When Patagonia founder Yvon Chouinard announced last week that he and family members would be giving away the company to use its profits to help fight climate change, the move was hailed as historic and remarkable by philanthropic experts.
The outdoor retailer, which has always championed sustainability and environmental efforts, once urged people to “think twice” before buying one of his iconic jackets. Well, after deciding to give the company away for free, some observers actually think twice about whether the giveaway is really that groundbreaking.
According to some legal experts, this is a typical tax move.
As the New York Times first reported, Chouinard, his wife and their two adult children transferred all of the company’s voting stock, or 2 percent of all shares, to the newly formed Patagonia Purpose Trust. The remainder of the company’s stock was transferred to a newly formed social welfare organization, the Holdfast Collective, which will pour a projected $100 million a year into environmental nonprofits and political organizations. Patagonia Purpose Trust will oversee this mission and the operations of the company. The giveaway was valued at around $3 billion and earned no charity deduction as the family paid $17.5 million in taxes on the donation to the trust.
While the move is groundbreaking in the world of philanthropists, New York University law professor Daniel Hemel told Quartz that the giveaway allowed the family to take advantage of a tax law maneuver often employed by philanthropists. The Chouinard family eventually paid more than $17 million in taxes, but Hemel found that the payment represented only a small percentage of the donation made, and the way the trusts and governing organizations played out allowed the Family still calling shots at both the business and its future charitable contributions.
The Chouinard family gift has been compared to a recent move by conservative billionaire Barre Seid, who sold his entire company for $1.6 billion to fund right-wing political campaigns. When The New York Times reported on Seid, it was noted that his transaction was shadowed in dark money while Patagonia’s was historic, although both billionaires have funneled money into 501c4 organizations. Hemel called out this juxtaposition to both Twitter and in his recent interview, in which he said the gifts were “essentially similar.”
Billionaires use charitable donations to address a variety of issues, from right-wing politics to protecting wildlife. Matthew Nisbet, a professor of communications and public policy at Northeastern University, has previously openly opposed the role of philanthropy and billionaires in climate change, telling Grist that the newly announced decision in Patagonia could be welcomed by many in the environmental industry, but Yvon Chouinard has essentially deviated from a reluctant billionaire to a political faux pas.
“Now that they’ve invented this (model) and launched it in the market for politically motivated billionaires, everyone will do it regardless of their background,” Nisbet said. “This is an escalating zero-sum political arms race.” In forming the new 501c4 Holdfast Collective, Nisbet compared this new organization to other big-name political fundraising groups such as the National Rifle Association and the conservative Club for Growth.
A 501c4 organization that is considered a tax-exempt charity by the Internal Revenue Service is not required to disclose its donors, but is required to disclose funds granted to other organizations of $5,000 or more. 501c4 organizations may engage in political lobbying related to the organization’s mission, but may not advocate for or against any particular candidate.
Nisbet feared that the flow of cash controlled by an interest group would push the agenda of climate issues in the political arena. “Do you think our policies should be decided by billionaires who can spend hundreds of millions of dollars on elections, with no accountability, no transparency, and pick and choose winners or issues?” he asked.
A lack of transparency around political spending and philanthropy has marred public perceptions of charitable giving, leading to a longstanding scrutiny dating back to the 20th-century oil baron John D. Rockefeller’s establishment of his eponymous foundation. 501c4 organizations have funded anti-climate Facebook ads and are directly influencing state-level climate legislation without knowing who is funding these actions. While the source of the Holdfast Collective’s funding will come directly from Patagonia’s profits, Nisbet said he worries the new organization could become a way for other billionaires to donate and impact climate issues. Modern billionaires have taken climate change, the environment and agriculture under their charitable wing more frequently in recent years, despite the fact that 10 percent of the world’s richest people are responsible for half of the world’s carbon emissions.
Soon-to-be-trillionaire Jeff Bezos launched a $10 billion Bezos Earth Fund in 2020, but Amazon has come under fire from watchdogs for underreporting its carbon footprint, penalizing climate-focused workers and polluting neighboring communities. Bill Gates has focused his philanthropy on agriculture and global hunger, while critics accuse him of devouring American farmland and cornering the seed market. Both Bezos and Gates have poured billions into tech-driven climate solutions, and Tesla founder Elon Musk has also committed $100 million to carbon capture innovations.
Patagonia has increased its political presence in recent years, going to court to fight for the preservation of Utah’s Bears Ears National Monument, joining anti-logging litigation and speaking out on voting rights. The outdoor retail giant has a long history of charitable giving, having donated 1 percent of all profits to environmental causes for decades and giving back $10 million in tax cuts to climate protectors.
Patagonia spokesman Corley Kenna told Grist that there are currently no publicly announced organizations where the company’s future funds will go, but “all options are on the table.” She said Chouinard and the Holdfast Collective are interested in addressing the root causes of the climate crisis, including land and water conservation, grantmaking to local groups, and a funding policy focused on solutions.
The spokesman strongly dismissed criticism that the recently announced corporate transition was not rooted in transparency and would fuel untraceable funds, citing Patagonia’s long history of transparency in manufacturing, donations and governance.
“Yvon Chouinard, the Chouinard family and the Holdfast Collective are not an extension of any political party,” Kenna said. “What we’re talking about here is a family committed to addressing the existential crises of our planet.”
With big-name corporations and wealthy families joining the fray, climate-focused philanthropy has grown in recent years but still accounts for less than 2 percent of global giving, according to a report by the ClimateWorks Foundation last year. Shawn Reifsteck, the foundation’s vice president of strategy and communications, said Patagonia is “blazing a new path for companies to give back to generations to come,” and he hopes others will follow. Philanthropic strategist Bruce DeBoskey said that as more philanthropists realize that the traditional model of writing checks and grants has not been successful in solving broader societal problems, billionaires are embracing new giving models like the Chouinard family giveaway.
“It’s not about changes in tax laws that I’m aware of,” DeBoskey said. “It’s about rethinking.”