Private funding

Germany has more than 19,000 foundations, more than any other European country. 9,000 have been set up in the past ten years alone. While the UN met at the Rio+20 summit, sustainability was also the motto at the annual meeting of the Association of German Foundations in Erfurt, Thuringia, with more than 1,500 participants. Dr. Wilhelm Krull is chairman of the board of the association and the general secretary of the Volkswagen foundation, one of the biggest German foundations.

Deutsche Welle: Every day, two or three new foundations are being set up in Germany. Are Germans particularly prone to philantrophy, or what is the reason for this foundation boom?

Dr.Wilhelm Krull: Well, this boom has been going on for the past ten years. Each year we have seen 800-1,000 new foundations being set up, basically by people who accumulated their wealth after WWII. We now have had more than 65 years of peaceful and economically successful development. The current generation transfering its wealth to the next generation often is in the situation that their children are also quite well off. So they think about something useful to do with their money.

And as far as I can see, this will probably continue, despite the current financial and economic crisis. Because as it is expected for Germany, at least another 4 trillion euros will be transferred from one generation to the next in this decade.

But it is not just the economic basis - of course that always helps if you want to set up a foundation - but it is also the moral responsibility people feel. We come across quite a lot of people who decide at age 60, 65 to give their life another direction by setting up a foundation and engaging themselves in a foundation.

As far as the German scene is concerned, its not necessarily like in the Anglo-Saxon world where the one big man or woman donates their money to a foundation. We have seen in the past 10, 15 years quite a number of so-called community foundations being set up, or foundations that are being set up collectively by a number of people following the same interests.

And that has proven very successful. We already have more than 250 of these foundations and it enables also the less rich to get involved.

The Rio+20 conference discussed challenges facing humanity in the next century, like climate change, poverty, a green economy and, of course, sustainability. What role should and can foundations play in these challenges?

By their very nature, foundations have a strong interest in sustainability, because they really want to keep their endowment in real terms, which is of course not easy in these day with low interest rates and higher inflation rates etc, but there are also more and more foundations engaging themselves as far as their investments are concerned in more sustainable, mission-related investments.

Also, as far as their funding and operating activities are concerned, they do engage in advocacy for questions related to climate change, they do fund research in technological development; they do fund a lot of climate adaptation in the Third World.  So there is a wide array of activities.

But at the end of the day we should not forget that the foundations cannot save the world. What they can do is they can provide what you can call islands of success, they can provide examples of how things can be changed, they can launch pilot projects. But they always need partners to have an impact on the politicians, but also on the economy and other areas of our societies. So they can be quite a catalytic player in all of this, but it takes a lot of communication and interaction in order to have an impact on these global issues.

How big is the impact of the financial crisis on the foundations and their work?

Many foundations in Germany as well as all of Europe and particularly in the US have lost a lot of money during the crisis. And they are still faced with a lot of challenges due to reduced interest rates on bonds. And particularly the small foundations are to 80 or 90 percent invested in government bonds.

If they now are forced to exchange their presently say four or five percent interest rates to say, 1,5 percent or at best two percent, then its pretty clear that with an inflation rate of around 2 percent, you almost earn nothing and you even have difficulties in keeping your capital in real terms. So this over the next few years will have quite a strong impact. That means also the money available for new projects will go down quite considerably.

So we will see a shift in investments. What is interesting in this respect is that we will not just go for the large companies in the respective indices. People will look much more closely at what the respective companies are doing.

Ethical, environmental and social indicators play a much larger role before you finally take a decision. For example, my foundation: we have exchanged one of these larger indices for one which is clearly an ecological one. We will now look for small and midcap investments. So deliberately deciding to look for high quality investments with a strong ethical component in them.  

How innovative are foundations? You published a think tanks study earlier this year, together with the Vodafone foundation. That says that German foundations are different in that respect to foundations in the USA, where foundation-funded think tanks play a different role.

We could first talk about the specific differences of German and American foundations as far as the relation to politics is concerned. Because there are for instance a lot of think tanks around Washington where you would clearly say that they are close to the Democratic or Republican party, and you can see that always when they exchange the executive part of a respective government department.

For Germany there is quite a different lesson to be learned, I would say, and that is that you try to avoid this kind of close relationship with a party.

As a foundation, you try to set up a more independent institution, as we have just done three years ago with nine foundations. It's the so called 'Expert Council on Migration and Integration'. In order, on the one hand, to see to it that we have more civil society-based advice to politics, but we, at the same time, see to it that it is not a hijacked agenda by one or two foundations pursuing a conservative or a socialist line of thought.

Apart from think tanks, where are other possibilities that you would say do not exist in other organizations to be innovative?

Well, my own foundation, the Volkswagen Foundation, may perhaps serve as an example where you can clearly see how this catalytical function of a foundation - in this case in higher education - is used at different levels.

Within Germany, for instance, giving post-doctoral researchers more independence as we did with junior research fellowships, and the 'Lichtenberg professorships' where we provided long time funding. So instead of always working on a short term low-trust basis, moving to seven or ten years of funding for somebody whom you trust will come up with really transformative ideas.

This is one way to show the way, by simply setting up, say 30 to 40 examples in Germany and then to hope that this is taken up by public funders and the institutions themselves.

As far as international funding is concerned, it has got much more to do with lessons learned by myself and the foundation. By myself, when I was involved in the change of the South African research system, it became pretty clear it would take a long time to transfer a more or less "white" university system, into a more equitable institutional set-up.

And it is the same for our foundation after having spent for some 20 years on so-called partnership programs. In these projects we would fund for two to three years, helping doctoral and post-doctoral students from Third World countries to get ready for the next step in their careers, and that was usually just sufficient to make them move to the US or to France or other countries. So with this short term funding, we indirectly contributed to a brain drain from the respective parts of the Third World.

So we decided to really take a new approach, working towards a symmetric partnership. That you get the African researcher in that case involved in the agenda-setting for the call of proposals. And also we committed ourselves at the beginning that we would offer successive opportunities for funding. And after the first three years of supporting a doctoral student, there would be a post-doctoral fellowship and then a more senior post-doctoral fellowship and so on. So along all the stages of a career we would provide incentives for the best minds to stay in Africa.

I think that is important , particularly when you get involved in research for instance on neglected tropical diseases in Sub-Saharan Africa, or the huge environemental challenges they are faced with, in large parts of Sub-Saharan Africa, that you see to it that its not a one-off kind of thing.

Are the people who found foundations a particular elite in society? 

They are in a way an elite because they were economically successful. But they are not all intellectually elite in a way that they consider themselves to know things better. But of course to be successful, economically or politically or intellectually, requires a certain personality and a certain dedication to a certain mission and that is what drives most founders of foundations - that they want to make a mark on a certain area.

I think in most cases, what drives people to set up a foundation is indeed the idea that the particular purpose the foundation is pursuing is one that will be needed in the long term. And all I can say is you look, for instance, at research and at how money is being spent in research occasionally by governments by simply throwing a billion at the research community and if you then ask five years later, what came out of it, almost everyone has forgotten about it.

But, for example, take a look at the Volkswagen Foundation: 50 years ago, it put some one billion euros in a foundation and now it has a capital stock of 2.5 billion and has been able over the years to spend four billion on research by allocating 100-120 million each year. This clearly shows you that this is the much more sustainable way of supporting certain objectives and purposes.

What makes you hopeful that the contribution of foundations and other civil society actors can really help make an effective change in the next 10 years that we are facing, that the Rio Summit does not seem to have solved?

As we have learned in the past, it is always important that things are being put on the agenda by agents from various walks of life. For instance, with respect to Rio, I could just give the example of the 'Limits to Growth' report. The Volkswagen Foundation supported it in the early 1970s with one million deutschmarks in order to get this kind of dangerous situation, which we were already in at the time, on the agenda. Unfortunately, since then, it has become even more dangerous.

And that is what foundations can achieve: to get something on the agenda over and over again, to build new alliances and networks and then see to it that also politicians move in the right direction.

But we should also keep in mind that politicians alone will not change things, and that they will not be able to live up to the challenges, if society as a whole is not willing to change its attitudes in order to change the way we deal with resources and the way we run our day-to-day lives. So there will be many, many changes needed, and in order to discuss them and to show that there are opportunities, we need to implement new role models in the future.

Interview: Anke Rasper
Editor: Greg Benzow