Norwegian foundations are stingy

Last week, the Norwegian Foundation Conference was held with the theme: “Foundations in the Contemporary — Rigging for the Future?”. However, this was the wrong question to ask, I argued there. The goal of Norwegian foundations should not be to secure a good future for themselves, but a good future for the world.

Many foundations misunderstand what long-termism means. Foundations are normally established to realize purpose with a long-term perspective. It is not to be confused with the fact that foundations selves must live forever.

If we are to overcome climate change, it is cheaper and better to prevent and solve problems early than to delay and repair. The same goes for most of the societal challenges nonprofit foundations work on.

The Future Requires Action Today‍

Today there is 6235 foundations in Norway, many of them for the purpose of handing out money to non-profit initiatives. They have billions of dollars in capital. Many operate with a prudent use of money, limited to a portion of annual returns. For some it's the bylaw party, for others it's the board's choice.

In fact, some people are so temperamental that one wonders if their real purpose is to maximize their own wealth. For example, parts Olav Thon Foundation out under 0.4 per cent per annum, out of an equity capital of 25 billion. This is significantly less than what Olav Thon would have paid in wealth tax without a foundation.

Foundations, whose purpose is to make the world a better place through handouts, should ask themselves: At a time when the world is burning, and where the damage gets bigger the longer we wait, is such a form of “long-termism” justified?

As a number of Norwegian business leaders wrote in DN a little over a year ago: Today's crises are of historic proportions. It requires historic leadership. The new foundation of one of the authors, Jens Ulltveit-Moe, is an inspiring exception. The climate foundation Umoe shall explicitly not last forever - it should hand out its funds over the course of 20 years.

Investing today to give later

But what about investing in the stock market and getting a return on your capital so that you can give more in the future? If one assumes a return of seven percent per year, one penny today could turn into two crowns in ten years. However, this approach overlooks the gain one loses by not to hand out a penny today (the so-called opportunity cost).

Reducing greenhouse gas emissions today results in less destruction and economic costs in all future years. Preventing pandemics is cheaper than dealing with them, and investing in people's education and health gives them increased productivity and income over time.

Vaccination programs in developing countries are projected to saving society for 21 kroner per kroner invested, and research has shown that aid actually contributes to economic growth. A study published by the World Bank estimates that the return from aid on average is 11 percent per year, which is better than in the stock market. In other words: Long-term thinking may well mean doing more today.

Norwegian foundations, with their tens of billions in capital, should ask themselves: are they primarily concerned with rigging their own foundations for the future, or rigging the world for the best possible future?

With more generous foundations, more capital could have been spent on solving major societal challenges, as an investment for the future, rather than dusting off books.