UJA-Federation of NY makes first investment in Israeli Social Impact funds

The federation won a government tender to participate in two social impact funds, IVN and Dualis.

March 23, 2015 21:07
2 minute read.
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Young Jews rally in support of Israel in New York, July 20.. (photo credit: EDUARDO MUNOZ / REUTERS)

The UJA-Federation of New York has made its first investment in Israeli social impact funds, which combine the goals of investment returns and doing social good.

“It’s obviously the marriage of business and philanthropy in a unique way,” said UJA-Federation of New York lay leader Michael Lustig, a former BlackRock investor. “If it’s possible to get a good return while doing something that’s mission-aligned, then it’s win-win.”

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The federation won a government tender to participate in two social impact funds, IVN and Dualis, and will contribute $500,000 to each. The funds, which will capped at NIS 22.5 million, including up to NIS 9 million from the government and the rest from private investors, are charged with investing in profitable businesses that also do a degree of measurable good, helping people at risk, special needs individuals, the elderly, and the unemployed.

Dualis, for example, runs small businesses such as the Liliot restaurant in Tel Aviv, which hire at-risk youth with the aim of helping them turn their lives around. The kids who go through their program, often high school dropouts, some of whom have minor criminal records, are cut off from hopes of a good army career or higher education.

They are given a job, training, and structure, but also extra attention. The business employs social workers and has to keep extra staff on hand, meaning its costs are higher, but it still turns a profit. Graduates of the 18-month program have a 90% chance of functioning normally in society after five years.

Chanoch Barkat, the founder of Dualis, sees the federation’s investment as a turning point for social impact businesses.

“The fact that UJA-Federation of New York came in as an investor is huge,” he said. In Barkat’s estimate, the federation groups around the US control a combined total of between $50 billion and $100 billion in funds. Around 95% of those funds are oriented strictly toward profitable investment, he says, while the remaining 5% are put into grants and philanthropic mission-related causes.

The fact that the money for the funds came from the investment side and not the mission-oriented side of the divide is an exciting harbinger of things to come.

“This is not just about social investment. We have now put the first little crack to open up phenomenal amounts of money for investing in Israel,” said Barkat.

Lustig sees Israel as a leader in social impact investment, and says he’s proud that his organization is at the cutting edge of investing with the dual purpose of making a return and promoting positive social outcomes.

“I think Israel’s ahead of the game in some respect,” he said, noting that some similar initiatives exist in the US government’s OPIC, the Overseas Private Investment Corporation, which focuses on development.

“Israel is definitely a leader and among the first, both in terms of the government but more so among Israeli entrepreneurs,” Lustig said.

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