Why We’re a Nonprofit, and What that Means for You

In responding to our crowdfunding campaign, a lot of people have asked why we are approaching this as a nonprofit, and why they should donate to the cause. We thought we share some recent correspondence on this, and invite your comments as well. The fact is that the IRS agreed that our mission qualified us for exempt status, and gave us an expedited decision, so we could begin to have an impact on the challenges communities — especially low and moderate income communities — face in adapting to climate change. So we’d like you to consider supporting us — but of course you need to be the judge.

Part I
​A friend and colleague of ours has raised this issue in a very pointed way:

I don’t get this. Why would I want to make a contribution to PACE so that property / business owners can upgrade their businesses….? If these technologies are so great they should offer an ROI that is compelling without my contribution. If not, then maybe they are not ready for primetime…. What am I missing?

My initial response — which evidently was not too convincing — was the following:

Thanks for your question, and I’m glad you emailed me with it, because if we have not made this clear we’re not going to be successful with our campaign. So a couple of points to start with:

1. PACE was developed in the first place because getting property owners to reduce their carbon emissions is considered a matter of “public benefit” (this phrase is actually in the law), but they’re not doing it because (a) they don’t have the capital, (b) can’t borrow it in the regular market because of the credit crunch, (c) wouldn’t want the liability on their balance sheet even if they could, (d) don’t know how long thell keep their buildings, and (e) have other priorities for investing whatever capital they do have. So the point is, property owners aren’t making the improvements; the goal of policy makers is to remove these obstacles, and PACE is a meaningful solution.

2. To make PACE happen requires some entity (government, business, or nonprofit) to go out to municipalities, property owners, contractors, and capital providers to explain the system and get the municipalities to adopt it. This turns out to be harder than it might seem. We’re trying to do this in NJ as a 501(c)(3) nonprofit, without government support, in order to provide an open program that will encourage the maximum number of projects. Private programs tend to be “closed” or linked exclusively to one lender. Connecticut has a government program.

3. We’ve been working to bring this to NJ for 2 years on a self-funded basis. Once it gets going it should become self-supporting, but to get there we need some kind of support. We’ve applied for grants but have not yet been successful. We’ve also asked for corporate sponsorships, but companies are more tight-fisted than individuals (corporations account for only 5% of overall U.S. charitable giving).

4. If it is successful, PACE will bring an enormous amount of local economic development to NJ, and will help transform communities to being more energy self-sufficient and more resilient in the face of what’s coming at us in the form of rising sea levels, extreme weather, etc.
Finally, as a 501(c)(3) whose mission is to help communities understand, mitigate, and adapt to climate change, we need public support and community involvement. We have external trustees on our Board, but we’re not a membership organization. We are considered a “private operating foundation.” So we need funding to get to the point of being self-sufficient.

As I said, this was not sufficiently convincing. Our colleague replied that

I see where you want to go and it is an honorable objective. And there are endless wonderful things I could contribute to from aids and cancer research to poverty and gun control. Funding such causes/forwarding such objectives,to me, constitute a role government fills.

If we can not sufficiently articulate the benefits to the point where some elements in society demand to benefit from them, then the priority remains low. So to rise above marginal effectiveness, I believe that you need a political buy-in to support PACE’s objectives. I apologize if I come across as critical, I think you are wonderful and idealistic. I just do not believe that the current path will lead to the desired result. I wish you good luck in achieving your objectives and acknowledge you for your courageous and dedicated work.

​Part II
​After thinking about this for a couple of days, I tried to address these concerns as well, not so much trying to get him to change his mind, but really taking it seriously and responding in a way that might be convincing to others:

Thanks for being willing to engage in this discussion. I’d be interested to know if there are any factors, in your mind, that would be compelling.

With regard to this being a governmental function, I would very much have agreed with this a few years ago, particular when I was in the government (in Canada), but that was before I returned to America and discovered how dysfunctional U.S. governments really are, at all levels — partly, I suspect, because Americans have such a poor view of them. It’s a cycle that feeds on itself: governments do less and less that is useful, people resent what they are required to pay for, and fewer good people are attracted to the ideals of public service.

Even in Canada, I left the government because I realized it just couldn’t do certain things, things that I thought were important to try to accomplish in society. So I started several social enterprises, and led an incubator project for Fairleigh Dickinson for sustainable startups.

But there are many difficult things that need to get done, things that will eventually pay off but which don’t make enough at the outset to become profitable enterprises. Hence the nonprofit model.

We went for our 501(c)(3) because we genuinely believed that bringing PACE to New Jersey is in the public interest, and it won’t happen without our initiative. The broader mission of our nonprofit is:

  1. Providing local communities with educational services on the effects of climate change and other related issues that can affect their long term ability to regenerate their ecological and economic systems,
  2. Providing local government institutions with assistance to undertake actions and initiatives to reduce and ameliorate present and expected extreme weather and other climate change effects,
  3. Providing small businesses and non-profit organizations with funding to undertake actions and initiatives to reduce and ameliorate present and expected climate change effects in low and moderate-income communities, including communities impacted by Hurricane Sandy.

But I’d be interested to learn why you would see what we’re doing as idealistic (in the negative sense) and unlikely to succeed. It seems that the problems we have stem mainly from a lack of social entrepreneurship and initiative. If governments were able to fix this, they would have, because it’s in everyone’s interest. But they don’t know how to do this.

In both the government and the non-governmental sector, the main problem is with the choices we make about what to invest in, and how to use our resources. PACE has the potential to make a very large long term impact on our energy systems and on our economy. But right now, groups like our are the only ones taking action. If we can’t get an environmentally and socially progressive majority to support our efforts, then we’re not laying them out correctly.

So while I’m not trying to or expecting to convince you, I appreciate getting your help in thinking the issue through to a better conclusion.

The bottom line, then, is that we are a 501(c)(3), which means that our primary obligation is to the public or the community.

Perhaps if we could design things perfectly we would not need philanthropy to support public advocacy. But this does not seem likely to happen any time soon. And perhaps we can convince people that giving to support what they believe in is not so much an obligation as a right and a privilege — that in our free society we can all pitch a few coins into the basket to have some people create and promote solutions that work better for everyone.

I guess this is what I see as part of a response to the “tragedy of the commons” — which is driving our climate, and our society, over the cliff today — unless we take urgent action to stop it.

—Jonathan Cloud

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