Question 1

Why not just donate directly?

Accepted Answer

WealthForTheWorld invests donations to grow them over time, aiming to donate a larger amount in the future. Which is
  better: donating directly now or donating a larger amount later?

By saving and investing assets, charitable purposes can be supported with more money in the long term than through
  direct donations. This assumption is based on the historical observation that the return on money invested in the
  capital market is greater in the long term than its loss of value due to inflation. For example, from 1970 to 2020,
  the global stock market averaged an annual return of about 5% after inflation. Thus, money invested in 1970 was worth
  over ten times its original amount by 2020.

However, this positive long-term capital return on charitable assets is not sufficient to justify preferring this
  approach over direct donations. The decisive factor is comparing the long-term social impacts (or social returns) of
  both methods. It's possible that the social return on money donated directly in 1970 could be higher in the long term
  than the social return on money invested in 1970 and donated in 2020, even if the latter amount is more than ten times
  larger. For instance, if money donated in 1970 had funded a clean water project preventing illness, the improved
  health and increased productivity of the community over the decades might result in a higher social return than the
  same money invested in 1970 and donated 50 years later.

The crucial question, therefore, is: Is the social return of charitable assets overall greater than the social return
  of directly donated money?

Social returns are more difficult to calculate and compare than financial returns. Reliable data on the long-term
  impact of philanthropic interventions is often lacking, and there is debate about how to effectively measure and
  compare social returns.

Despite these challenges, the social return on money invested is likely to be higher than that of direct donations,
  argues Philip Trammell of the Global Priorities Institute at Oxford University. Trammell writes:

The impact of impatience
  
    Donating directly means giving to a cause that has other funders, such as people in extreme poverty. The main
    motivation for investing instead of donating to these causes is the belief that people, including the poor,
    generally save too little. Most people tend to prioritize immediate benefits over future ones or care less about
    future generations (e.g., their descendants) than about the current generation. This impatience results in more
    spending now, less saving for the future, and consequently less long-term well-being.
  
  Could there be higher returns on direct donations to non-profits focused on global health?
  
    There is skepticism that the global poor typically have access to investments with returns high and persistent
    enough to outweigh the benefits of investing first and giving later. If such high-return opportunities existed,
    there would be incentives for outsiders to invest in these local opportunities, such as local farms. This motivation
    was behind profitable microlending, which has generally not met expectations.

While individuals in undeveloped regions might have somewhat higher investment opportunities due to local knowledge,
    it is unlikely that these opportunities consistently surpass equity returns. If money were given today to people in
    a region that grew faster than equity returns, the region would eventually catch up economically with the rest of
    the world. At that point, investing in those local opportunities would no longer be as difficult. If local and
    global investment returns eventually equalize, initially, a dollar invested today might be more valuable than a
    dollar with interest in the future due to similar returns. However, once this equalization happens, the value
    comparison changes: giving in 10 years might be less effective than giving today if the region develops quickly, but
    giving in 20 years could be as effective as giving today, and giving in 30 years could be more beneficial.

Additionally, invested money does not have to be allocated to the same beneficiaries over time. Even if some regions
    grow rapidly, there will always be other areas where future aid can be more impactful. For example, the Democratic
    Republic of Congo has a lower real GDP per capita today than in the 1960s, indicating persistent needs that might
    benefit from future-focused giving.

Adapted from an email conversation with
    Philip Trammell from the Global
    Priorities Institute (University of Oxford), edited by WealthForTheWorld.

Philip Trammell provides an extended discussion on this topic and related issues
    here.

A podcast with Trammell is available
    here. You
    can also find a lecture by Trammell on this topic
    here.

If you find this argument plausible, WealthForTheWorld offers a transparent, non-profit, tax-exempt platform for
  making donations through long-term investments. If you prefer to donate directly to effective non-profit
  organizations, we recommend visiting
  effektiv-spenden.org.

Question 2

Who do you donate to and specifically why there?

Accepted Answer

We do not have the resources to evaluate the impact of charitable organizations ourselves. That’s why we rely on the in-depth analyses conducted by the independent experts at GiveWell when selecting our donation partners. This organization regularly conducts comprehensive, evidence-based evaluations and identifies particularly effective charitable projects worldwide. Here you can find an overview of our current donation partners and more information about their work.

Question 3

What happens to the WealthForTheWorld assets in the long term?

Accepted Answer

Our goal is to contribute as much as possible to solving pressing global problems.

To achieve this goal, we support organisations that work as effectively as possible on solutions to these problems
  with monetary donations.
  The following applies: the greater the WealthForTheWorld assets, the greater the future donations, the greater the
  chance of overcoming problems such as extreme poverty, the pandemics, climate crises and so on.

Every euro invested in the WealthForTheWorld assets generates future donation payouts greater than the invested
    euro. Accordingly, there is no amount above which it would make sense to cap the WealthForTheWorld assets.

The WealthForTheWorld assets are dissolved when

there is an organisation that can use the assets more effectively in the sense of our goals than WealthForTheWorld.

there is a point in the future when it clearly makes more sense to donate parts or all of the assets rather than the
    return on the assets. This would be the case, for example, if an event that threatens the earth can only be
    prevented if a lot of capital is spent in the short term.

problems such as extreme poverty, pandemics, climate crises, etc. no longer exist and it is foreseeable that they
    can no longer occur in the long term.

Side-effect of a large WealthForTheWorld fortune.
  
    The larger the WealthForTheWorld assets and the resulting donations, the more attention (media perception) our
    commitment to effectively altruistic positions gets.

Question 4

What are the costs incurred by the association?

Accepted Answer

For the day-to-day operations of the association, costs of about €15 per month arise. These costs are covered entirely by earmarked donations specifically designated for association expenses. Donations to the Wealth for the World are not affected by this and flow 100 % into the fund’s assets.

Breakdown of Expenses of Geld für die Welt e.V.

Legal Entity Identifier (LEI)

~€6

Website hosting and domain
        ~€4

Transaction fees for buying and selling shares
        ~€5

Expenses per month
        ~€15

Wealth for the World is exempt from capital gains tax as a non‑profit association. The calculation of returns, website design, newsletter and other activities of the association are carried out voluntarily and free of charge.

You can find the detailed annual income and expenses of the association in our
  
    current annual report
  
  .

Up to and including 2024, 99 % of all donations were invested in the fund; the remaining 1 % was used to cover the costs mentioned above.

Question 5

Active versus passive portfolio management?

Accepted Answer

WealthForTheWorld is manages its assets like a passive investment fund. The performance of the portfolio follows the
  performance of the global equity markets. We do not make active investment decisions in selecting stocks and in terms
  of an optimal time to buy/sell stocks.

Whether actively managed funds generate higher returns than passive funds is a controversial question. For example, in
  a
  comprehensive 2010 study, Nobel Prize-winning economist Eugene Fama states that, in principle, actively managed funds do not generate higher
  returns compared to the market.

Explanation of terms:
  Active funds make timing (optimal buy/sell) and selection decisions to optimize the return of a portfolio.
  Passive funds follow the performance of an index (e.g. the performance of the DAX).

Question 6

Why do you invest in the MSCI World?

Accepted Answer

The MSCI World Index is considered the most important benchmark index of global economic development. Composed of
  approximately 1650 individual positions from 23 countries, the MSCI World reliably tracks the development of the
  economies of the most important industrialized nations and thus the global economy. In addition, the MSCI World is one
  of the broadest investment products and thus allows to participate in the development of the entire economy instead of
  only one specific sector. In addition, the MSCI World is considered extremely reliable in terms of its long-term
  performance. Since 1970, it has been able to achieve an average annual return of around 7 percent. Even several
  substantial crises could not jeopardize the return of the index in the long run.

For these reasons, the MSCI World is well suited for our purpose of long-term passive investment. The WFTW fund is
  intended to enable people without capital in particular to participate in the long-term upward trend of the global
  economy.

Question 7

By passively investing in the MSCI World, WFTW is invested in companies like Amazon. Why don’t you choose a more sustainable selection of companies?

Accepted Answer

Our investment strategy aims to participate passively in global economic growth to achieve a stable, long-term return that enables maximum payouts to our donation partners. An alternative would be to invest exclusively in sustainable companies. However, the evaluation and selection of such investments are costly and time-intensive, and would amount to an active investment strategy. This would most likely lead to more volatile and lower returns, potentially jeopardizing our long-term goal of maximizing donation payouts. More on the question of active vs. passive investment strategy here.

Furthermore, research findings (see below) indicate that buying shares has only a slight positive impact on the financing options for companies. However, the role of a shareholder opens up opportunities to influence corporate decisions actively – for instance, by exercising voting rights or engaging in direct dialogue with management. Studies show that targeted shareholder interventions can bring about measurable improvements in environmental and social standards.

A comprehensive summary of research on this topic is provided in the publication Investor Impact - How Can Investors Change the World? by the University of Zurich (UZH).

Question 8

Who "owns" WealthForTheWorld's assets?

Accepted Answer

WFTW is a registered and nonprofit association. As such, it is an independent legal entity and can accumulate assets.

In this sense, the WealthForTheWorld association owns the money donated to it. However, it may only use the
  money in accordance with its charitable statutes:

The executive committee of the association (selected over the annual meeting of the members of the WFTW registered
  association) represents the association and takes all important decisions, also with regards to the assets of the
  association. The work of the executive committee is controlled and examined through two ways: Firstly, via the general
  meeting, before which the board must declare itself annually and which can dismiss the board. On the other hand, the
  tax authorities regularly audit whether the activities of the association comply with the charitable purposes.

The assets of the WealthForTheWorld are legally bound exclusively to the statutory purposes such as development
  cooperation. Should the e.V. be dissolved, the assets flow - in accordance with the statutes - to 100% into charitable
  projects.

Question 9

What happens to money donated to WealthForTheWorld?

Accepted Answer

100% of every donated euro goes into the GfdW fund.

Specifically, this means that once more than €10,000 is available in the donation account, the money is invested in the GeldFürDieWelt ETF portfolio.

Through the Impact Portal, donors can track how their donation develops within the GfdW fund. Additionally, each year, they can choose from a selection of highly effective organizations to receive the annual payout attributable to their donation.

Donations and any returns generated cannot be refunded.

If GeldFürDieWelt is ever dissolved, all remaining funds will be distributed to charitable organizations in accordance with its statutes.

Question 10

When do you calculate and donate the return on assets?

Accepted Answer

We do not try to find the perfect time1 to buy or sell, but always calculate return and donation
  amount for the same time period:
  Annually between the first of Novemver and October 31.2

WealthForTheWorld is a nonprofit project and not a professional investment fund. Our goal is not to be better than the
  market, but to passively follow its long-term upward trend.

Furthermore, this procedure creates transparency. It becomes comprehensible and verifiable at any time how the
  WealthForTheWorld donations have come about.

[ 1 ] The perfect time!?
  
    Many investors try to match the perfect moment to buy securities as cheaply as possible and sell them expensively.
    Whether this approach - even in terms of professional fund managers - in the long term yields better returns, is
    controversial.. For example, in a
    comprehensive study from 2010, Nobel Prize-winning economist Eugene Fama notes that, in principle, actively managed funds do not produce higher
    returns compared with market returns.

Question 11

Is WealthForTheWorld a registered non-profit?

Accepted Answer

Yes, WealthForTheWorld is recognised as a non-profit organisation in Germany. The non-profit status of the organisation is regularly reviewed by the German tax authorities. In order to ensure that GeldFürDieWelt does not lose this status in the long term, we have had our work and donation practices extensively audited by lawyers.

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