By aligning their capital with their values, Jewish investors and philanthropists can potentially have a greater impact on the world’s problems.
Many people look to their faith for guidance when making decisions that seek to have a positive impact in the world. For example, a key concept in Judaism, Tikkun Olam, translates from Hebrew to “repair the world.” While followers of Judaism interpret the idea differently, for many, Tikkun Olam evokes the duty to serve those in need.
How can you help “repair the world,” given the complexity of current global challenges? “One way is to use your capital to advance causes aligned with Jewish values,” says Melanie Schnoll Begun, Head of Philanthropy Management at Morgan Stanley. Your capital can be deployed through charitable giving and through impact investing.
“Jewish values will translate into different objectives for each individual, family or organization,” says Lily Trager, Director of Investing with Impact at Morgan Stanley Wealth Management. “To facilitate this flexibility, we have developed a spectrum of investment approaches to activate financial strategies that align with the individual objectives of each investor.”
As with many faiths, embedded in Jewish custom and law is the tradition of philanthropy, from the practice of pushke—a small, blue and white tin box used to collect coins for charity—to the robust giving of Jewish individuals, federations, foundations and nonprofits across the world today. Giving can take many forms and financing methods, such as loan guarantees, lines of credit and equity investments to achieve each individual’s or institution’s philanthropic mission.
This generosity often extends outside Jewish communities and causes. A recent study found that on average 75% of the grants from Jewish federations, community foundations, family and corporate foundations, and donor-advised funds went to secular charitable organizations. In total, Jewish philanthropists, federations and foundations donate approximately $9 billion annually to various philanthropic causes including social welfare, health, education, advocacy and the arts.1
A donor advised fund account can be a flexible way to align philanthropy with your religious values. You can begin by discussing with your Financial Advisor allocating some or all of your account towards your Jewish values.
While faith-based philanthropy may seem more familiar given its prevalence in Judaism and other faith traditions, faith-based investing can require more explanation.
The Torah offers guidance on aligning capital with Jewish values through a number of commandments and mitzvot, the Hebrew word for good deeds. Below are four ways investors can bring their faith to investing:
- Climate Change: Tikkun Olam, or repairing the world, could be interpreted as a call to address one of the most pressing global challenges of today: climate change. This can be achieved by excluding companies that are among the worst environmental performers, or by proactively investing in innovative companies that are developing products and services to accelerate the transition to a low carbon economy.
- Social Justice: Another Jewish mitzvah, Tzedek, is a call for justice. It can evoke an obligation to fight for justice for the poor by investing in companies working toward the eradication of poverty, for gender and multicultural equality, or for a fair court system around the world.
- Local or Global Issues: Some investors may want to align their portfolio to their world view by focusing on specific groups or geographies to generate impact. Individuals and institutions can invest in exchange-traded funds (ETFs) that track the Indexes from specific geographic markets. Qualified investors can choose private equity investments that are making an impact in specific communities locally or globally.
- Shareholder Engagement: The mitzvah of Tzedakah dictates the responsibility of Jews to give to charity, but also emphasizes the intentionality of giving as equally important to the amount. This could mean allocating some of your capital to asset managers who actively engage with their portfolio companies to improve corporate practices and ensure that your money goes a long way to create impact.
There are several approaches investors can take to align Jewish values to investing. One is to apply screening restrictions. For example, this could mean excluding companies with poor environmental or human-rights records. Another approach is environmental, social and governance (ESG) integration. For example, an investor for whom Tzedek makes gender diversity and equality important could design a strategy that uses ESG data to identify companies with good gender equality, social practices and governance.
A third approach is thematic-exposure investing, or the intentional allocation of capital to sectors or geographies addressing specific impact objectives. The final approach is impact investing, which allows qualified investors to access investment strategies in private funds and companies that directly produce a specific type of impact. For a family reflecting on Tikkun Olam, this could mean investing in a strategy focused on clean and renewable energy solutions, or one that provides affordable housing.
The journey of aligning your capital with your values is a long and important one, and it can start with a conversation with your family (or, in the case of institutions, with your board), on what Jewish values mean to you.
Morgan Stanley hosted the first Jewish Values Consortium series in New York, Los Angeles and Southern Florida this year. Over 250 Jewish philanthropists and community leaders provided insight on the wide range of applications of Jewish values to investing and we have embedded that knowledge in new educational materials and other resources available to our clients. Speak with a Morgan Stanley Financial Advisor to start a conversation about aligning your religious values with your philanthropic and investment capital.