Recently, CEO Erika Karp moderated a panel discussion on behalf of the Jewish Federation of North America (JFNA), an organization that brings together Jewish foundations and non-profit organizations in support of shared goals and values. The panel focused on how foundations can incorporate mission-aligned investing in the endowment portfolios as well as through Program Related Investments. Suzanne Barton Grant from JFNA framed the discussion with an audience poll that revealed that a lack of knowledge among investment committees is a key barrier to adopting mission-aligned practices.

Erika spoke with Joel Wittenberg of the W.K. Kellogg Foundation and Ned Rosenman of Blackrock. They explore the variety of forms mission-aligned investments can take, the intersectionality of issues that can multiply impact, and the challenges of measuring impact.

There’s a quote I love from the famed Jewish philosopher Martin Buber: “All journeys have secret destinations of which the traveler is unaware.”

Twenty-five years ago when I started working on Wall Street, I had no idea that my journey would find me running a firm that’s about impact investing, social justice, environmental impact and governance. I also had no idea that my Jewish heritage and its focus on “Tikkun Olam” — repairing the world — would become so intertwined with my professional mission.

There’s another quote that I find so relevant to my work, from an ancient rabbi, Rabbi Tarfon. He said, “It is not incumbent upon us to complete the task, but neither are we at liberty to desist from it.” In other words, we can all do our share. For my share, I think about capitalism and economics and finance every day, and I think they happen to be really powerful tools. I also believe that impact investing, sustainable investing, is entirely consistent — in fact, it’s the same — as practicing Jewish values.

Tools to Righteousness

For example, consider Noah. I think we all know there was an ark and lots of animals and Noah did something good because God asked him to. But was Noah a righteous man? He was certainly blameless; he didn’t partake in the evil that caused God to plan the flood. But was he righteous? According to Rabbi Tarfon’s teaching, if Noah had no power or resources to do fight evil, well then, he was blameless. If he had the tools and the power, and still stood by, he might be blameless but he would not be righteous. That’s the lesson I take from Judaism and apply to my work. We have the tools. Money is a tool. Investing is a tool. We use those tools to bring about as much good as we can, to be as righteous as we can.

The Social Impact of the Private Sector

We’re in a time of unprecedented challenges. Human trafficking, slavery, suffering persists. California is burning, the Arctic is melting, and a number of keystone species such as bees are at risk of extinction. We know that in the next couple of decades there’s going to be more plastic in the ocean than there are fish right now. Income inequality is creating social stress in many areas of the world.

There’s also some unprecedented good, and here’s where the capital markets come in. We’re seeing asset owners, asset managers, investment banks, accounting firms, regulators, exchanges, ratings agencies — all these pieces of the capital markets — start to move in the same direction at the same time, in the direction of seeking sustainability.

When it comes to investing, we need to move not millions, not billions, but trillions of investment dollars towards environmental and social impact. And you cannot move trillions until you engage the whole private sector, the entirety of the capital markets, the private sector. We need collaboration. We need understanding, we need transparency. And the good part is they’re coming. It’s happening.

Words of Economic Wisdom

Here’s another quote worth citing: “To feel much for others and little for ourselves; to restrain our selfishness and exercise our benevolent affections constitute the perfection of human nature.” Another rabbi?

Actually, that’s an economist: Adam Smith. (I think Adam Smith is poetry.) People typically associate Adam Smith with The Wealth of Nations and the concept of “the invisible hand,” which says that markets will work it out themselves. The only thing Adam Smith forgot with regard to the invisible hand is that there are externalities, negative externalities that companies produce when they do their thing.

Milton Friedman is another economist who forgot something. When a board of directors thinks that their job is to solely to maximize shareholder value, they cite his work. They say, that’s all we can do, that’s what we have to do, it’s a fiduciary obligation. Well, two words that Milton Friedman left out were “long term.” We need to maximize shareholder value over the long term. Friedman also said, “Most economic fallacies come from a tendency to assume that there’s a fixed pie, that one party can gain only at the expense of another.” And so Milton Friedman knew what it could, what it should be like when it comes to capitalism and the capitalist system.

Judaism and Capitalism: The Perfect Pair

When it comes to negative externalities created by business activity, and when it comes to creating value over the long term, Jewish values provide a roadmap. In fact, the best quote of all about capitalism actually does come from a rabbi. The great Hillel said, “If I am not for me, then who will be? But if I am only for me, then what am I? And if not now, then when.” To me, this is the essence of Jewish values, and the essence of how capitalism can grow the pie for all. Now is the time.

Erika Karp is the Founder and Chief Executive Officer of Cornerstone Capital Group. This piece was adapted from a speech delivered at a gathering of Cornerstone clients and friends. You can view the video here.

Jewish Business News, December 18: We use those tools [money and investing] to bring about as much good as we can, writes our Founder & CEO Erika Karp when discussing “Tikkun Olam” – repairing the world – and why impact investing is so important.

Read more here.

Cornerstone Capital Group recently had the honor of hosting a special evening at Congregation Beit Simchat Torah synagogue. CEO Erika Karp was joined by Robert Bank of the American Jewish World Service, who spoke of the close relationship between impact investing and Jewish values. We are pleased to share this replay for those who could not join us for the event.

As we once again approach the Jewish High Holidays — “The Days of Awe” — we return to a theme we have touched upon before: the importance of amplifying the voices of progress.

“The Days of Awe” refers to the ten days starting with Rosh Hashanah and ending with Yom Kippur.  They are a time for reflection, introspection, repentance and renewal. In the context of capitalism, there can also be “Days of Awe.” Days where market-based approaches deployed to address massive global challenges can help find alternatives to fossil fuels, drive the rebuilding of crumbling infrastructure, support economic inclusion, education, healthcare, and human rights and dignity for those threatened by war, illness and food insecurity.

“The Days of Awe” could bring lessons to leverage the power of capitalism towards its best and highest purpose. Fostering global prosperity can be achieved through a more sustainable form of capitalism – a form of capitalism where leaders must be prepared to engage in a nuanced debate and exchange of ideas that will yield extraordinary resilience.

In reflecting on the future of capitalism, we draw from wisdom of the great scholar Hillel, who was said to not only advance his own thoughts, but those of his opposition.  It is in that context that we revisit an article first published in Forbes a couple of years ago: “Sustainable Capitalism… If not now, then when?”

The prominent Jewish scholar Hillel is known to have said “If I am not for myself, then who will be for me? And if I am only for myself, then what am I? And if not now, then when?” These questions posed at around 50 BC are incredibly timely in the context of today’s struggling global economy and threats to our system of capitalism. Indeed, “If not now, then when?”

Today, while the worst appears to be over for the global financial crisis, we witnessed the global economy pile on trillions of dollars in additional debt through quantitative easing, the Eurozone still under siege awaiting cohesive policy and political leadership, and China’s leadership driving a dramatic transition while hoping to maintain enough growth to support the needs of 1.3 billion people. Again, “If not now, then when?”

We live in a world which consumes about 1.5 times the earth’s sustainable level of natural resources each year to support our current consumption patterns. Our population is aging such that the financial burden on the young to care for the old is growing rapidly. The extent of income inequality is dramatically increasing, the US alone has almost 50 million people living in poverty, and almost a billion people around the world don’t have access to clean drinking water. “If not now, then when?”

The time is indeed now. All the pieces are in place to move forward and leverage the extraordinary power of capitalism on behalf of the entire world. We have everything we need across the broad realms of technology, science, academia, economics, government and finance to ensure a better future. We have the opportunity to repair an economic system which remains the greatest vehicle the world has ever known for creating wealth and prosperity. The real question is whether we have the force of will to follow through. In the face of a justified crisis of confidence in capitalism, we must rebuild trust and faith in the system. We can. And now is the time.

To do this though, we need to better acknowledge the shortcomings in our abilities to deal with complex global problems. As did Hillel, we need to pose the hard questions to the right people and to ourselves. We need two things which are currently in deficit. The first is greater transparency into the mission, strategies, objectives and priorities of the world’s private sector companies combined with a regulatory infrastructure which encourages that transparency. The second is a generation of business leaders who are better at facilitating collaboration.

On the subject of transparency, I would argue that many signals now point to the need for more systematic analysis of environmental, social and governance (ESG) factors in the investment processes which drive capitalism. The time is now given that there are one thousand asset management firms representing $30 trillion in assets who need to better understand business decision-making processes associated with the inevitable trade-offs inherent in running a business for the long run. These firms, all signatories of the Principles for Responsible Investing, now have access to more ESG data than ever before. This data can now be housed in the cloud, better analyzed, better assured, and better disseminated through social media by the scores of investors, accountants, consultants, investment banks and academic institutions that are demanding it. This data, which is pivotal to decisions around financial investments as risk and return are analyzed, can now be disclosed in a more coherent and efficient matter now that standards are being established as with the GRI (Global Reporting Initiative) and the Sustainability Accounting Standards Board (SASB). The time is indeed now for better transparency.

With regard to collaboration, the time has also come. As made obvious during the global financial crisis, independent action by individual economic entities working towards their own interests will ultimately fail. “If I am only for myself, then what am I?” Complex problems cannot be solved sequentially. There must be parallel processes, initiatives and perspectives which can ultimately come together to find solutions. There must be a belief that solutions for the whole will ultimately be beneficial for the individual. Collaboration can be encouraged by leaders who are incentivized to truly steward financial, human and natural capital for the long-run. We have indeed begun to see that in the capital markets across the corporate and investment world. Collaboration can be accelerated by embracing diverse perspectives. The imperative and the infrastructure is in place, so “if not now, then when?”

In summary, I argue that the awesome power of capitalism can be unleashed through rebuilding confidence and conviction. Confidence and conviction can be restored through greater transparency and collaboration. Transparency and collaboration will allow for more creativity, innovation, productivity and growth. Obviously all these things are easy to say, but not as easy to execute. In order to actually deliver on the promise, I would suggest that we attack complexity with simplicity as did the scholar Hillel. The simple principle of asking questions is the best starting point. But, to ask them constructively and consistently, and to ask again and again until the answers are forthcoming, is the trick. To elevate consciousness around broad environmental, social and governance factors and then to ask for accountability is essential. We must ask the right questions to the right people. Then we need to insist upon robust answers, comparability and accountability. The future of capitalism can indeed be much brighter if viewed as “a question of questions.”

 Erika Karp is the Founder and CEO of Cornerstone Capital Group.

 

 

 

This last July, over 500 young adults, representing an estimated wealth of $750 billion, gathered at the United Nations headquarters in New York as part of the Nexus Global Youth Summit to discuss social entrepreneurship. They did not send their wealth or philanthropy advisors, but instead chose to spend three summer days cooped up in conference rooms to learn how to better use their capital and business acumen to make the world a better place.

The Nexus attendees reflect a dramatic shift in how millennials relate to wealth. The generation entering the workforce around the recent recession, laden with debt and weary of institutions, is set on making a difference. This may surprise those who view millennials as self-occupied and individualistic, quintessentially portrayed by the obnoxious selfie. However, it is a mistake to focus only on the superficial aspects of the fascination with the “self”; the emphasis on the individual is driving millennials to seek meaningful and value-inspired lives. This affects how they choose their jobs, consume, and importantly, invest their money.

As of 2015, millennials make up the largest generation in the US labor force. In addition to their earned income, they stand to inherit $59 trillion from baby boomers. A 2014 U.S. Trust survey found that 67% of millennials believe that their investment decisions are a way to express their social, political or environmental values, and 73% believe they can achieve market rate returns by investing in companies based on their impact. These factors help explain the global growing interest in for impact investing, a practice recently recognized by the CFA Institute as a distinct method of values-based investing that intentionally seeks to generate and measure social and environmental benefits alongside a financial return.

So how should we think about designing investment opportunities that appeal to millennials? The Nexus example holds several clues.

First, millennials want to belong to communities where they can express their identities and feel a part of something bigger than themselves. While the jury is still out on whether technology is bringing us together or tearing us apart (it is doing both), one thing is clear: online networks are not a substitute for offline community and human interaction.

Second, millennials want to be actively involved in the investment process. Finally, a third related factor is an unprecedented demand for transparency. Millennial investors want to see the measurable difference they are making. This last factor helps explain why millennials are changing the face of philanthropy and, perhaps, why they have lost faith in wealth advisors as well as in the stock markets.

Although the field of impact investing is growing rapidly, few existing products sufficiently meet the demand for values-based community involvement, active participation, and transparency. Public equities struggle to provide opportunity for meaningful dialogue or participation. Investments in private companies – where exciting and hands-on transactions occur – have traditionally been off-limits to retail investors and anyone but ultra-high net worth individuals or institutions.

The growing field of angel impact investing provides a notable exception. Aided by changes in regulation and technology, individuals are increasingly investing directly in early-stage companies that have a social or environmental mission. Angel investing is often done in a communal setting, which lends itself to creating a dialogue around shared values, and in turn boosts a sense of purpose and belonging. Among the more than 400 active angel groups in the US are a growing number of impact-focused groups including Toniic and Investors’ Circle.

Despite this progress, impact investing as a meaningful personal practice is still in its infancy and requires ongoing innovation. At LAVAN, an angel group investing in Israeli impact entrepreneurs, we seek inspiration for creating meaningful experiences from another and perhaps unlikely source – religion. Religious institutions have millennia of experience in building communities and facilitating values-based dialogue. Our particular religious tradition – Judaism – has a long history of group learning and facilitated debate as means of arriving at a communal understanding of values. Further, more than most religions, Jewish law regulates even the most mundane aspects of life (e.g., dietary laws), and the extension to investing is a natural one.

LAVAN fuses tradition with investing by drawing on the fundamental Jewish commitment to making the world a better place. In the words of Rabbi Irving (Yitz) Greenberg, “the heart of Judaism is the vision of perfection. The dream is of a world in which every human being is in the image of god, i.e. of infinite value, equal and unique.” Jewish tradition teaches that all humans have a responsibility, through a covenant with God, to bring our world and its inhabitants to a more dignified, and ultimately perfect, state. Jewish law is intended to provide the rules that help the Jewish people fulfill their end of the agreement, namely by ensuring that everyday actions serve that end.

The key takeaway here is straightforward and universal: With every act, we must ask ourselves how we are bringing the world closer to the image of perfection. Our investing activities are no exception.

To infuse values into investing, and meet the growing demand for social impact products, we must first understand how a sense of meaning is achieved. Millennials do not want financial products; they want impact investing experiences that enable them to participate thoughtfully, feel their impact, and belong. It is our job to create opportunities for them to do so.

Avi Deutsch is Co-founder and CEO of LAVAN, a network of angel impact investors who support Israeli entrepreneurs tackling the world’s most pressing social and environmental challenges. He is the former Business Development Manager at Boundless Impact Investing, a market intelligence platform for impact investors. Prior to that he spent a year in Rwanda, building a safe and stable family environment for at-risk, orphaned youth.

As leaders from across the globe are set to convene this month in New York City for the UN General Assembly, we are reminded how important it is to amplify the voices of progress. We are also inspired by the arrival of the Jewish High Holidays….“The Days of Awe.”

“The Days of Awe” refers to the ten days starting with Rosh Hashanah and ending with Yom Kippur. They are a time for reflection, introspection, repentance and renewal. In the context of capitalism, there can also be “Days of Awe.” Days where market-based approaches deployed to address massive global challenges can help find alternatives to fossil fuels, drive the rebuilding of crumbling infrastructure, support economic inclusion, education, healthcare, and human rights and dignity for those threatened by war, illness and food insecurity.

“The Days of Awe” could bring lessons to leverage the power of capitalism towards its best and highest purpose. Fostering global prosperity can be achieved through a more sustainable form of capitalism – a form of capitalism where leaders must be prepared to engage in a nuanced debate and exchange of ideas that will yield extraordinary resilience.

In reflecting on the future of capitalism, we draw from wisdom of the great scholar Hillel, who was said to not only advance his own thoughts, but those of his opposition. It is in that context that we revisit an article first published in Forbes a couple of years ago: “Sustainable Capitalism… If not now, then when?” It is in light of this context that we select Hillel’sVoice.net as our “Featured Domain.”

The prominent Jewish scholar Hillel is known to have said “If I am not for myself, then who will be for me? And if I am only for myself, then what am I? And if not now, then when?” These questions posed at around 50 BC are incredibly timely in the context of today’s struggling global economy and threats to our system of capitalism. Indeed, “If not now, then when?”

Today, while the worst appears to be over for the global financial crisis, we witnessed the global economy pile on trillions of dollars in additional debt through quantitative easing, the Eurozone still under siege awaiting cohesive policy and political leadership, and China’s leadership driving a dramatic transition while hoping to maintain enough growth to support the needs of 1.3 billion people. Again, “If not now, then when?”  We live in a world which consumes about 1.5 times the earth’s sustainable level of natural resources each year to support our current consumption patterns. Our population is aging such that the financial burden on the young to care for the old is growing rapidly. The extent of income inequality is dramatically increasing, the US alone has almost 50 million people living in poverty, and almost a billion people around the world don’t have access to clean drinking water. “If not now, then when?”

The time is indeed now. All the pieces are in place to move forward and leverage the extraordinary power of capitalism on behalf of the entire world. We have everything we need across the broad realms of technology, science, academia, economics, government and finance to ensure a better future. We have the opportunity to repair an economic system which remains the greatest vehicle the world has ever known for creating wealth and prosperity. The real question is whether we have the force of will to follow through. In the face of a justified crisis of confidence in capitalism, we must rebuild trust and faith in the system. We can. And now is the time.

To do this though, we need to better acknowledge the shortcomings in our abilities to deal with complex global problems. As did Hillel, we need to pose the hard questions to the right people and to ourselves. We need two things which are currently in deficit. The first is greater transparency into the mission, strategies, objectives and priorities of the world’s private sector companies combined with a regulatory infrastructure which encourages that transparency. The second is a generation of business leaders who are better at facilitating collaboration.

On the subject of transparency, I would argue that many signals now point to the need for more systematic analysis of environmental, social and governance (ESG) factors in the investment processes which drive capitalism. The time is now given that there are one thousand asset management firms representing $30 trillion in assets who need to better understand business decision-making processes associated with the inevitable trade-offs inherent in running a business for the long run. These firms, all signatories of the Principles for Responsible Investing, now have access to more ESG data than ever before. This data can now be housed in the cloud, better analyzed, better assured, and better disseminated through social media by the scores of investors, accountants, consultants, investment banks and academic institutions that are demanding it. This data, which is pivotal to decisions around financial investments as risk and return are analyzed, can now be disclosed in a more coherent and efficient matter now that standards are being established as with the GRI (Global Reporting Initiative) and the Sustainability Accounting Standards Board (SASB). The time is indeed now for better transparency.

With regard to collaboration, the time has also come. As made obvious during the global financial crisis, independent action by individual economic entities working towards their own interests will ultimately fail. “If I am only for myself, then what am I?” Complex problems cannot be solved sequentially. There must be parallel processes, initiatives and perspectives which can ultimately come together to find solutions. There must be a belief that solutions for the whole will ultimately be beneficial for the individual. Collaboration can be encouraged by leaders who are incentivized to truly steward financial, human and natural capital for the long-run. We have indeed begun to see that in the capital markets across the corporate and investment world. Collaboration can be accelerated by embracing diverse perspectives. The imperative and the infrastructure is in place, so “if not now, then when?”

In summary, I argue that the awesome power of capitalism can be unleashed through rebuilding confidence and conviction. Confidence and conviction can be restored through greater transparency and collaboration. Transparency and collaboration will allow for more creativity, innovation, productivity and growth. Obviously all these things are easy to say, but not as easy to execute. In order to actually deliver on the promise, I would suggest that we attack complexity with simplicity as did the scholar Hillel. The simple principle of asking questions is the best starting point. But, to ask them constructively and consistently, and to ask again and again until the answers are forthcoming, is the trick. To elevate consciousness around broad environmental, social and governance factors and then to ask for accountability is essential. We must ask the right questions to the right people. Then we need to insist upon robust answers, comparability and accountability. The future of capitalism can indeed be much brighter if viewed as “a question of questions.”

Each month in the Cornerstone Journal of Sustainable Finance & Banking (JSFB), we will offer thoughts on a “Featured Domain,” which is selected from our proprietary “Sustainable Domain Bank.”  The Cornerstone “Sustainable Domain Bank” contains 2,000+ addresses on the Internet, which are an articulation of business processes, business practices and aspirations for a more regenerative form of capitalism. Many of these domain names have the potential to be developed into business plans reflecting a robust interpretation of sustainable capitalism and finance.  In particular, each “Sustainable Domain” captures a principle, or reflects a value inherent in the systematic understanding of the Environmental, Social and Governance (ESG) imperatives facing businesses and the economy today.  Each Domain is intended to facilitate dialogue across functions and sectors of the capital markets; and each is available for collaborative partnership, purchase or transfer should it have particular appeal to Cornerstone clients and colleagues.

Erika Karp is the Founder and CEO of Cornerstone Capital Inc.