Investing Assets as Tzedakah

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February 1, 2005
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Jeffrey Dekro

MOST FEDERATION, communal fund, and family foundation professionals look at their grantmaking budgets and see both too little money and too many worthy organizations to support. What they often fail to appreciate is a vast pool of available resources – not just with the five percent of their corpus allocated to grantmaking, but also the 95 percent of assets allocated for investment.

For most of American Jewish history, our institutions have strictly maintained a “firewall” between operations – including grantmaking – and fund management. Investment decisions were geared to preserving and modestly growing the asset base. Considering the often precarious state of Jewish life, this emphasis has been entirely understandable: Jewish organizations amassed funds to rescue and support endangered Jews and also to ensure our security and well-being.

Today, however, Jewish institutions (including federation endowments, donor-advised funds, as well as family foundations) have become a true financial force, collectively holding assets that are conservatively estimated at $50 billion or more. Our communal institutions are a presence in every major American city; yet, like a person who does not know his own strength, we have chosen to use only a small portion of those assets – the grantmaking portion – to pursue limited aspects of our Jewish agenda.

Foundations that have breached the firewall between grants and investments – after piercing layers of bureaucratic and intellectual resistance – have found that they are able to support projects both inside and outside the Jewish community at a level far beyond their grantmaking budgets. The Avi Chai Foundation, for example, has made more than $56 million in interest-free construction loans to Jewish day schools. FJC (formerly the Foundation for the Jewish Community) has long had a policy that at least 10 percent of all donor-advisor funds are used as low-income community development loans or bridge loans for nonprofits. And the Shefa Fund’s Tzedec community investment program has mobilized more than $17 million in loans for housing and small business development, with a focus on minority and low-income neighborhoods.

Direct investment is not the only option for marshaling this strength.   Through shareholder activism, institutions can use their investment power to push for greater corporate responsibility on issues that have broad overlap with Jewish interest, like employee healthcare or labor relations.   For example, Shefa has organized a Jewish Shareholder Engagement Network that now represents more than $1.3 billion in total assets and, in the past year and a half, endorsed shareholder resolutions about prescription drug availability, response to HIV/AIDS in Africa, equal opportunity, and the need for more transparent corporate governance.

But for this type of activity to be more than just an occasional effort, unique to only a few foundations, Jewish institutions must think of investments in a fresh way – as another tzedakah asset class. Using Jewish communal assets – to support both Jewish needs, such as housing for seniors and low-income families, as well as social justice efforts spanning both the Jewish and the broader community – would represent a major Jewish philanthropic breakthrough. Several years ago, the Reform movement set the modest target of spending 1.8 percent of its assets for low-income community development – a standard it has upheld ever since.

In short, few foundation executives would not welcome more funds to support their missions. Yet, when those funds are already widely available, albeit in a slightly different form, few funders are choosing to make use of them. Thus, we must ask ourselves an extremely appropriate version of a very familiar question, “Why? And if not now, when?”

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