---
title: the heritage fund that grows back
canonical_url: https://ensurance.app/guide/the-heritage-fund-that-grows-back
markdown_url: https://ensurance.app/guide/the-heritage-fund-that-grows-back.md
subtitle: the resource curse taught nations to save what runs out. the living half of the inheritance is still off the books.
category: nature-finance
---

# the heritage fund that grows back

*the resource curse taught nations to save what runs out. the living half of the inheritance is still off the books.*

The resource curse is the pattern in which a country that is rich in oil, gas or minerals ends up with slower growth, weaker institutions and more volatile budgets than its wealth would predict. A sovereign wealth fund is the best-known cure for it. Under the oil field there is often a second inheritance the fund never counts: an aquifer that refills slowly, a wadi system that carries flash floods to the coast, a mangrove fringe that holds the shoreline, and the soil of a farming valley. These keep working for the country whether or not any fund holds a unit of them.

This post is about that second inheritance. A heritage fund turns a resource that runs out into money that lasts. It rarely asks what happens to the resources that do not run out unless they are let go.

## what the resource curse is

The term describes a set of related problems, and economists still argue about how strong each one is.

- **Dutch disease.** Resource exports push up the currency and pull labour and capital into the resource sector. Farming, manufacturing and other exports lose ground.
- **Volatility.** Budgets tied to a commodity price swing with it. Governments spend in booms and cut in busts, and the cuts often land on long-term investment.
- **Institutions.** Large rents concentrated in one sector can weaken the link between taxpayers and the state and invite capture.
- **Depletion.** The resource is finite. Each barrel sold is wealth that leaves the ground for good.

Jeffrey Sachs and Andrew Warner's work in the 1990s made the cross-country pattern famous: economies with high natural resource exports tended to grow more slowly. Later research has qualified it. Institutions, timing and policy matter a great deal, and several resource exporters have done well. The cure the best-known exporters reached for is the same one: save the rent in a fund, invest it abroad, and spend a disciplined slice.

## the heritage fund as a conversion machine

The economic logic behind that cure has a name. John Hartwick showed in 1977, in a simple growth model, that a country can keep consumption from falling as it runs down an exhaustible resource. To do it, the country invests the resource rents in reproducible capital. The oil in the ground becomes ports, schools, equities and bonds. Total wealth holds steady while its form changes.

A sovereign wealth fund is that rule turned into an institution. The country exchanges a natural asset that is running out for financial claims that, in principle, last forever. The fiscal rule then decides how fast the claims can be spent.

Norway is the textbook case. Its 2026 budget draws NOK 579.4bn from the fund. That is about 2.8% of fund value, under the 3% rule that is meant to keep the real value intact for future generations. Kuwait faces the same problem from the other side. A Baker Institute study in March 2026 estimated that Kuwait's proven reserves last about 103 years at current output. That is so long that weakening demand, not exhaustion, may be what strands them.

The conversion machine works, and it is one of the better institutional ideas of the last century. It has two weak points.

## two weak points in the cure

**The drawdown arrives when the price falls.** A fund built from commodity revenue is asked for money exactly when commodity revenue disappoints. In 2025, the Saudi Public Investment Fund ordered spending cuts of at least 20% and scaled back its giga-projects, as reported by AGBI. A NEOM contract was cancelled and the 2029 Asian Winter Games at Trojena were postponed. Ambitious domestic programmes are the first thing a fiscal squeeze reaches. A fund with a development mandate does not always smooth the cycle. It can pass it on.

**The rule counts only one kind of natural capital.** Hartwick's logic treats the country's natural wealth as the exhaustible stock under the ground. The renewable stock on top of it does not appear in the fund's accounts at all. That stock is the aquifer, the soil, the coastal wetland, the rangeland and the forest. The World Bank's adjusted net savings measure makes the same point from the other direction. It subtracts the depletion of natural capital from a country's savings, so a country can look like it is saving while it runs down its natural base.

So a country can do everything right by the rule while the other half of its inheritance degrades. It can save every dollar of rent and hold a diversified portfolio abroad, while the aquifer under its own farms drops and the coast loses the mangroves that held it. The fund is preserved. The country's living capital is not, and it may be the part of the wealth that future generations need first.

:::johnson
**a heritage fund turns oil that runs out into money that lasts. living land is the one asset that can do both at once** — it produces every year, and it can last forever if someone pays for its condition.

[see how a natural asset is valued →](/natural-assets?from=guide)
:::

## the renewable half of the inheritance

A depleting resource and a living one behave differently on a balance sheet, even though both are natural capital.

| | Oil or gas in the ground | An aquifer, a catchment, a coast |
|---|---|---|
| What it produces | One sale per unit, then gone | A flow every year: water, soil, flood control, fish, cooling |
| What happens if you hold it | Value depends on price and demand | Value depends on condition |
| Stranding risk | Demand shifts, carbon policy | Neglect, overdraw, conversion |
| What the heritage fund does with it | Sells it and saves the rent | Usually nothing — it is outside the fund |
| Who pays when it fails | The budget, through lower revenue | Farmers, utilities, insurers, ministries, through higher costs |

The last row is where the resource curse returns in a new form. A country with a strong fund and a degrading living base can still find its budget under pressure. The pressure comes from desalination bills, flood repairs, food imports and a farm sector losing ground, not from oil prices. The fund was built to protect future generations from the first kind of shock. Nothing in it protects them from the second.

## how ensurance gives the living half an account

Ensurance is a system of accounts and instruments for natural assets. It does not replace the fund or the fiscal rule. It gives the renewable half of the inheritance the things the fund already gives the financial half: an address, a value and a way to pay for it over time.

**An address.** Each natural asset — a parcel, a catchment, a stretch of coast — has an **agent** with its own **account**. Money paid for that place lands there and is visible. It does not disappear into a ministry line.

**A value beside the price.** RealValue, our natural capital accounting engine, estimates what the living system does in a year. The estimate is ecosystem service value per acre per year, adjusted for condition, across 15 stocks and 19 flows. It sits beside the cost of protecting the place. The gap between the two is the living work that the land price does not carry. That puts the aquifer and the coast on the same page as the portfolio, in a currency a finance ministry reads. The number is a bridge to get capital to the place. It is not a claim that the place is worth only that.

**A path from cost to care.** Ensurance moves a natural asset through three stages: unensured, ensured, entrust.

- **Ensured** funds the real asset's capital cost — acquisition, debt retirement, restoration — until the place is debt-free and claim-free.
- **Entrust** is what comes after. The land's cost is out of the picture, so proceeds from then on pay for ongoing stewardship: the people and work that keep the parcel, its species and its flows.

Read with Hartwick's rule in mind, this is the conversion done once and then reversed in the place's favour. Capital pays the cost of the living asset once. After that, the asset's own flows and the payments of the people who depend on it keep it in condition, year after year. That is what a heritage fund wants from its portfolio: a base that keeps producing without being sold.

**Two payors.** Under the blended model, real-asset investors finance the cost, and the people who depend on a flow fund its value because they lose when it fails. At home, a sovereign fund could take the cost side. That position is designed, and it needs counsel before it exists. The value side is the utilities, insurers, farm cooperatives and ministries that already pay when the aquifer drops or the coast floods. The design lets them pay for the condition instead of the failure.

The instruments are plain. A **certificate** is a record of a hold on one named agent, one for one, priced on the cost of protecting the place. A **coin** is a currency with a public pool whose fees route to named accounts. Neither is a claim on the land or a debt. Proceeds go to the natural asset first and then to the people who steward it.

## what this means for a fund and its ministry

A heritage fund does not need to own farmland at home to protect the renewable half of the inheritance. It needs the living half to be visible, valued and funded on the same horizon as the financial half. Three questions get there.

1. **Which living systems does the economy at home draw on?** Name them: the aquifer under the farm valley, the wadi catchments above the coastal city, the mangrove fringe in front of the port, and who holds or stewards each, including Indigenous and local communities. The [keystone parcels](/guide/what-is-a-keystone-parcel?from=guide) method asks which acres hold up more than their own ground.
2. **Who already pays when they fail?** Utilities, insurers, agriculture ministries, port operators. They are the value-side payors, whether they know it or not.
3. **What would it cost to take the most important ones to entrust?** That is a capital cost, paid once. It is the kind of number a fund that thinks in generations can carry.

The same question applies to any perpetual capital. [An endowment is a perpetual mandate on a mortal planet](/guide/an-endowment-is-a-perpetual-mandate-on-a-mortal-planet?from=guide) asks it of foundations and universities. A sovereign fund asks it at the scale of a nation.

## the bottom line

The resource curse taught resource-rich countries to save the rent from what runs out. The next step is to count the part of the national inheritance that does not have to run out at all: the water, soil, coasts and forests that keep producing if someone pays for their condition. A fund built to last forever can hold claims on the world's economies. The living base at home is the one asset that can last forever on its own terms.

If you work in a fund, a finance ministry or a planning office and want to see what that base looks like as accounts, start with [natural assets](/natural-assets?from=guide) and [certificates](/specific?from=guide), read [how ensurance works for governments](/solutions/governments?from=guide&topic=sovereign-wealth), or [write to us](/contact?from=guide&topic=sovereign-wealth).

## sources

- Hartwick, J. M. (1977), "Intergenerational Equity and the Investing of Rents from Exhaustible Resources", *American Economic Review* 67(5) — the Hartwick rule
- Sachs, J. D. and Warner, A. M. (1995), "Natural Resource Abundance and Economic Growth", NBER Working Paper 5398 — the resource curse
- [Norwegian Government, Meld. St. 1 (2025–2026), the national budget](https://www.regjeringen.no/en/documents/meld.-st.-1-2025-2026/id3126584/?ch=3) — 2026 fund withdrawal and the 3% rule
- [Baker Institute (March 2026), "Slow depletion, big reserves exposes Kuwait to oil demand risks"](https://www.bakerinstitute.org/research/slow-depletion-big-reserves-exposes-kuwait-oil-demand-risks) — reserve life at current output
- [AGBI (March 2025), PIF spending cuts slow giga-projects](https://www.agbi.com/giga-projects/2025/03/pif-spending-cuts-slow-giga-projects-and-trigger-layoffs) and [AGBI (January 2026), investors welcome Saudi giga-project cuts](https://www.agbi.com/analysis/giga-projects/2026/01/investors-welcome-saudi-giga-project-cuts/) — PIF spending cuts, NEOM, Trojena
- World Bank, adjusted net savings (World Development Indicators) — depletion of natural capital subtracted from national savings; concept only, no figures used

## the series

- [the risks a sovereign wealth fund cannot sell](/guide/sovereign-wealth-fund-risks?from=guide)
- [the universal owner cannot sell the ground](/guide/the-universal-owner-cannot-sell-the-ground?from=guide)
- [the heritage fund that grows back](/guide/the-heritage-fund-that-grows-back?from=guide)
- [food security without the land grab](/guide/food-security-without-the-land-grab?from=guide)
- [why a sovereign fund cannot buy nature at scale](/guide/why-a-sovereign-fund-cannot-buy-nature-at-scale?from=guide)
- [a public account for the public wealth](/guide/a-public-account-for-the-public-wealth?from=guide)
- [what a national wealth fund could hold at home](/guide/what-a-national-wealth-fund-could-hold-at-home?from=guide)