What’s Jewish about Impact Investing?

What’s Jewish about Impact Investing?

By Avi Deutsch

 

Contrary to popular belief, eating is not inherently Jewish. In fact, nearly every Western religion employs this basic human need in the service of religious practice. It is not the eating that is Jewish, it is how we eat that makes it meaningful.

The same is true of investing- it is definitely not inherently Jewish, but that doesn’t mean we can’t make it a meaningful Jewish experience.

The idea that investing can be a meaningful experience has grown in popularity in recent years. More and more individuals and institutions see their capital as way of furthering their values. If in the past we only expected financial returns on our investments, today impact investors also seek measurable social or environmental returns. Not instead of, but at the same time. However, impact investing is an agnostic tool; it doesn’t tell you what the good is, only how to realize your values. That is where Judaism comes in.

The vastness of the Jewish corpus makes it possible to claim many behaviors and practices as Jewish. However, this type of cherry-picking adds little value. The question is not what makes something Jewish, but rather how do we draw on thematic Jewish principles and values to enrich our lives and infuse meaning into a variety of practices. Here’s how we can apply some of our most significant values to investing.

To Love God with all your Money

Unlike other religions, Judaism does not seek to separate the spiritual from the physical. Abstinence is not a quintessential Jewish value, and Jewish leaders build families and live within the community. Instead, Judaism seeks to bring all aspects of life under the umbrella of holiness, even the physical and the mundane.

One of the clearest and least-known iterations of this unity comes from the most famous Jewish prayer- the Shema. Many Jews know to recite V'ahav'ta eit Adonai Elohekha b'khol l'vav'kha uv'khol naf'sh'kha uv'khol m'odekha, but few know the meaning of uv'khol m'odekha, often translated as ‘to love God with all your might/very-ness’. The Talmud interprets me’od as money or possessions.  Our earthly possessions are not exempt from our greater responsibility towards something greater than ourselves.

The notion of loving God with all our possessions poses multiple questions. What does it mean to love God with your money? What are the implications on personal property and wealth distribution?

Stewardship vs. Dominion

The origins of the Jewish notion of property and wealth can be found in the two different stories of creation found in the book of Genesis. In the story that unfolds in Genesis 1, man is made in the ‘Image of God’, and is commanded to ‘subdue’ the earth, and have ‘dominion’ over all other living creatures. This would seem to imply that the earth and all that in it are ours to do with as we please.

In the second story depicted in Genesis 2, man is made ‘from dust’, to which he shall return, and he is commanded to ‘guard’ the Garden of Eden. This story evokes a notion of stewardship: the earth is not ours, we are merely charged with safeguarding and improving it. While the term stewardship is commonly used today in reference to environmentalism, the notion has much broader implications on questions of wealth distribution, income inequality, and fiduciary responsibility.

These conflicting accounts are not reconciled in the scripture, leaving us with a deep tension that is more relevant today than ever. Later essential commentary (ha’Tora sh’bealpeh) tended to reconcile the two by associating ‘dominion’ with just ruling for the benefit of one’s subjects, and thus in the ‘Image of God’ (see Bereishit Rabbah 8:12).

If we accept the concept of stewardship, we must at a minimum strive to do no harm to our planet and society. To love God with all our money thus becomes an obligation to safeguard his creation. In practical terms, we could employ investment strategies that screen companies based on social and environmental performance. But is not harming enough?

A Commitment to Repairing our Planet

While stewardship requires that we don’t harm the planet, other Jewish values may require that we do more than that, that we actively work or repair it.

The obligation to improve the world we live in runs deep in the Jewish tradition. Modern Jewish movements often cite Tikkun Olam (repairing the world) as a core Jewish value, though in reality this term appears for the first time only in the Mishna and is used to justify only a handful of rabbinical decrees. The modern interpretation of Tikkun Olam draws heavily on Kabbalistic teachings. Other related values such as Gemilut Chasadim (acts of kindness) and Tzedakah (justice or charity) are deeply grounded in mainstream Orthodox Judaism, but historically their focus has been on helping the Jewish community.

A contemporary account of this moral imperative to repair our plant can be found in the teachings of Rabbi Irving (Yitz) Greenberg. According to Rabbi Greenberg, the ideal of a perfect and just world lays at the heart of Judaism. However, due to the forces of inertia, this perfection cannot be achieved overnight. Instead, it is a step by step process made possible through a covenant between God and Jewish people. In return for God’s protection and assistance, each Jewish generation must do its best to move the world towards this ideal. The process thus becomes an ongoing, gradual task, regulated and administered by the Halacha (Jewish law). Dietary laws, to return to our earlier example, are intended to minimize the suffering of animals, and make us more conscious of the food we are putting in our mouth.

A similar approach should therefore guide our investment decisions. To love God with our money implies not only that we do no harm, but that we use our money as a tool in the pursuit of making the planet better.

An Active Approach      

What then does Jewish law have to say about the use of capital for improving our world? As it turns out, very little. This is hardly surprising; the financial tools and legal frameworks used today are a recent phenomenon. Jewish law does however address the most ancient financial tool- lending.

Jewish law explicitly forbids predatory lending. However, it goes one step further and explicitly commands that we use our capital to help those in need. In Deuteronomy 15, we are commanded to not ‘harden thy heart’ and to lend money to the poor, to the unbankable and to the un-credit-worthy. Not to give, but to lend.

This obligation serves as the basis for Maimonides famous assertion that the highest form of charity is to provide a poor person with a job, enter into a partnership with him, loan him money, or as a last resort, give him a gift. The goal is to help the poor in the most respectful manner and to ‘strengthen his hand until he does not any longer need to ask others for help’ (Mishneh Torah, Gifts to the Poor 10:7). One can’t help but think of the slogan of the Acumen Fund, one of the forefathers of the impact investing industry:  ‘A bold new way of tackling poverty that’s about dignity, not dependence, and choice, not charity’.

Don’t Fight Them, Embrace Them

In the final decades of 19th century, Orthodox Judaism was confronted with a mass defection of young Jews attracted by the budding ideological movements, including Zionism. The mainstream Orthodox institutions viewed these individuals as lost souls, and blamed their desertion on poor education and the temptations of modern society. However, one Rabbi stood apart in his view of these secular ideologists- Rabbi Abraham Isaac Kook.

Rabbi Kook, who later served as first Ashkenazi chief rabbi of British Mandatory Palestine, believed that the problem was not in the defectors, but in the shortcoming of modern Judaism. A mass defection towards ideological alternatives revealed a lack of moral leadership within modern Judaism. The atrophied religious institutions were unable to provide their young constituents with relevant forms of Jewish practice. Within the competing ideologies he saw sparks of Divinity which were the key to restoring Judaism and reengaging the young idealists.

The need for moral leadership and contemporary Jewish practices is still visibly acute. Impact investing offer us a unique opportunity to inspire and engage. Let us embrace the growing interest among young Jews in using business as a tool for good, and infuse it with meaning by drawing on Jewish sources, debating Jewish values, and connecting with the State of Israel. 

 

Photo credit: Guido Heitkoetter

Investing Together: Creating Investment Opportunities for Generation Selfie

Investing Together: Creating Investment Opportunities for Generation Selfie

By Avi Deutsch

 

This last July, over 500 young adults, representing an estimated wealth of $750 billion, gathered at the United Nations headquarters in New York as part of the Nexus Global Youth Summit to discuss social entrepreneurship. They did not send their wealth or philanthropy advisors, but instead chose to spend three summer days cooped up in conference rooms to learn how to better use their capital and business acumen to make the world a better place.

The Nexus attendees reflect a dramatic shift in how millennials relate to wealth. The generation entering the workforce around the recent recession, laden with debt and weary of institutions, is set on making a difference. This may surprise those who view millennials as self-occupied and individualistic, quintessentially portrayed by the obnoxious selfie. However, it is a mistake to focus only on the superficial aspects of the fascination with the “self”; the emphasis on the individual is driving millennials to seek meaningful and value-inspired lives. This affects how they choose their jobs, consume, and importantly, invest their money.

As of 2015, millennials make up the largest generation in the US labor force. In addition to their earned income, they stand to inherit $59 trillion from baby boomers. A 2014 U.S. Trust survey found that 67% of millennials believe that their investment decisions are a way to express their social, political or environmental values, and 73% believe they can achieve market rate returns by investing in companies based on their impact. These factors help explain the global growing interest in for impact investing, a practice recently recognized by the CFA Institute as a distinct method of values-based investing that intentionally seeks to generate and measure social and environmental benefits alongside a financial return.  

So how should we think about designing investment opportunities that appeal to millennials? The Nexus example holds several clues. First, millennials want to belong to communities where they can express their identity and feel a part of something bigger than themselves. While the jury is still out on whether technology is bringing us together or tearing us apart (it is doing both), one thing is clear: online networks are not a substitute for offline community and human interaction. Second, millennials want to be actively involved in the investment process. Finally, a third related factor is an unprecedented demand for transparency. Millennial investors want to see the measurable difference they are making. This last factor helps explain why millennials are changing the face of philanthropy, and perhaps, why they have lost faith in wealth advisors, as well as in the stock markets

Although the field of impact investing is growing rapidly, few existing products sufficiently meet the demand for values-based community, active participation, and transparency. Public equities struggle to provide retail investors with the opportunity for meaningful dialogue or participation. Investments in private companies – where exciting and hands-on transactions occur – have traditionally been off-limits to retail investors and anyone but ultra-high net-worth individuals or institutions.

The growing field of angel impact investing provides a notable exception. Aided by changes in regulation and technology, individuals are increasingly investing directly in early-stage companies that have a social or environmental mission. Angel investing is often done in a communal setting, which lends itself to creating a dialogue around shared values, and in turn, boosts a sense of purpose and belonging. Among the more than 400 active angel groups in the US are a growing number of impact-focused groups including Toniic and Investors’ Circle.

Despite this progress, impact investing as a meaningful personal practice is still in its infancy and requires ongoing innovation. At LAVAN, an angel group investing in Israeli impact entrepreneurs, we seek inspiration for creating meaningful experiences from another and perhaps unlikely source – religion. Religious institutions have millennia of experience in building communities and facilitating values-based dialogue. Our particular religious tradition – Judaism – has a long history of group learning and facilitated debate as means of arriving at a communal understanding of values. Further, more than most religions, Jewish law regulates even the most mundane aspects of life (e.g., dietary laws), and the extension to investing is a natural one.

LAVAN fuses tradition with investing by drawing on the fundamental Jewish commitment to making the world a better place. In the words of Rabbi Irving (Yitz) Greenberg, “the heart of Judaism is the vision of perfection. The dream is of a world in which every human being is in the image of God, i.e. of infinite value, equal and unique.” Jewish tradition teaches that all humans have a responsibility, through a covenant with God, to bring our world and its inhabitants to a more dignified, and ultimately perfect, state. Jewish law is intended to provide the rules that help the Jewish people fulfill their end of the agreement, namely by ensuring that everyday actions serve that end.

The key takeaway here is straightforward and universal: with every act, we must ask ourselves how we are bringing the world closer to the image of perfection. Our investing activities are no exception.

To infuse values into investing, and meet the growing demand for social impact products, we must first understand how a sense of meaning is achieved. Millennials do not want financial products; they want impact investing experiences that enable them to participate thoughtfully, feel their impact, and belong. It is our job to create opportunities for them to do so.

 

This article was originally published in the Journal of Sustainable Finance & Banking

A call for Entrepreneurs for Spring 2016 Pitch Events

A call for Entrepreneurs for Spring 2016 Pitch Events

We are excited to announce that we are now accepting applications from entrepreneurs for our Spring 2016 Pitch Event, May 16th-18th in New York and San Francisco. 

This is an opportunity for four Israeli impact entrepreneurs working on scalable solutions to global challenges in health, education, poverty alleviation and the environment to pitch to LAVAN's community of angel impact investors. Please see our investment criteria for more information. 

Eligible companies can apply here. Applications received by March 3rd, 2016, will be considered for the Spring Pitch Event. Applications received after that date may be reviewed for our Fall 2016 Pitch Event. Please note that we are strongly prioritizing companies who will be actively fundraising ($1.0-3.0M) at the time of the Pitch Event and have commitments from other investors. 

Webcast: A Beginner's Guide to impact Investing in Israel

Webcast: A Beginner's Guide to impact Investing in Israel

In this webcast, Avi Deutsch and Vanessa Bartram Discuss:

  • What is Impact Investing
  • Who’s Doing it and How
  • The Israeli Impact Investing Ecosystem
  • What Else is Needed
  • About LAVAN

 

Exercise Your Judaism with Impact Investing

By Avi Deutsch

 

It's time to break up the monopoly around Jewish practices. Most Jews will agree that observing halachic commandments such as shabbat, kashrut, and chagim, is the common form of Jewish practice. However, by limiting the conversation to obeying Jewish law we risk alienating large segments of the community that find it hard to connect with these practices. If Judaism, as both a culture and a religion, is to maintain its relevance to the greater Jewish population, it's time to ask ourselves what it means to live a Jewish life outside a synagogue in the 21st century. How do Jewish values play a meaningful role in our everyday personal and professional lives?


Investing is not typically considered a religious practice. At best, it may be subject to religious constraints. However, the emergence of impact investing, defined as an investment approach that intentionally seeks to create both financial returns and measurable positive social or environmental impact, has the power to create a new dynamic between Jewish practices and investing, one that infuses meaning into a typically an individualistic practice. 


I am not suggesting that impact investing is inherently a Jewish practice, but rather that impact investing enables investors to exercise their values, Jewish or otherwise, using their capital. Many large asset management firms, including BlackRock, Bain Capital, JPMorgan, Goldman Sachs, Morgan Stanley, and others, have recognized the powerful potential of brining meaning into the practice of investing, and have launched their own initiatives in the field. Currently estimated at US $50 billion, the impact investing market is expected to reach US $0.5-1 trillion by 2020. 


There are several ways in which impact investing can bring Jewish values into our everyday lives. First, by encouraging investors to ask difficult questions and contemplate what Jewish values mean to them. Second, by asking investors to actively apply those values through a cognizant perusal of relevant investment opportunities. Third, by requiring investors to commit time, energy, and capital to promoting those values. Finally, and perhaps most importantly, impact investing opens the door to community engagement, discussion, and action around shared Jewish values. 


Impact investing should be differentiated from other types of values-based investing. Socially Responsible Investing (SRI) consists of a negative screen of, or divestment from, tobacco, guns, and other harmful commodities. Yet another form of values-based investing, dubbed Sustainable Investing, encourages investors to consider companies' Environmental, Social, and Governance (ESG) practices. Multiple mutual funds and ETFs offer religious investors, be they Christian, Muslim, or more recently, Jewish, the opportunity to align their investments with their faith using negative screens and ESG standards. But Impact investing is something else; it's about actively pursuing one’s values and working to solve a social or environmental issue using market mechanisms. 


To do this, we have to begin with a conversation about Jewish values. Some quintessential Jewish values such as Tikkun olam (repairing the world), Zedek (justice), and Gmilut chasadim (acts of kindness) lend themselves easily to impact investing. Imagine investing in a company that provides much-needed healthcare to the developing world or education to under-served populations. Other values such as Shabbat or Tshuva (repentance) may be harder to picture, but that’s not to say they cannot be served using market mechanisms. Impact investing can house a pluralism of Jewish values and perspectives, allowing investors to congregate and co-invest around shared values.  


Once we've established the values we want to pursue, it's time to identify investments. This is no easy task, and it requires careful due diligence. In the case of direct investing, this means identifying companies that can benefit most from the investors' knowledge, skill set, connections, and capital. To be sure, this type of investing is not for everyone. But for those who have the capital and capacity, impact investing offers a new and exciting way of practicing Jewish values. Others have an important role to play in the larger conversation around what impact investing with Jewish values looks like and how to encourage more entrepreneurs to tackle some of our planet's toughest challenges. As this field grows, there will be additional investment opportunities for different types of investors. 


While impact investing can serve many Jewish values, one value that stands out as particularly relevant is the connection with the State of Israel. As Jewish communities around the world are torn apart by the constant debate over Israel's political and security predicaments, impact investing offers an opportunity for a new dialogue, one focused on mutual Jewish values. It's time to redefine the relationship with Israel not as one imposed by lineage, but as an authentic bond with an entity that encourages the practice of shared values. Actively investing and growing value-aligned Israeli companies is a unique opportunity to create a new form of kinship between the state of Israel and Jews in the diaspora.


We cannot ignore the changes occurring in the Jewish world over the past decades. According to 2013 study by the Pew Research Center, 69% of American Jews consider living a moral life an essential part of being Jewish, versus 19% that consider observing Jewish law essential. Impact investing offers a new way of engaging large segments of the Jewish community in a discussion on what it means to be Jewish in the 21st century. We should embrace this opportunity by starting the conversation in our communities. 

This blog post was originally published in the Times of Israel

 

Portfolio Company News: Cervical Cancer Screening Technology Continues to Win Acclaim

LAVAN’s first investee, MobileODT, continues to attract international recognition. Previously highlighted by Fast Company as one of the top 10 most innovative companies of 2015 in Israel, MobileODT was recently announced by Business Insider to be one of  “53 Startups that will be huge in 2016”. In October of 2015, the company also took first place in AdvaMed’s 2015 MedTech Innovator Competition.

While this last award is less well known, it may be the most important of the bunch. MobileODT was selected out of over 300 candidates from around the world, competing for a coveted place in AdvaMed’s accelerator and a $200,000 cash prize. The Competition’s selection committee lauded MobileODT’s success in bringing a much anticipated healthcare revolution to fruition – leveraging the power of mobile technology to provide low-cost, high quality, and accessible healthcare worldwide.

Co-Founders Ariel Beery, CEO, and David Levitz, CTO, launched MobileODT in 2012 with the goal of saving the lives of 270,000 women who die each year from cervical cancer in the developing world. The proprietary mobile colposcope they developed can be connected to a smartphone and used to screen for cervical cancer in field conditions. The device retails for a mere 10% of traditional alternatives and relies on cloud-enabled technology to further reduce costs by transmitting images to off-site physicians. Copies of these images are stored in MobileODT’s research database, enabling their team to develop algorithm-based diagnostic solutions to further support clinicians.

Cervical cancer is the first of many markets for MobileODT’s technology, which can be easily adapted to screen for oral, anal and dermatological cancers. “Our goal is to make diagnostic imaging available to everyone on the planet,” says Beery. While the company designed the device to meet needs of the developing world – rugged conditions and limited clinician training in low-resource settings – customers in the developed world have also taken note and are placing orders.  Notably, the company has begun supplying devices to U.S. Emergency Departments who have recognized MobileODT’s technology as a much-needed solution for sexual assault photo-documentation. 

While MobileODT’s innovative technology continues to provide social impact, it has also delivered financial benefits for the company and its investors. The AdvaMed prize is just one in a series of cash prizes and grants that the company has won, adding up to more than one million dollars in non-dilutive capital to date.  The company exemplifies a new breed of impact startups – quickly gaining steam within Israel – that is capturing the attention and dollars of global corporations and foundations interested in the Israeli  ‘tech for good’ market. It is no coincidence that four of the ten winners at December’s Medica convention in Dusseldorf hailed from Israel. And, you guessed it, MobileODT was right there on stage among them.