Leichtag Foundation Goes All-In 100% on Impact Investing
JLens is excited to spotlight one of our investors, the Leichtag Foundation, and their commitment to invest 100% of their portfolio in mission-aligned impact investments. JLens interviewed Charlene Seidle, Executive Vice President, to learn more about the leadership role the Leichtag Foundation is taking in the Jewish community on impact investing.
Could you introduce us to the Leichtag Foundation?
The Leichtag Foundation was founded by Lee and Toni Leichtag. They were entrepreneurs who grew up in abject poverty. Lee may have graduated high school, Toni probably didn’t. They loved the thrill of starting a new business, and they felt like they were the achievement of the American dream. When they finally hit it big, more toward the end of their lives, they never felt like the money was theirs, so they focused on giving it back, and they left 98% of their assets to the foundation. After their sudden death, The Foundation transitioned to an independent foundation, with currently around $105 million in assets. They had a high tolerance for risk - you have to if you’re going to be an entrepreneur. The foundation is also a limited life foundation.
What drew you to the topic of impact investing?
I liked the idea of turning the traditional foundation model on its head. In my time at the Jewish Community Foundation of San Diego, I had been involved on the endowment development side, giving away a certain percentage a year. I am someone who struggles with binaries, so I liked being able to say, there’s 100% of assets that can be used in multiple ways to achieve good. This got more cemented when Leichtag became an independent foundation, and we were in a rare position - we had the ability to take a lot of risk, and to be urgent about that risk, to lead and to fail forward, using a full spectrum of tools to address challenges. Our board had a real mandate that we should be at the forefront of risk.
Tell us more about your goal to align 100% of the foundation’s investment assets with your mission?
We have a broad definition of mission-alignment, including specifics around Israel, climate change, and our mission areas, as well as anything that broadly serves the community. There are several categories: there are funds and passive investments, including JLens. There is venture capital. Then we have direct investments, like the Leichtag Commons, our signature real estate campus of social enterprise in Encinitas, as well as a few other social real estate investments. We are looking at some affordable housing models here as well.
We set an initial target to achieve 100% mission alignment across our investment portfolio by 2025. We are already at about 60%. We started with VC in Israel, invested at Leichtag Commons, and started to look for other social real estate projects, which has been slower than we initially expected. Interestingly, we are looking at liquidity much more than we were. We are urgently spending, and we don’t know how long we can lock up our sources of capital, which limits our ability to invest in early-stage companies, for example. We appreciate our investment in JLens because of both the mission alignment and the high liquidity.
Were there any challenges along the way?
We adopted a Do-No-Harm approach that ended up being more complicated and harder to implement than direct impact investments. It was simpler to present an exciting investment, even one that has slightly less financial return but a clear social goal. Do-No-Harm was also challenging from a cultural perspective. We have a terrific investment committee; these are people who are charged as fiduciaries of the organization, they care about financial return, and it is hard to have to turn down something with an attractive financial return because you are asking a lot of questions the manager can’t answer.
It has also been very difficult to find the level of information we need to determine if a company or an investment manager is violating the do-no-harm policy. Our Do-No-Harm approach avoids child labor, human trafficking, entities who deny the right of the State of Israel to exist as a democratic Jewish state, discrimination, detrimental effects on human health, environmental destruction and more. For years, we could not find an international emerging markets fund we were happy with and only recently found one. Transparency was lacking, and it was hard to get this information. Obviously things are changing, but it is something we have to keep on
Could you tell us about some of your unique investments, like your interest-free loans? Within two weeks of the start of the pandemic, before the government’s PPP loan program, through a community emergency fund we helped launch, we offered interest-free loans. We didn’t want organizations to have to make rushed decisions about staff before they had time to consider. Our local JCC was unique in keeping people employed at the beginning, and the CEO points to our interest-free loan as a key factor. We’re very proud of that. We have also done some interest-free loans in Israel, in particular cashflow loans with nonprofits. Those we continue to do with some of our grantees, and they are reported on our investment statements.
What is the foundation’s approach to investing in fossil fuels?
We are actively discussing this question. We decided to go fossil fuel free with our JLens portfolio as a first step. We were having a broader discussion around climate change, in a moment when it was particularly apparent in our state with the ravages of wildfires. We are also thinking about the shmita (sabbatical) year coming up - we even have a shmita task force, which is not confined to investments, and will announce some initiatives in September. We are thinking about cycles of the earth and honoring our role. Although we are usually very localized in our giving, in San Diego and Jerusalem, and we do not focus on the area of climate change, the board and staff all feel this is an urgent issue and an emergency.
Regarding fossil fuel divestment, everyone has been broadly supportive in acknowledging the issue, but there have been a diversity of perspectives on how fast we should go. We are moving toward broad fossil fuel guidelines and waiting for some research from our investment advisor before we do so.
What is in the future for the foundation?
We continue to balance the urgency of the moment with the need to sustain for the longer term. We are running the sprint and the marathon at the same time, and we don’t know how long the marathon is because we don’t yet know how long the foundation’s limited life will be. We will seek exits - we want to be a patient partner and an urgent pioneer. We invest in changemakers, and we have been constantly floored by the abundance of those people particularly in the communities we serve and look forward to deepening those partnerships.