Impact Investing Through a Jewish Lens
This blog post from eJewish Philanthropy is based on a presentation at the Jewish Funders Network 2014 Conference
Impact investing has become quite popular lately, but it’s simply a new approach based on a very old concept – investing with one’s values to positively impact the world and minimize harm.
Faith communities were the earliest proponents of impact investing and there are many Jewish teachings on ethical investment and business practices. Dr. Meir Tamari of Jerusalem’s Business Ethics Center has estimated that more than 100 of the 613 commandments in the Torah relate to keeping money “kosher,” more than all the commandments concerning kosher food.
Impact investors seek measurable social or environmental benefits in addition to financial return. Examples include clean energy to combat climate change and microfinance to alleviate poverty.
The growing popularity of impact investing is due to several factors:
New metrics that allow investors to measure the positive impact of their investments and more closely align their portfolios with values and philanthropic goals.
An abundance of research that has demonstrated that incorporating environmental, social and governance factors into investment considerations and often improves financial performance.
Increased investor demand that has led to the development of customized investments that meet financial goals while addressing specific societal needs.
Younger generations now expect business and investment to generate a social benefit in addition to profits, compared to older generations raised on the Milton Friedman philosophy that business exists solely for shareholder gain.
The Jewish community has been slow to embrace values-aligned investing unlike other faiths. There are currently more than 100 faith-based mutual funds with $31 billion in assets, but there has never been a fund based specifically on Jewish values.
The Jewish community’s hesitancy is primarily the result of three dynamics:
1. Lack of Jewish Engagement in Socially Responsible Investing
Impact investing is the newest component of the Socially Responsible Investing (SRI) movement that began a few decades ago. SRI funds seek to ‘do no harm’ and primarily divest from Christian sin stocks (alcohol, gambling, adult entertainment, weapons, tobacco, contraception). Few Jewish investors find these funds attractive, as the restrictions do not align perfectly with Jewish values. Additionally, the SRI field has further rebuffed the Jewish community by supporting divestment campaigns designed to punish Israel rather than promote peace. As SRI has been the main gateway into positive impact investing, the Jewish community has made a slower entrance.
2. Challenges of Jewish Consensus Building
Many other faiths created values-based investment policies decades ago to structure SRI funds. Given the lack of Jewish hierarchical leadership, the encouragement of debate, and the broad spectrum of opinions in the Jewish community, some have wondered whether it is possible to craft a Jewish investment lens. JLens was formed in 2012 to help accomplish that. The organization provides education, and advises Jewish institutions on Jewish Values Investing (JVI). JVI is a new term coined in partnership with JLens clients to recognize the uniqueness of investing with Jewish values. JVI incorporates environment, social, governance, and Israel-related considerations customized for each institution.
3. Jewish Leadership in Philanthropy and Finance
An invisible wall has traditionally divided the fields of finance and philanthropy. On one side, financial advisors and investment professionals invest money to maximize financial gain. On the other side, mission-oriented philanthropy experts and donors make grants and focus on social impact. Jewish leadership in both fields has made it challenging to redefine traditional roles and encourage philanthropy and finance professionals to work together, a necessary requirement for impact investing.
The investment capital held by Jewish individuals and institutions (federations, foundations, endowments, pensions and nonprofits) is substantial. Imagine if that capital, while meeting financial goals, was also used to reduce poverty, protect the environment, support Israel, and provide access to healthcare and education. Investment capital has the ability to support philanthropy to advance the Jewish value oftikkun olam (repair the world). The Foundation for Jewish Community, with more than 1,000 donor-advised funds under its umbrella, is an excellent example of investment capital supporting philanthropic goals.
The great Jewish sage Maimonides explained in the 12th century, “the highest level oftzedakah (charity) is providing sustainability through a gift, loan, partnership or job to establish someone in business so they are no longer dependent on others.” Maimonides’ vision has never been easier to implement thanks to the recent advances in impact investing.
Julie Hammerman is the founder of JLens, an investor network and consulting organization enabling impact investing through a Jewish lens.