How is my donation saved or invested?

A key feature of the Future Fund is that there is a dual benefit of the fund:

1. Charities are supported through interest on investments
2. The investments themselves are done into people and/or business that bring a social and/or environmental benefit.

The choice is up to you as the donor: you choose which charities are supported with your donation and in what sectors the investments are made. For the latter, there are 4 flavours:

1. government bonds (this is like having a savings account, except with a bank, it is with developed country governments)
2. ‘responsible’ stock market investments
3. green stock market investments
4. supporting entrepreneurs in developing countries through microfinance

Here below, we describe these 4 flavours in more detail.

1. government bonds

What are government bonds?

If you have chosen ‘government bonds’, your donation will be invested in bonds with governments from developed countries. The average interest on per year on such bonds was 2.3% in the past century (already corrected for inflation).

Transparency

The Future Fund will be completely transparent about these investments: all government bonds will always be reported on the Future Fund website.

Current government bonds investment funds

If you have chosen the ‘government bonds’ flavour, your donation will be managed by iShares and by Vanguard, two of the largest investment fund managers in the world. IShares has a good a good international bond fund, the iShares International Treasury Bond ETF and Vanguard a good bond fund for the USA, the Vanguard Extended Duration Treasury ETF. Together they have a high diversification (bonds of more than 20 developed countries and the EU) and a very low cost (0.35% per year for iShares and 0.07% for Vanguard). More information about the funds can be found on the iShares website and the Vanguard website, and on investment fund information websites, such as Morningstar (iShares and Vanguard) and on Yahoo Finance (iShares and Vanguard). We will regularly re-evaluate available bond funds and when there is a change in the fund we opt for, it will be reported here and in the next Future Fund newsletter.

2. ‘responsible’ investments

What is ‘responsible investing’?

If you have chosen for an investment in the stock market, your donation will be invested in accordance with ‘responsible’ investment values. ‘Responsible’ investing means that ethical, sustainable and social standards are taken into account in the investments. In practise, this is done by opting for so-called ‘ESG‘ or ‘SRI‘ funds. ESG stands for Environmental, Social, and Governance (ESG) and SRI stands for Socially Responsible Investment (SRI). As a sidenote: ESG and SRI investments generate the same (or even better) return as regular investments. In these funds, companies in certain sectors are excluded (such as weapons, tobacco and gambling) and more weight is given to companies that perform better on ESG or SRI scores.

Evidence-based investing

Besides investing responsibly, the Future Fund values investing based on the best-available evidence base about what generates the safest and highest long-term interest. To achieve this, the evidence-base in investment science shows that it is best to invest:

  1. As diversified as possible (in ‘the market as a whole’). This includes investments in companies in all developed countries.
  2. At the lowest possible cost. ESG and SRI funds are becoming increasinly the norm, and therefore their costs have plummeted. Many have dropped below a cost of 0.20% per year.

Transparency

The Future Fund will be completely transparent about these investments: all ESG and SRI funds will always be reported on the Future Fund website (see next paragraph).

Current ESG/SRI fund

The first donations into the Future Fund were done in March 2020 and the donors opted to for the stock market investment flavour. The organization that is currently managing these investments is Amundi, one of the largest investment fund managers in the world. Amundi also has a very good selection of responsible investing funds, which is why we chose for Amundi. The donations are currently invested in their Amundi index MSCI World SRI fund, a fund with a good responsible investing profile (the fund follows the MSCI World SRI index), the highest possible diversification (all stocks in 23 developed countries) and a very low cost (0.18% per year). More information about the fund can be found on Amundi’s website, and on investment fund information websites, such as Morningstar and on Yahoo Finance. We will regularly re-evaluate available ESG/SRI investment funds and when there is a change in the fund we opt for, it will immediately be reported here and in the next Future Fund newsletter.

3. green investments

What is ‘green investing’?

If you have chosen for green investments, your donation will be invested in companies in the global stock market that perform specifically well on sustainability standards.

In practise, this is done by opting for investment funds that adhere follow certain indices, like the MSCI Global Environment Index, the MSCI World Climate Change Index and the MSCI ACWI Low Carbon Target Index. Note that such investments (see the links) have the same or an even better interest as regular investments in the stock market as a whole.

Transparency

The Future Fund will be completely transparent about these investments: all green funds will always be reported on the Future Fund website (see next paragraph).

Current green investment fund

The donations of donors who have chosen the ‘green investment’ flavour will be managed by iShares, one of the largest investment fund managers in the world. IShares has a very good selection of responsible investing funds and specifically has a very good green fund, the iShares MSCI ACWI Low Carbon Target ETF fund, which is why we chose for iShares. This fund follows the MSCI ACWI Low Carbon Target, has the highest possible diversification (all stocks in 23 developed countries and 26 emerging economies) and a very low cost (0.20% per year). More information about the fund can be found on the iShares website, and on investment fund information websites, such as Morningstar and on Yahoo Finance. We will regularly re-evaluate available green investment funds and when there is a change in the fund we opt for, it will be reported here and in the next Future Fund newsletter.

4. supporting entrepreneurs in developing countries through microfinance

What is microfinance?

Microfinance is a form of financing that provides banking services to individuals and small businesses who lack access to conventional banking and related services. It provides a steady, reliable interest and at the same time supports small entrepreneurs in developing countries with micro-loans.

Transparency

The Future Fund will be completely transparent about these investments: all microfinance funds will always be reported on the Future Fund website (see next paragraph).

Current microfinance fund

The donations of donors who have chosen the microfinance flavour will be managed Triodos, one of the largest banks in the world with a specific focus on ethical, sustainable and social banking. Triodos has a good microfinance fund, the Triodos Microfinance Fund. This fund has a long track record (>10 years) and a low cost for a microfinance fund (2.13% per year). More information about the fund can be found on the Triodos website. We will regularly re-evaluate available microfinance funds and when there is a change in the fund we opt for, it will be reported here and in the next Future Fund newsletter.