How Impact Investing Can Help Israel

Sun Dec 9, 2012 12:13am EST

* Reuters is not responsible for the content in this press release.

  LOS ANGELES, CA, Dec 09 (Marketwire) -- 
Israel's social sector -- the public and private agencies, institutions,
and businesses that address the country's social and economic development
-- plays a vital part in its economy by identifying and dispensing
crucial services. But even though such spending is among the highest in
the developed world -- 5.6 percent of GDP -- the country is behind in
employing the relatively new tool of social or "impact" investing, which
leads to social good while delivering a financial return to companies. 

    A new report from the Milken Institute, "Building a Social Capital Market
in Israel," explores ways that impact investing can help the nation's
social sector evolve.

    "We identified a large gap in the marketplace, which is an important step
toward building a complete social investing system in Israel," said Glenn
Yago, senior director at the Milken Institute and founder of its
Financial Innovations Labs(R). "We've captured the best advice of top
experts in impact investing, and we believe the time is right for
bringing new approaches to Israel, where there's great receptivity to
innovation."

    The report recommends ways to overcome barriers, including legal and
regulatory restrictions, revenue challenges, and access to capital. It
details specific approaches for scaling up current financing programs,
replicating best practices from other nations, establishing a social
investment fund, and creating policy tools to provide incentives for
social investment in Israel.

    Among the tools that can be used to attract capital to Israel's social
investment market are increasing limits on tax deductions, allowing tax
credits to be carried forward and made transferable, and instituting
tax-exempt financing.

    The report also suggests a number of policy changes:


--  Allow the creation of "benefit corporations" that represent a hybrid
    of non-profit and profit-making enterprises;
--  Allow the creation of philanthropic funds as a way of spurring the
    growth of available capital; and
--  Create a classification for social enterprise bonds, similar to U.S.
    501(c)(3) bonds, to raise longer-term, lower-cost funds in the capital
    markets.

    

"Building a Social Capital Market in Israel" emerged from a Milken
Institute Financial Innovations Lab held in May where the National
Economic Council and leaders in Israeli, U.S., and U.K. social investing
markets met to help prepare a roadmap for a social investing framework.

    Yago, together with other financial, business and technology innovators,
will participate today in the panel, "Impact Investing: Israel as a
Launching Pad for Social Investment," at the Globes Israel Business
Conference at the David Intercontinental Hotel in Tel Aviv. Moderated by
Milken Institute Chief Operating Officer Paul Irving, the session will
answer questions about combining public-private and philanthropic
investors, the particular challenges facing the formulation of investment
targets, barriers to investment, and mobilizing financial institutions
through capital markets with social impact bonds to spur a new wave of
social investment activity.

    Impact investing is an approach to finance that extends the definition of
returns beyond the merely financial to include social benefits, filling a
gap between public and private sources of financing and funding,
especially where private companies do not (or cannot) provide services
competitively. Impact investors believe it's possible to solve social or
environmental challenges while generating sustainable financial and
social returns.

    "Our report outlines strategies to open access to conventional and new
capital markets and introduce novel organizational mechanisms that allow
partnerships to form between governments, NGOs, and private enterprise,"
said Yago. "At the Globes conference, we will discuss using philanthropic
and government resources to leverage 'smart' money into the social
investing economy, using good investment practices, strong business
models, and compensation for talent and performance."

    Copies of "Building a Social Capital Market in Israel" are available for
download at
http://www.milkeninstitute.org/publications/publications.taf?function=detail&ID=
8801383&cat=finlab


    About the Milken Institute
 A nonprofit, nonpartisan think tank, the
Milken Institute believes in the power of capital markets to solve urgent
social and economic challenges. Its mission is to improve lives around
the world by advancing innovative economic and policy solutions that
create jobs, widen access to capital and enhance
health.

www.milkeninstitute.org
 @milkeninstitute

    

Contact
Conrad Kiechel
director of communications
(310) 570-4668
E-mail: ckiechel@milkeninstitute.org

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