Giving in perpetuity or spending out: pros and cons

 

European Foundation Centre

0
1603 Cover

Rosien Herweijer

As director of GrantCraft in Europe, I always have my ear to the ground so as to pick up on the impulses and trends that are driving the foundation sector which can later serve as the substance of new GrantCraft guidance tools and materials. My ear was therefore finely tuned to a lively debate that unfolded on the choice between giving in perpetuity and spending out during the first-ever Autumn Assembly on 7 November 2011 in Brussels. Organised by the European Foundation Centre (EFC) and Donors and Foundations’ Networks in Europe (DAFNE), participants were polled on why they would prefer giving in perpetuity, the approach favoured by most. Approximately 65% of the audience considered that giving in perpetuity would allow for more long-term impacts. This was challenged in the debate and someone observed that the time-horizons of foundations are getting systematically shorter, irrespective of their spending pattern.

Providing the argument for giving in perpetuity, Rui Esgaio, Fundação Calouste Gulbenkian, noted that his organisation regularly morphed in response to changing realities, while staff working at Gulbenkian benefited from feeling they belong to a longer-term cause. During times of financial crisis, he said it also gave confidence to people to see the ‘lights on late’ at the Gulbenkian offices. No one in the perpetuity camp expressed a fear of losing focus or becoming too routine. And yet for Karisia Gichuke of the Diana Princess of Wales Memorial Fund, which closes its doors in December 2012, giving in perpetuity runs precisely this risk, compared to the strong sense of urgency and focus felt by those working with a spend-out strategy. Gichuke was not afraid that spending-out would leave a vacuum; on the contrary, she felt that investing in other (sustainable) institutions would leave a much stronger legacy than striving for the continued existence of one’s own institution.

At the same time, however, as Piero Gastaldo, Compagnia di San Paolo, a member of the audience, argued that if we all spend out, we not only leave future generations with our problems but also without resources to address them. And maybe none of these arguments are universally valid and everything depends on size, as another participant, Beate Eckhardt of SwissFoundations reflected: when you are a really small foundation, spending out would not have a huge additional impact on the issue. But supporters of spending-out argued that when giving in perpetuity we mobilise only 5% of our assets towards our mission, while spending out means we also mobilise the remaining 95% towards those goals and consequently can have a much stronger and deeper impact on problems.

Ultimately, it really depends on your mission, according to Rien van Gendt, Vereniging van Fondsen (FIN). He referred to the example of one foundation that was spending out for the eradication of malaria, something that they considered achievable in 20 years, while another foundation was giving in perpetuity to advocate for children. In a third example given by van Gendt, a foundation was actually building an endowment and spending very little, to have resources to mitigate the effects of climate change in future years. This analysis raised the question whether an issue like climate change is something that needs a huge investment now, or whether the impacts of climate change can be addressed as they emerge over time.

In the end, a second poll showed that 70% of participants would choose giving in perpetuity – 5% more than in the poll before the debate unfolded – and there was a consensus that in fact there is plenty of space in the foundation sector for both types of giving. The debate on spending out is likely to continue, however; what remains is the concern around time horizons, legacy and sustainability. New and upcoming GrantCraft publications may address at least two dimensions of giving:

  • Sticking to a course and well-mapped long-term strategy, an issue addressed by the upcoming ‘Scanning the Landscape in a Digital Age’ guide.
  • How foundations can leave a more sustainable impact through collaboration with other funders, something that in Europe – given our diversity – involves more effort, but also may yield large benefits.

For more on the Autumn Assembly debates, including videos, check out the EFC website. For news on GrantCraft go the GrantCraft website or follow the GrantCraft blog.

Rosien Herweijer is director of GrantCraft in Europe.

Tagged in: DAFNE Europe European Foundation Centre Foundations Grantcraft Perpetuity Spending out


Comments (0)

Leave a Reply

Your email address will not be published. Required fields are marked *