Hedge Fund-Financed Green Group Discloses $50M in Grants

Nat Simons’ Sea Change Foundation finances advocacy that benefits his venture capital firm

Nathaniel Simons' boat 'Elan' / Lachlan Markay
• September 8, 2015 5:00 am


A foundation funded by opaque financial vehicles poured nearly $50 million into leading liberal and environmentalist groups in 2013 and 2014, according to newly released tax filings.

The Sea Change Foundation, which has quietly bankrolled some of the country’s leading left-wing nonprofits during the Obama presidency, poured millions into groups such as the Center for American Progress, the League of Conservation Voters, and the Natural Resource Defense Council, the filings show.

It also granted more than $14 million to the Energy Foundation, which serves as a pass-through for donations to those and other major environmental organizations.

As groups backed by the foundation push green energy policy initiatives, its president is also investing in companies that stand to profit from those initiatives.

Sea Change is run by the California financier Nathaniel Simons and his wife, Laura Baxter-Simons. Since 2009, it has pumped hundreds of millions of dollars into policy groups pushing subsidies for green energy companies and restrictions on their fossil fuel competitors.

Sea Change did not return a request for comment.

At the same time, Simons, who travels to work in a 54-foot yacht, has helped lead a venture capital firm called Prelude Ventures that invests in early-stage cleantech companies, many of which have benefitted from policies that Sea Change-backed groups advocate at the federal and state levels.

The money supporting those groups comes from a handful of financial vehicles that provide little public documentation on the source of their revenue.

Sea Change’s income from Aug. 2013 through July 2014, the period for which it recently reported its financials to the Internal Revenue Service, was roughly evenly split between donations to the foundation and investment income from its extensive financial portfolio.

Simons himself, and three trusts bearing his name, provided all of Sea Change’s contributions during that period. The rest of the income came from the sales of stakes in two hedge funds managed by Renaissance Technologies, the firm founded by Simons’ father, the legendary financier and Democratic mega-donor Jim Simons.

The sources of Sea Change’s significant assets previously came under scrutiny after it reported receiving $23 million in contributions from a Bermuda-based company called Klein Ltd. It remains unclear what the company does, or how it derives its revenue.

One of Klein’s directors, Roderick Forrest, is an attorney at the Bermuda law firm Wakefield Quin, which also represents Russian state-owned oil interests. Forrest is listed as a director of one of the hedge funds that provided Sea Change with investment income last year, according to Sea Change’s 990 filing with the IRS.

The public release of that filing comes as the federal government pursues policies promoted by Sea Change grantees that stand to enrich companies in which Simons has invested through his venture capital firm.

One of Prelude’s recent investments is a clean energy financing firm called Renew Financial, which is working to assist states in complying with the Environmental Protection Agency’s new regulations on carbon emissions from the power sector.

Renew specializes in Property Assessed Clean Energy (PACE) financing, which allows governments to foot the bill for commercial and residential energy efficiency projects. Property owners then reimburse the government through their property tax bills.

Environmental groups see PACE as an effective way for states to reduce carbon emissions as a way to meet the new regulation’s emissions restrictions.

Renew Financial is an institutional founder of a group called PACENation that promotes governments’ expanded use of the practice. That group is financed in part by the Energy Foundation, the largest recipient of Sea Change funds. Its board includes the president of Renewable Funding, at one time a Prelude portfolio company.

In addition to the Energy Foundation, other Sea Change-backed groups such as CAP, NRDC, the Environmental Defense Fund, the Sierra Club, and the Alliance to Save Energy also support the expanded use of PACE financing.

They are also nearly unanimous in their support for the EPA regulations that make PACE a more appealing option for states looking to reduce their carbon footprints.

President Barack Obama himself called for expanding federal support for PACE financing during a speech in Nevada last month at the annual National Clean Energy Summit.

The summit is organized by a group called the Clean Energy Project, whose board includes the lobbyist Brent Herbelee. Herbelee, who boasts of his close relationship with Senate Minority Leader Harry Reid (D., Nev.), represented Simons directly as he lobbied on cap and trade legislation early in the Obama presidency.

Tim Woodward, a managing partner at Prelude, said in a 2013 interview that the firm’s goals have been hindered by the low price of fossil fuel energy in the United States.

"We are … looking for opportunities to bring ‘energy efficiency’ in the marketplace but do it in a way that the customer will engage and care," Woodward said. "Unfortunately, energy is still a very inexpensive resource in North America, and that can make it difficult for many customers to pay much attention."

Gabriel Kra, Prelude’s managing director, says the solution is to raise the prices of fossil fuels through legislation or regulation.

"What is the role for government? Send intelligent market signals," he said in 2010. "I think the easiest market signal to send is a price on carbon. … If you force people to factor that in, you’ve done a good job."

At the time, Kra said, Prelude was investing heavily in companies focusing on energy efficiency. Policies benefitting such companies have since become pillars of the White House’s energy and climate platform.