Making more from less: foundations growth despite weak returns

  • Less than half of the foundations surveyed achieve real capital preservation
  • About a quarter of the foundations surveyed already achieve a positive social impact with their investments
  • The number of new foundations has increased slightly. Rogall: “Foundations remain one of the most popular forms of engagement”

“The current situation with low interest rates and volatile markets is difficult for foundations. But anyone who decides to set up a foundation of lasting nature does so with a long-term perspective and with the intention of making a sustainable commitment to society.”
Prof. Joachim Rogall, Chairman of the Executive Board

Berlin, 4 March 2019. The year 2018 was one of a turnaround for the investment of assets in German foundations. As a recent survey shows, almost 40 percent of foundations expect a return below the inflation threshold. This is the result of the latest figures of the foundation panel of the Association of German Foundations. In 2017, only 20 percent of the foundations surveyed saw the inflation compensation in danger. “2018 was a tough year,” according to Felix Oldenburg, Secretary General of the Association of German Foundations. “Although the figures show that the low interest phase is fully reflected in the return on investment, they also show that foundations have learned their lessons from the past years: they have turned from passive savers into active investors. Unfortunately, there are still too few tailor-made offers from financial service providers.” Here the Association of German Foundations continues to provide impetus. Already now, more and more foundations are investing their capital in an impact-oriented way (2018: 26.1 per cent; 2016: 22.1 per cent), thus increasing their social impact through their choice of investment products.

Slight increase in the number of new foundations compared with the previous year

“The current situation with low interest rates and volatile markets is difficult for foundations. But anyone who decides to set up a foundation of lasting nature does so with a long-term perspective and with the intention of making a sustainable commitment to society,” confirms Prof. Joachim Rogall, Chairman of the Board of Management of the Robert Bosch Foundation and Chairman of the Executive Board of the Association of German Foundations.

The foundation sector is growing steadily despite the situation on the financial markets. The number of civil-law foundations with legal capacity rose by 2.1 percent last year. A total of 554 foundations received a certificate of recognition in 2018. In 2017, there were 549 foundations. Today, there are 28 foundations per 100,000 German citizens. In addition to the currently 22,743 foundations with legal capacity under civil law, there are many foundations of other legal forms.

Foundation law reform must not die

Joachim Rogall warns: “In order to have an impact on society, foundations urgently need more flexibility. Politicians have already announced changes in this regard. Now we hope that legislators will implement the foundation law reform quickly.” One component of the foundation law reform is the introduction of the Business Judgement Rule. According to this rule, foundation boards must not be held liable if they have exercised the diligence of an orderly and conscientious management in the way they ran the foundation. This would give foundations more security in their work, especially regarding the investment of assets. According to a survey conducted by the association on the foundation law reform, more than 90 percent of the foundations surveyed consider the introduction of the Business Judgement Rule to be very important or important.

A look at the federal states

There are a total of 22,743 foundations with legal capacity under civil law in Germany. 89 percent of them are located in the western federal states. More and more donations are also being made in the East. At 3.7 percent, the net growth in the five eastern states was much higher than the national average of 2.1 percent. 62 of the 554 new foundations established last year were founded in eastern Germany. The front-runner is Brandenburg, with a growth of 8.2 percent and 16 newly recognised foundations. Hamburg remains the federal state with the most foundations per number of inhabitants: it has 78 foundations per 100,000 inhabitants. The national average is 28 foundations per 100,000 inhabitants. There was movement among the top three “foundation capital cities”: Würzburg and Oldenburg can hold their own at the top, while Frankfurt am Main has slipped to fourth place, making room for Darmstadt.

Felix Oldenburg

Secretary General
Phone: +49 (0) 30 89 79 47-55