The Federations not only need to re–think their advocacy strategy within Israel but also their financial strategy.

By Yosef I. Abramowitz

The sacred ground beneath the historic assumptions about relations between the State of Israel and North American Jewry are quickly shifting, and the main Jewish fundraising body for Israel, the Jewish Federations of North America, which is kicking off its General Assembly October 22 in Tel Aviv, is slow to realize that it needs to develop more political muscle if it wants to protect pluralism and more.

This is the central thesis of “Federations & Fault Lines: The Shifting Plate Techtonics of Jewish Life,” which I penned for this week’s Jerusalem Report. What I didn’t write about is the money.

The Federations not only need to re-think their advocacy strategy within Israel but also their financial strategy, since they are getting almost no leverage and are missing out on billions of dollars of impact. The annual AIPAC budget now equals the entire Federation system contribution to the State of Israel, and this federation contribution equals only about a tenth of a percent the state budget.

Even with tens of billions of dollars under management in the Federation endowments, almost none of those funds are invested in Israel or even in job-creating businesses in their partnership sister-city relationships in Israel. These endowment portfolios are littered with investments that are not aligned with the values of the Federation or the Jewish community, like oil companies, handgun manufacturers, certain Arab countries and private prisons. Indeed, while the Federation-related community relations councils press the US government on immigration issues like the separation of kids and parents at the border, they are not scrubbing their endowments of direct or indirect investments in the private prisons that actually hold 70% of those detained.

The Israeli economy is strong, with plenty of investment opportunities and the Tel Aviv stock market is historically providing better returns than those in the US. The fact that groups like OurCrowd, which crowd-sources for Israeli companies, are growing so quickly demonstrates the yearning of Jews to be part of Israel’s economic success story. While the Philadelphia Jewish Federation, for example, sends a couple of million dollars to Israel annually, the real action is the $5 billion in annual trade between Israel and companies in the greater Philadelphia area. Jewish Federation endowments and pension funds would be worth more today – and therefore have more funds to dedicate to Jewish education – if they were part of the exits of Waze, Mobileye, Sodastream and dozens of others.

The most egregious missed financial opportunity related to Federations is how Birthright Israel is funded. This flagship revolutionary program is managed like a glorified charity rather than as a valuable strategic asset. Ignored for the past 18 years is adapting the best in alumni relations to both streamline graduates into the Jewish community as well as to create revenues to help make the program self-sustaining. For example, if the 600,000 plus graduates of Birthright Israel were given a branded credit card on their last emotional day of the program, just the minor fees on the cards of the graduates would generate today at least $60 million a year in revenues, more than what Sheldon and Dr. Miriam Adelson have pledged. And the database – the real treasure – would be in far better shape, since the Jewish community easily drops people, but the credit card companies know how to keep tabs on their customers.

The winner of the best financial leverage story in the Federation world will be heard Tuesday afternoon at the afternoon plenary and belongs to UJA Federation of Toronto, which spun $1 million in grant money into $3 billion plus into impact gold, creating thousands of jobs.

Toronto is partnered with the Eilat Eilot region in the south of the country and created a program through the local municipality that provided the backbone for much of the solar power industry in the country. Full disclosure: the course I took in 2006 on renewable energy and regional development was sponsored by the Toronto Federation and I went on to create the industry with my partners. Today, $3 billion in for-profit monies have been invested so far, mostly in the periphery, and that should double in the next several years. Not a bad impact return on a strategic philanthropic investment. The only nonprofit in Jewish life to benefit from the cash-flows from solar in Israel because of an early impact investment they made is Keren Kayemet L’Yisrael (JFN-KKL), and not the Federations.

In three months, the Israeli government is scheduled to announce a bold program for Israeli and world Jewish money to be invested, with guarantees, into African development programs that advance Israeli humanitarian and diplomatic goals through our industries of goodness, like green energy, water and agriculture. Will the federations be last to embrace this historic business and impact opportunity?

At a time when young people are seeking meaning and impact and the philanthropy of their grandparents and parents doesn’t speak to them, the Federation system needs to embrace new bold financial models or continue the slow drift into irrelevance.

Yosef I. Abramowitz, winner of the Covenant Award for Excellence in Jewish Education and Israel’s Green Globe Award in the Knesset, was the first private-sector candidate for Israel’s Presidency and serves as CEO of Energiya Global Capital. He can be followed @ KaptainSunshine