Defining the scale of our original 2013–2016 capital investment in outdoor exploration (Treehouse and Discovery Woods outdoor nature playscape), later investments to advance the museum’s sustainability and solar conversion initiatives was the first step toward being able to tell the story to prospective investors.
What we are doing
Critical to being able to effectively raise funds for climate/outdoor/environmental education, sustainability efforts and associated capital initiatives was rooting our story in the data on how children are being affected by climate conditions and nature deprivation. For our early investors in this area, especially when we had yet to prove our ability to be successful, it was important for us to anchor our work to best practices outside the children’s museum industry and capitalize on the ways our learning environment was especially well-suited to delivering experiences in the outdoors. The “needs no explanation” nature of our Treehouse (and the immediate power of the accessible nature of our outdoor spaces) brought in donors with imagination and an affinity for the simple childhood joy of playing outside, but who perhaps did not need as strong a grasp on measurable outcomes. An early (and somewhat unmeasurable) goal of getting a certain percentage of our visitors outside for a percentage of their visit at least communicated that we intended the Treehouse and Discovery Woods to be used, not just admired.
With Discovery Woods and the Treehouse funded, we eventually branded all our outdoor and nature-based programs under the heading Backyard and Beyond—an appealing sponsorship opportunity that let us connect with companies looking to make a mark in this area. Finding new ways to link programs to the mental health and wellbeing of children and families, particularly through the COVID-19 Pandemic, has been similarly important. Updating our story regularly, showing our ability to look at environmental education with a fresh and keen eye, and acknowledging the changing, relevant social conditions has helped us engage new donors over time.
Discovery Museum has been fortunate to have several donors who are particularly passionate about this part of our work and have made it possible for us to think expansively about the why, not just the how. We’ve made sure that community members with relevant expertise are: engaged with the museum as formal or informal advisors (who often become donors); that we are actively sharing our experiences and collaborating with other museums and nonprofits of all kinds (which exposes our work to our fans and constituents); and that our town administrators and state legislators are up to date on the ways we are supporting and advancing the efforts of more “center lane” conservation and nature education organizations. Through all of this, we have seen our reputation grow by delivering on our environmental education promise, and greater trust from prospective donors.
Where we want to go
We will need to increase our investment in our museum's natural spaces in the next few years to keep those healthy, despite changing climactic conditions and heavy use by our beloved visitors. This will require a significant investment and so, for the first time, we are seeking funding that is more about the preservation of nature than about providing experiences in nature for children. This is a new but important story for us, that will require a new set of donors with a different core interest than many that have been acquired to date. We hope that in a year we will be able to report some success.
Attachment list and links
Discovery Museum Outdoor Exhibits including the Treehouse and Discovery Woods: https://www.discoveryacton.org/visit/exhibits#outdoors
