More on Nonprofits and Climate Change

I’ve been writing and speaking on the responsibilities of virtually all nonprofits and their leaders to consider climate change (and pollution) in planning and decision-making. See, for example, What’s Your Nonprofit Doing to Fight Climate Change? Expectedly, I’ve received some push back from attorneys and others about the requirement not to divert charitable assets away from the mission. I have tried to address this concern by relating fiduciary duties to mission and values, discussing BoardSource’s Purpose-Driven Board Leadership approach, and tying these ideas to climate change. But I want to further clarify that I am not asserting the nonprofits have a free pass to go off mission with substantial allocations of assets.

Nonprofits exempt under Section 501(c)(3) of the Internal Revenue Code are subject to two important laws that would constrain spending outside of their mission:

1. State charitable trust laws that prevent a diversion of charitable assets; and
2. Federal tax laws that require that a charitable organization to be operated primarily for its stated 501(c)(3) exempt purpose(s).

These requirements may be further amplified by the wording on the nonprofit’s articles or certificate of incorporation and its bylaws.

Climate Change is Related to Mission

The argument I’m making is that climate change is directly affecting charitable missions and charity’s abilities to advance their missions. Accordingly, engaging in mission-related climate change activities may be completely appropriate and lawful for charities. For example:

An art museum may not have the preservation of environment or human health as part of its 501(c)(3) mission. However, climate change may impact its ability to draw visitors interested in learning about and experiencing the art promoted by the museum. Climate change may also impact its ability to preserve the art it has collected and the value of its other assets. So, it may be perfectly appropriate for the art museum to include among its messaging to visitors, including through its selection of art to be displayed, educational information about climate change and its impact on art.

A cancer-research charity may also conclude that climate change may impact incidence rates, the efficacy of treatments, and access to treatments and care. Accordingly, it may be appropriate for the charity to research these impacts and design strategies to address the threats climate change poses to those with cancer.

A civil rights charity may be well aware that climate change can disproportionately impact BIPOC and other historically disadvantaged persons. This may prompt the need to consider how to address this issue moving forward and correcting past harms placing these groups at increased jeopardy.

Activities That Are Not Mission-Related

In all of the examples above, there are considerations of how climate change is impacting the charity’s ability to further its mission for the benefit of its intended charitable class. There is also recognition that the persons benefited by the charity do not live in isolation of their communities with which they are interdependent. But that doesn’t mean that a charity can do anything to benefit the community even if it’s unrelated to the charity’s mission.

For example, the art museum described above cannot devote a substantial part of its resources to benefiting tsunami victims in another part of the world if such contribution was not related to its charitable and educational mission. Similarly, the cancer-research charity cannot direct a substantial part of its activities to advocating for climate change mitigation efforts for reasons unrelated to understanding, treating, and lowering the incidence rate of cancer. And the civil rights charity probably cannot invest all of its investment assets in renewable energy companies without violating applicable prudent investor laws.

Resources

Why climate change is a risk to all our missions (Liz Gadd, NPC)

Charities and climate change (Ioan Marc Jones, Charity Digital)

It’s time for philanthropy to step up the fight against climate change (Suzanne Cox, Tom Hellstern, Kimberly Henderson, Tracy Nowski, Maisie O’Flanagan, Dickon Pinner, Taylor Ray, and Adam Sabow, McKinsey & Company)

Charities, climate change and good governance (OSCR – Scottish Charities Regulator)