By Maya Natan
The field of private philanthropy in Israel has undergone significant changes in recent years, becoming more sophisticated and more like business investment management. Using terms from the worlds of private banking, capital management and venture capital, such as social yield and due diligence, Israeli philanthropists today define themselves as social investors seeking to create sustainable change.
As the founding director of JFN-Israel, which since 2008 has been harnessing the power of Israeli philanthropists to create purpose-driven, sustainable social change through the power of networks, collaborations and knowledge sharing, I have a front-row seat to this exciting field. Here are the most important trends we expect to see in 2020.
1. For the first time ever, Israelis will be able to establish family foundations and manage their donations through a donor–advised fund.
JFN Israel is preparing to launch Israel’s first-ever donor-advised fund, a new charitable giving instrument. The DAF-IL, approved by Israeli tax authorities, will enable individuals and companies to contribute and manage all sizes of philanthropic funds in a simple and effective manner. This instrument will be especially useful for those managing a new influx of cash, from a sale or retirement for example.
We anticipate that DAF-IL will lead to a significant increase in the scale of philanthropy in Israel. Stay tuned for more details later this year!
2. Increased needs, due to disruptions in the government allocation process.
Israeli nonprofits, particularly social service agencies, on average depend on the government for more than 50 percent of their revenue.
With Israel entering its second year of having no government, thanks to two inconclusive elections, budget approvals are being delayed, potentially through the fall.
This means that nonprofits that rely heavily on government support may have to wait months for government funding, and are likely to need private funders to step into the breach.
3. The growth of “collective impact” models bringing together philanthropists, government and other sectors.
As noted above, philanthropy currently accounts for a small percentage of social service agencies’ revenues, particularly when compared to the role of the government. While the current government instability described above makes new partnerships with it impossible for now, when Israel once again has a regular government, hopefully later in the year, such partnerships offer promising opportunities. Philanthropists are increasingly examining models for best coordinating with the government on shared goals and considering how private resources can be leveraged to have the greatest impact.
Such cooperative models, which can include the business sector as well as government, philanthropists and the social service agencies, are not suited to all social issues, and they demand planning and set-up time. However, such an approach, when done well, can lead to real breakthroughs.
4. More collaboration between donors in specific areas of giving.
Many social investors understand that their ability to create significant social change in isolation, is very limited, particularly change that is sustainable over the long term.
While for years Israel saw a proliferation of new nonprofits, that growth is slowing, and in recent years, a number of groups have merged. We are now seeing a growing tendency towards partnerships and ventures with proven success and scalability.
5. Growth in opportunities for impact investment, particularly in renewable energy, health, community and urban development.
Impact investing, the practice of putting money into projects that generate profits while also advancing social causes, is increasingly popular globally and in Israel. New Israeli government policies encouraging such efforts and the launch of new funds, advisory bodies and products in the social arena, have made impact investing more accessible. We expect these investments, in which there is a double bottom line – business and social, will continue to expand in the coming year and see particular interest in the areas of renewable energy, health, and urban development.
6. Growing attention to environmental issues.
The effects of the climate crisis are already here. Israel’s largest investment firms are already conducting risk analyses in light of environmental and climatic considerations and their impact on financial returns. At the social level, Israel is witnessing a massive awakening of the young generation and its demand to move the environmental issue to the top of the agenda. Local philanthropists have an important role to play in raising awareness of the problem and in helping environmental organizations protect natural resources and reduce pollution of all kinds. Alongside these, Israeli innovation and entrepreneurship need to be encouraged, developed and harnessed to find local and global solutions to the climate crisis in its various forms.
7. Growth of philanthropy by and for Arab citizens of Israel.
In recent years, we have seen a steady rise in the number of Arab Israeli business people making social investments and philanthropic gifts, particularly in areas like reducing crime and improving educational opportunities. Israel’s Arab sector now has a significant philanthropic leadership cadre, with many leaders actively recruiting others and sharing best practices. We expect this to continue in 2020.
8. Changes in the arts and culture sector, ignited by the stagnation in government budgeting and a growing interest in engaging Israelis on the social periphery.
In recent years, changes in the government budgeting and allocation processes have led many organizations to seek meaningful international partnerships. In addition, while the art scene was once concentrated in urban hotspots like Tel Aviv and Jerusalem, a growing number of efforts seek to make art, in its many forms, more accessible to residents of smaller and less affluent communities, and to engage a diversity of Israelis.
9. Israeli charitable giving becomes intergenerational.
Israel has had no formal mechanism for establishing family foundations, but, with the launch of DAF-IL, that will change. Just as globally, trillions of dollars are expected to be transferred from one generation to their children in the coming decade, a sizable intergenerational wealth transfer is expected in Israel. Among our members, we are seeing growing interest in bringing adult children and other family members into the charitable giving process, and the two above developments – DAF-IL and the transfer of wealth – make this increasingly easy to do.
10. Israeli philanthropists will professionalize, seeking expert guidance in making their funding decisions.
As the philanthropic sector in Israel grows and becomes more complex, and as mechanisms like DAF-IL, make it easier for new players to enter the field, we anticipate a growing need for objective, strategic advisory consultation services for funders. Since 2015, JFN Israel has provided Israeli and international funders investing in Israel advisory services through mapping areas of interest, field analysis and connection to Israeli experts, leadership and funders. We expect this trend to grow and expand in 2020.
Maya Natan is the founding director of JFN Israel, the Israeli office of the Jewish Funders Network.