Jerusalem’s alleyways represent a childhood where I was constantly reminded that even dreams have limits. Every morning, in the streets of the modest neighborhood in which I grew up, I would watch the local ultra-Orthodox women walking to and from work. Their incomes from these jobs, mostly in childcare and teaching, were not enough to provide for their large families. Yet, despite this daily struggle, these women never dared to imagine a better life.
These thoughts raced through my mind as I sat in a meeting to decide whether to invest in a company that provided professional training to ultra-Orthodox women to facilitate their entry into the lucrative Israeli hi-tech sector. The well-furnished conference room where we met felt a long way away from the places I had seen in my childhood. Then, I was exposed to the clear limitations on opportunities for ultra-Orthodox women. Now, though, I – along with those in the room – had the ability to start breaking those boundaries and change this reality.
Few traditional investors will tell you that they want to change the world. For those of us in the “impact” sector, however (or what is currently known as “blended finance”), that dream is present in every investment we make.
Impact investments are measured differently from traditional investments. Their aim is to create positive societal change; in healthcare, the environment and education. Unlike traditional investments, which focus on the financial bottom line, impact investments are measured by broad-ranging outcomes, such as how many jobs they will create, how many lives they will impact and how they will preserve the environment.
In recent years, this term has become increasingly popular, a necessary buzzword for every contemporary venture capital or private equity firm. But while for some, it is an afterthought, for others, it is a guiding principle.
Another important term with which the investment industry has become familiar in recent years is Sustainable Development Goals investments (SDG) – a concept developed by the UN to describe investments that positively impact society, education and the environment. This is an enormous and recent change. Its impact has been made apparent by the new set of quantifiable measurements gradually entering world markets, a new global approach and increased funds being allocated to new socially impactful ventures. According to various estimates, the sum of current “responsible investments” (according to SDG, Environmental, Social, and Governance and similar definitions) is around $36 trillion, an enormous figure which represents a major global shift.
Another major catalyst for change in recent years is, of course, the ongoing COVID-19 pandemic. Investments that were once considered safe are now unstable. Our world has been disrupted. Governments and private investors have been forced to completely rethink their investment strategies, with public health and social responsibility being brought to the forefront. We see public funds realigning their focus to healthcare, vital infrastructure, and a revamped demand for massive investment in remote medical care solutions, as well as research and development of vaccinations and medicines.
REAL ESTATE models have also undergone a major transformation as leading investors seek out alternative projects with a more socially conscious bottom line. Coping with the world’s looming uncertainties and the extreme changes to human life resulting from the pandemic and the climate change crisis is causing investors to search for new investment avenues. Fund managers are now demanding impact indices in order to invest in new projects, and the public as a whole is taking a greater interest in how its money is being invested by pension and insurance funds. Investors increasingly want their profits to be felt in their hearts and minds, as well as in their pockets.
Israel has the potential to lead this emerging field. Israeli investors and companies have for years seen how their technologies can not only provide clean running water in areas where this is scarce, but that there is money to be made in doing so. By using Israeli infrastructure, technology, advanced sensors and methodology, farmers across the developing world can increase yields, both for themselves and for their investors.
We live in a world in which new opportunities for education – made possible by impactful investments in infrastructure, digital learning and online employment opportunities – can change the horizons of an entire generation. We see this as part of a new global portfolio; a “new world order” of investments that does not operate by the old zero-sum financial paradigm. Rather, it operates on the understanding that the world will be better and more profitable if we learn how to create opportunities through impactful investments from which multiple parties gain.
And what about the ultra-Orthodox women from the neighborhood in which I grew up? How are they doing today? Since 2019, 356 of them have completed the hi-tech training certification program at Extra-Tech, the technological incubator for the ultra-Orthodox population in which we decided to invest. Ninety percent of this group have since been hired by leading tech companies, enjoying salary increases of approximately 300%. In this area, as in so much else, Israel can – and must – lead the way to become not only the Start-Up Nation, but also the Impact Nation.
The writer is the founding CEO of the Menomadin Foundation, an Israeli-based international impact fund. Through its “blended finance” approach, the foundation is a partner of – and an investor in – dozens of social and philanthropic impact-promoting start-ups and enterprises in Israel and around the world, leveraging private and public capital in the development and application of innovative models and for the creation of sustainable social and economic impact.