Social Investment to Address Israel's Growing Needs
May 3, 2012
Los Angeles
Held at the request of the National Economic Council of the Israeli Prime Minister's office, this Financial Innovations Lab focused on creating social investment programs and policies for the state of Israel. The goal is to create a flexible, market-oriented and efficient system that will increase sources of capital.
With that goal in mind, the Lab "Social Investment to Address Israel's Growing Needs" brought together a diverse group of experts and decision-makers from impact investing and venture philanthropy including representatives from the Israeli government, private investors, academics, philanthropists and social entrepreneurs.
Overcoming challenges from education to environmental sustainability to health care has largely been the purview of the public sector and the philanthropic community, but these sources lack the funding to fully address these issues. Many of the financial tools for funding social infrastructure are unavailable in Israel, so the nonprofits that deliver most of these services cannot reach the scale necessary to have a lasting impact.
Learning from best practices from the United States and abroad, the Lab participants reviewed the most effective strategies to leverage private dollars for social purposes. Some examples:
Grand Challenges Canada would like to extend its challenge program to social entrepreneurs in Israel, offering $100,000 grants for products and services that can scale up and fill an unmet health-care need, including services outside Israel. For example, one recent grantee proposes to develop a fetal monitor product that does not require electricity (For information: www.grandchallenges.ca).
A pay-for-outcomes model has been used in a pilot project in England. A bond's value is based on project outcomes. The bond pays no return if the project fails to reduce recidivism in a targeted prison population. But if recidivism drops by 7.5 percent, the British government will pay an "avoided cost" amount, and the bond will return a market rate to lenders (For information: www.socialfinance.org/uk).
Double-bottom-line investing involves venture capital investing for both market returns and other outcomes - job creation, products for healthy living, community programs and so on. One fund, DBL Investors, is in the top quartile of its fund cohort - illustrating that there need not be a compromise between doing good and doing well (For information: www.dblinvestors.com).
Creation of for-profit businesses that reinvest a share of their profits in job training programs. Liliyot is a Tel Aviv restaurant that excels in its field - kosher dining - and its social mission - creating an on-ramp for at-risk youth. The enterprise partners with Elem, a nonprofit that provides youth counseling services. Liliyot investors still expect a return on capital, and the business plans to expand to nearly a dozen restaurants (For information: www.liliyot.co.il).
Results from the Lab, including recommended next steps for implementation, can be found here. For more information, contact Caitlin MacLean, senior manager of Financial Innovations Labs, at cmaclean@milkeninstitute.org
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