This Too Is for the Good1 Giving and Investing in Alignment with Jewish Values

A collaboration between Investing with Impact and Philanthropy Management “Charity outweighs all other commandments.” — Talmud, Bava Batra

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Perhaps the central questions for all people TABLE OF CONTENTS of faith are: How do we live in the world as Five Mitzvoth ��4 good and moral people? What are the values Initiating a Meaningful Conversation ��7 that have been imparted to us through the A Brief History of Jewish Philanthropy �� 8 The Mission-Aligned Jewish Investor �� 10 teachings of our religion, and how do we A Hypothetical Case in Point ��11 pass those values down to our children and Approaches to Mission-Aligned Investing ��12 grandchildren? How should those values Jewish Values-Aligned Financial and Philanthropic Capital Approaches ��13 inform the way we interact with our families, Approaches to Mission-Aligned our communities and the world around us? Philanthropy ��16 Advancing Mission Through And, how might those values guide our family Shareholder Action and Engagement �� 16 Jewish Values in Action, and foundation investing and giving decisions? Now and in the Future �� 17 Those raised in the Jewish faith, or observing it by choice, may first ask a more fundamental question: Is there a set of common values that spans the extraordinary diversity of the Jewish people and, if so, what are they?

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Two Jews, Three Opinions

To paraphrase the Midrash Tanchuma, of Jewish religious identity — Haredi Other Christian denominations, such an ancient, three-volume commentary, (ultra-Orthodox), Dati (religious), Masorti as Baptist, and leaders of Muslim “All Jews are brothers and sisters.” But as (traditional) and Hiloni (secular).2 sects have released their own sets of we well know, brothers, sisters, mothers Some religions have governing bodies guidelines based on their interpretations and fathers sometimes disagree. Judaism that periodically issue faith-based of Sharia4 and faith-based responsible is a religion of laws, scholarly inquiry and investing and philanthropic guidelines. investing.5 While many rabbis and robust debate over how the teachings For example, the principles for the United Jewish scholars have opined on of the ancestors are to be interpreted in States Conference of Catholic Bishops the subject, Judaism has no direct the modern world. These interpretations Investment Guidelines, established equivalent that we can identify. may vary across Orthodox, Conservative, in 2003,3 provide a set of guidelines Of course, that does not mean Reform and Reconstructionist for Catholic values-oriented investors, that Jews who wish to practice faith- followers, and there are even likely to be including dioceses, religious schools, based philanthropy and investing are disagreements among different members of hospitals, families and individuals. without guidance. While discussions the same synagogue. In fact, according to The guidelines include specific of Jewish values may proceed down a 2016 Pew Research Center survey, about exclusionary screens and targeted, different paths, they all start at the 4 in 10 Israeli Jews do not identify with positive environmental and social impact same wellhead: the Torah. So, it is safe any of these streams or denominations of recommendations, but leave room for to suggest that a discussion of Jewish Judaism. Israeli Jews are more typically the interpretations and preferences of values in giving and investing should grouped into four informal categories specific organizations and individuals. begin with the word of God.

5 Mitzvoth TZEDAKAH Literally translated as “righteousness,” Tzedakah speaks Looking to the Torah for guidance, to the imperative to give to charity. any number of commandments TIKKUN OLAM and parables might add to the Defined as “repair the world,” Tikkun Olam evokes discussion of giving and investing the duty to serve those in need. according to Jewish values. While TZEDEK many volumes could be written Having the same root as Tzedakah, Tzedek emphasizes the call to justice and fairness. on the subject, the following five mitzvoth, the Hebrew word G’MILUT CHASADIM for “good or praiseworthy deeds,” Translated as “loving kindness,” G’milut Chasadim calls for caring and compassion. serve as a useful basis for the conversation:6 TIKVA Translated as “hope,” Tikva reminds us to remain optimistic for the future. TZEDAKAH LEVEL 4 : The recipient knows the donor, but the donor does not “The greatest good you know the recipient. LEVEL 3: The donor knows the can do for another is recipient, but the recipient does not not just share your know the donor. LEVEL 2 : Neither the donor nor the riches, but to reveal recipient knows the other. LEVEL 1 : The donor gives the to him his own.” recipient the wherewithal to become self-supporting. — Benjamin Disraeli Note that the seven lower levels of charity Any discussion of Jewish philanthropy refer exclusively to giving, while the might properly begin with the mitzvah highest level aligns giving with investing, of Tzedakah, which speaks to the particularly concerning investments that responsibility of all Jews to give to charity. seek to generate more scalable financial, The biblical origin of Tzedakah is quite social and environmental returns. For specific: It states the obligation to donate example, which might we consider to be the 10% of one’s crops to members of the higher level of charity: an anonymous gift community in need. Many Jews still to a hunger relief program, or a low-interest follow these precepts, donating 10% of loan that enables a village to build an their earnings to good works, as do many irrigation system, which then gets repaid by Christians who tithe a portion of their the community and loaned out to the next earnings and Muslims who follow the village and the next in a virtuous cycle? practice of Zakat. Most of the world’s other major religions also have prescribed practices for the giving of alms. TIKKUN OLAM Importantly, Tzedakah not only refers to the act of giving, but also the intention “When we are no of the gift and the manner in which it is longer able to change given. While no act of charity is considered bad, Tzedakah commands that gifts be a situation, we given willingly, proactively and, preferably, anonymously. The great philosopher and are challenged to rabbi Maimonides codified this hierarchy change ourselves.” into eight distinctive levels of righteous charity. In descending order, these are: — Viktor Frankl LEVEL 8 : The donor is pained by the act of giving. Introduced in the Lurianic Kabbalah LEVEL 7: The donor gives less than account of creation, Tikkun Olam is he should but does so cheerfully. generally translated as either repairing LEVEL 6 : The donor gives after or healing the world. The original being solicited. text referred to the separation of the LEVEL 5 : The donor gives without spiritual from the physical world, and being solicited. the “healing” was a sort of return to the

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spiritual realm. By the 1950s, the term and just court systems around the world, gentiles alike. The hundreds of Jewish was being adopted in Jewish circles as protecting the rights of the underprivileged. medical centers around the country a call to social action, and was likely an Tzedek not only calls upon Jews to might be seen as a tangible monument inspiration to many American Jews who oppose injustice, but to be conscientious of this compassion. participated in the Civil Rights Movement of their own biases and to be fair in Our consideration of G’milut Chasadim of the early 1960s. More recently, Jewish their own dealings. From the investment might also inform decision-making around environmental advocates have embraced perspective, this may suggest a how to commit intellectual capital, as well a more literal version of “repairing the commitment to understanding the as financial capital, to the organizations world,” believing that Tikkun Olam governance policies and social impact of we support. How might your empathies suggests a responsibility to mitigate the the companies we may support with our instruct how and where you commit your worst effects of a warming planet.7 Such investment capital, and to evaluate the time to effect the change we would like notions might guide investment policy composition of boards and staff seeking to see in the world? as well as grant-making policy for Jewish diversity by race, age and gender. philanthropists, perhaps by employing TIKVA social or environmental criteria in the G’MILUT CHASADIM construction of investment portfolios “ Judaism’s profound to avoid the most serious emitters of “Whoever gives the carbon — a known cause of weather conviction is that many changes and climate-related disasters, poor money is blessed 8 of the tragic elements of including rising sea levels — and by sixfold; whoever does investing in climate solutions, including the everyday world are resilient infrastructure, energy-efficient it with a kind word is building and technology, sustainable not immutable, that little agriculture and more. blessed sevenfold.” by little the world can — Talmud, Bava Batra TZEDEK and must be improved.” If Tzedakah dictates that the “Care of the poor is — David Arnow9 intentionality of charity is of equal importance to the amount, G’milut incumbent on society Tikva is the call to remain optimistic, Chasadim commands that Jews not regardless of the circumstances. The as a whole.” only give their time, but that they do so countless trials and tribulations Jews with genuine compassion. Comforting — Baruch Spinoza have endured over the centuries, from a family sitting shiva, the weeklong petty name-calling to the horrors of mourning period following the death of Tzedek is essentially a call for justice. This the Holocaust, have done little to a first-degree relative, for example, is a mitzvah implies an obligation to broaden dampen the inexhaustible drive to quintessential act of G’milut Chasadim. our circle of concern, combating injustice endure, overcome and move forward Another expression of G’milut wherever we see it and not only where it toward a more promising future. It may Chasadim in the Jewish community is directly impacts our own community. The be worth considering if this resilience the thousands of voluntary organizations mitzvah of Tzedek might be seen as being endows the Jewish people, and all that commit themselves to supporting closely allied with the quintessentially people, with an opportunity and a the sick and elderly members of society, American belief that all people are entitled responsibility to reach out to those who irrespective of color, creed or faith. to life, liberty and the pursuit of happiness. have little reason to hope, and how we Many of these organizations have been It has similarly inspired many members might inspire others to have hope and built on the tradition of Jewish self-help of the Jewish community to fight for fair drive change in the world. to provide for the welfare of Jews and

6 MORGAN STANLEY | 2019 Initiating a Meaningful Conversation

Reflecting our commitment to improving the world, 2. What is your giving purpose? Morgan Stanley recently hosted the first Jewish Values TALMUDIC PROMPT: “Rabban Simeon ben Gamaliel said: Consortium client series in New York, Los Angeles and ‘The world is established on three principles: truth, justice and southern Florida. These events were attended by over peace.’ As it is said: ‘You shall administer truth, justice and 250 Jewish philanthropists and community leaders peace within your gates.’” — Pirkei Avot 1.18 representing their families, Jewish federations and Jewish-intersectional nonprofits. Our goal was to provide CONVERSATION: “If Jewish values singularly influenced your opportunities for these “brothers and sisters” of the investing and philanthropy agenda, which of the three values Jewish community to discuss what constitutes Jewish (truth, justice or peace) would you draw upon most and why? values, to honor disagreement and to seek common Or, is there another value that is more important? ground. Rather than trying to reach a consensus among 3. What is the goal? all attendees, our goal was to provide a platform for participants to consider how they might integrate TALMUDIC PROMPT: “Rabbi Tarfon said: ‘The day (life) Jewish values thoughtfully into their giving and investing is short; the task great; the workmen (human beings) decisions. Just as everyone should establish a unique set are lazy; the reward is great, and the Master is of financial goals alongside a trusted Financial Advisor or insistent.’” — Pirkei Avot 2.20 Institutional Consultant, investors seeking to align their CONVERSATION: The wise sage Rabbi Tarfon teaches that life capital with Jewish values need to establish a process to is short but that the reward is great. With your day/life, what determine their own priorities. is the most important goal you have for your philanthropy At each of these events, we were fortunate to and investing, and what Jewish values inspire your goal? have a rabbinical authority present who shared an understanding of Jewish history and text with which 4. What did you inherit? to ground the discussions. A respected academic, TALMUDIC PROMPT: “Akavyah ben Mahalalel said: ‘. . . author and religious leader, Rabbi Darren Levine, know from whence you came, whether you are going, invited attendees to examine their philanthropic and before whom you are destined to give a strict and investment practices through the lens of select account.’” — Pirkei Avot 3.1 scriptural passages. He offered the following Pirkei Avot (a compilation of ethical teachings and maxims by CONVERSATION: Many people inherit their values from rabbis mentioned in the Talmud) and prompts to spark parents and family members. What are the Jewish values focused discussions on philanthropy, investment and that you inherited that influence your investing and mission alignment. Perhaps these might form the basis philanthropic approach? for a similar values-based conversation with your family, 5. Is there value in one good deed? or the board of your foundation or federation. TALMUDIC PROMPT: “Simeon ben Azzai said: ‘Run to perform 1. How do you assume responsibility? even a minor mitzvah … for one good deed draws in another TALMUDIC PROMPT: “He used to say: ‘If I am not for good deed, and one transgression leads to another; for the myself, who is for me? If I care only for myself, what reward of a good deed is a good deed, and the reward of am I? If not now, when?’” — Pirkei Avot 1.14 sin is sin.’” — Pirkei Avot 4.2

CONVERSATION: “If not now, when?” suggests both an CONVERSATION: Jewish values suggest that one good deed urgency to accomplish something and also suggests leads to another. How could you imagine your investment that it is your responsibility to accomplish it. In your and philanthropy creating a “domino effect” of good deeds life and work, what requires urgency and what values and actions? inform the personal responsibility you are bringing to accomplish the goal?

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A Brief History of Jewish Philanthropy

gleanings of your harvest. You shall not time as Jewish communities around the “In Jewish history, there pick your vineyard bare, or gather the world banded together to take care of are no coincidences.” fallen fruit of your vineyard; you shall others in their communities. leave them for the poor and stranger. I While the self-sufficient Jewish — Elie Wiesel am the Lord your God.”10 community of New Amsterdam in Over the centuries, the mitzvah of 1654 might be considered the first The Jewish people have long had Tzedakah has inspired many other American Jewish federation, that formal mechanisms for philanthropy, philanthropic practices that continue to honor is usually attributed to Associate particularly for those intended to care this day. For example, a tradition called Jewish Philanthropies, a Boston for other Jews in need. Some of these “pushke” arose in the shtetls of Europe. federation formed in 1895. In close practices are explicitly prescribed in the This custom refers to a traditionally order, other federations were formed Hebrew Bible, such as in Leviticus 19:9- small, blue-and-white tin box kept in the in virtually all of the American cities 10: “And when you reap the harvest of home for the deposit of coins to be given where communities of newly arrived your land, you shall not reap all the way as charity. Such individual efforts steadily Jews settled. By 1932, the National to the edges of your field, or gather the grew into larger, collective actions over Council of Jewish Federations and Welfare Funds was established to coordinate efforts between these individual federations. The United Jewish Appeal was founded in 1939 as a national organization. From their earliest days, Jewish federations provided vital social services to the Jewish community — from The Generosity summer camps for children to retirement homes for the elderly. The of American Jews federations have also served as essential pillars of support for Israel from its With 56% of our fellow citizens making founding in 1948 to the present day. an annual charitable donation, the United While specifically Jewish nonprofits States ranks among the world’s most are still an important focus, a recent generous nation.12 Americans of faith, including study published in The Conversation, the Jewish community, rank even higher. an academic and research news website, indicates that collective Jewish giving Another report by Giving USA suggests that has moved increasingly toward secular observant Jews have taken the mitzvah of organizations. The study analyzed the Tzedakah to heart. More than 90% of Jews giving patterns of thousands of Jewish who report a high level of involvement in federations, community foundations, Jewish life give both to secular and to religious family and corporate foundations, and charities, while only 58% of Jews who report donor-advised funds. It determined that an average of 75% of their grants went a “very low” level of involvement give to to secular charitable organizations. any kind of charity.13 Jewish philanthropists, federations and foundations donate $9 billion annually to secular cultural, educational and medical institutions.14

There are also indications that Jewish giving is following the general philanthropic trend toward disintermediation. In particular, younger generations of Jewish philanthropists are less inclined to focus their giving on Jewish communal organizations, and more likely to contribute directly to the causes they support. While their philanthropy may still be greatly influenced by their Jewish values and heritage, they seek greater control over the beneficiaries of their grant-making and over the composition of their foundation endowments. This change has resulted in an increased interest in pursuing, in addition to traditional philanthropy, mission-aligned investment strategies that seek market-rate returns alongside positive environmental and social impact. This interest is especially prevalent within vehicles like private foundations and donor-advised funds, where philanthropists are investing some or all of the funds into areas where they are donating, but also within family offices, endowments, nonprofits and individuals’ personal accounts.

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The Mission-Aligned Jewish Investor

As we have explored above, the mitzvoth and program-related investments their human, financial and philanthropic pertaining directly to charity suggest targeting mission alignment. capital to meet today’s global challenges, that the ways we give and motivations • Financial Capital: Investments that such as poverty alleviation, access for giving are of equal importance to seek to meet long-term financial goals to education, health care and more. how much we give, or even to what ends. alongside positive environmental Further, we see a maturation of the In other words, Jewish values may not and social impact in alignment market to facilitate this approach. For only guide philanthropic objectives, with mission. example, a growing body of evidence has but also philanthropic practices. This demonstrated that sustainable and impact At Morgan Stanley, we understand ancient notion is closely related to a very investments can be activated for mission that individuals, families and modern, mission-aligned approach to alignment across the financial pools of organizations of all types and sizes have strategic philanthropy. capital while also seeking to achieve the capacity — and increasingly the In recent years, those responsible for long-term financial objectives.15,16,17 desire — to leverage the full spectrum of overseeing capital for charitable purposes are increasingly seeking to amplify the impact of their philanthropy by also investing in opportunities that are closely aligned with their core mission and values and also have the potential to generate financial returns. The rapid Annual Giving by Religious Affiliation expansion of these practices — what we refer to broadly at Morgan Stanley in the U.S. in 2016 as Investing with Impact — holds the potential to help scale solutions to U.S. Jews give more to some of the greatest challenges of our charity on average than times. To serve individuals, families, Americans with other foundations, federations and other faith traditions. charitable institutions, Morgan Stanley has defined a process called Mission Align 360o. This proprietary process provides a road map to examining and $2,526 coordinating all sources of capital so that Jewish they align with a customized mission to maximize positive environmental and $1,142 social impact. These diverse pools of capital include: Catholic • Human Capital: The collective skills, talents, knowledge or other intangible assets of families and organizations $1,178 that drive decision-making across all pools of capital. $1,749 Other • Philanthropic Capital: Affiliations Capital that Protestant has no — or a low — expectation of financial return, such as grant-making The Conversation, CC-BY-ND Source: Giving USA

10 MORGAN STANLEY | 2019 A Hypothetical Case in Point

To provide a practical illustration, let’s say that a examine their grant-making portfolio and determine if prominent Jewish family foundation based in the their grantees’ work supports their efforts in building United States is focused primarily on providing access synergies between their Jewish values and projects. to quality and affordable health care for all. Their The board may also reflect on their invested capital, board, composed of both family and independent and whether it is appropriately allocated to help members, in partnership with their Financial Advisor, drive the programmatic work of the foundation. has lived up to their fiduciary responsibilities, and their Through discussion and education, the board may investment portfolios have consistently generated the decide that there is a business and programmatic case cash flow needed to fund their grant-making to both to be made for allocating some of the investment Jewish and secular hospitals and research institutes portfolio toward mission-aligned investments. This globally. The matriarch and patriarch of the family, could be formalized through the creation of a mission- who established the foundation, believe that family aligned investment policy statement that clearly charity is an important tool for transferring their values articulates the mission-aligned and faith-based goals down through generations. That vision is shared by of the foundation alongside their financial goals. their children and grandchildren who currently sit on Working with their Financial Advisor or Institutional the board, and is being instilled in their other children, Consultant to structure a portfolio to achieve their who are being exposed to the tremendous work of the financial goals in terms of asset allocation and manager family foundation and may be future board members. selection, they may look to include investments in Now let’s say that they decide to devote a board publicly traded companies that generate revenue meeting to examining their giving and investing from innovative health care technologies, medical practices from the lens of aligning with their mission drug discoveries, access to medicine for low-income and Jewish values. Where might that discussion begin, populations globally and bonds that fund hospitals in and where could it lead? impoverished communities. Arguably the best place is to start by looking inward. The board might also consider directing their The board members might ask whether they and their Investment Managers to exclude or engage with program and investment staff are in agreement on the investments in companies that are contributing to foundation’s mission statement and how it might evolve negative health care outcomes, such as tobacco in the future. The board might ask how Jewish values manufacturers or others that might be misaligned intersect with the broader mission around access to with their Jewish values — in this instance, avoiding health care, and influence hiring and board-recruitment companies with major investments in countries practices. They might also examine how trustees, staff that have not recognized Israel’s right to exist. and grantees are all expected to work together to build a culture to support mission alignment across every area of the foundation. “Our lives are fashioned Given their focus on access to health care for all, their discussion on Tzedek might inspire them to consider by our choices. First, we expanding the scope of their grant-making activities by partnering with other like-minded institutions make our choices. Then our and philanthropic families to source collective choices make us.” opportunities to build impact at scale. They might work with Morgan Stanley Philanthropy Management to — Anne Frank

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Approaches to Mission-Aligned Investing

“Wealth is fleeting, managed accounts, mutual funds ENVIRONMENTAL, SOCIAL AND and exchange-traded funds. Investing GOVERNANCE (“ESG”) INTEGRATION honor winged, but with Impact approaches — and their is the effort to leverage financially intersection with concepts and themes material data regarding the sustainable charity abides.” of relevance especially for Jewish or corporate practices of companies in order Jewish-adjacent communities — are to identify opportunities and mitigate — Mischele Yehoshua Steinberg outlined below and organized along risks. ESG integration tends to generate a continuum, from minimizing broad-based positive impact versus objectionable impact to generating creating more of a targeted impact in a Attendee polling at recent positive impact: defined or thematic issue area. ESG data Morgan Stanley Jewish Values RESTRICTION SCREENING concerns comes from a variety of proprietary and Consortiums revealed a widespread the identification and avoidance of third-party sources, and might include interest in aligning investment exposure to companies, or debt issuers, environmental/carbon disclosures, policies and practices with personal or that directly contradict the mission employee policies, product and employee organizational missions. To a somewhat and impact goals of the family or safety, diversity of management lesser extent, the attendees agreed foundation. For example, a family and board of directors, community that faith contributed to the guiding reflecting on Tikkun Olam might involvement and more. ESG data is principles of their investment strategy. interpret this to mean excluding selected by the Investment Manager They also expressed interest in multiple companies with poor environmental based on availability and materiality approaches to aligning their portfolios or human rights records. Other of data to the future performance of with their Jewish values. Of these, investors may seek to divest from companies in which you are investing. the greatest interest was investing in certain geographies — including, but There are ESG-integrated investment companies with positive environmental, not limited to, exclusion of investments strategies across all asset classes, and social and governance (ESG) policies, in companies with major operations each strategy tends to be differentiated in and investing in companies targeting in countries that do not recognize terms of the data source, approach to data specific sustainability solutions or Israel’s right to exist. There are many integration into the investment selection geographies, particularly in or around other available restriction screens, the process, shareholder engagement and Israel. Their key issues included support most common of which are industry- impact reporting. of community, environment and society level focused tobacco manufacturers THEMATIC EXPOSURE focuses on broadly, corporate governance and and civilian weapons manufacturers. sectors of the market dedicated to support of Israel. Investors may elect to employ restriction addressing specific objectives in a manner Financial capital investments can screens as a result of a set of moral or that is consistent with the investor’s be activated across a spectrum of ethical guidelines, or as an approach to mission and faith-based goals. This Investing with Impact approaches mitigating potential risk. Restriction approach often focuses on investing in that seek commercial or market-rate screens can be implemented by the companies that are developing products returns to support the short- and long- investment strategy, or by utilizing and services that are advancing solutions term financial goals of the investor. Morgan Stanley’s restriction overlay to global social and environmental These investment approaches can be screening capabilities for separately challenges, and generating positive customized to generate broad-based managed accounts and single- impact. Investments can be made across positive environmental and social stock portfolios. Restriction screen asset classes and align with a wide range impact, and/or to target specific mission investments are available across all asset of themes — such as climate change and alignment and faith-based objectives. classes and tend to be differentiated by fossil fuel-aware solutions, including They are available across public and definition (including revenue threshold) water and energy solutions, diversity private asset classes, geographies and and data source, as well as shareholder and inclusion, community economic investment types, including separately engagement and impact reporting. development and more.

12 MORGAN STANLEY | 2019 Jewish Values-Aligned Financial and Philanthropic Capital Approaches

Grants Program Related Investments

Impact Investing

INCREASING Thematic Exposure DIRECT IMPACT

ESG Integration

Restriction Screening

MINIMIZING MISALIGNMENT

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In the case of Jewish values with a focus carbon energy sources for the poorest Morgan Stanley Financial Advisor or on Israel, investors may elect to invest populations globally, or in a fund focused Institutional Consultant can help you in an equity strategy that tracks the Tel on access to quality education in the integrate your unique approach into Aviv market index or a bond strategy United States. investment portfolios. Here are a few that finances Israeli climate-related Following the above definitions, we to consider: infrastructure projects. This approach have worked to provide a framework for • Invest in a separately managed account, may involve some degree of additional considering implementation approaches to mutual fund or exchange-traded fund concentration risk, given the potential aligning your investments with intended (ETF) that employs restriction screens specific sector focus, and should be positive outcomes. Individuals, families to exclude investment in geographies, implemented in coordination with and institutions seeking to align their sectors or companies that are misaligned a holistic approach to total portfolio investments with Jewish values do not with Jewish values. For example, construction, asset allocation and need to sacrifice financial performance. screening out defense companies that manager selection. In August 2019, the Morgan Stanley are the top suppliers to Arab Boycott IMPACT INVESTING provides access for Institute for Sustainable Investing League countries or environmental qualified investors to private investment analyzed the performance of nearly bottom performers. strategies across both equity and debt. 11,000 mutual funds from 2004 to 2018, • Invest in a broad-based, ESG-integrated Private market investments can span and showed that “there is no financial mutual fund focused on companies geographies, thematic-issue areas and trade-off in the returns of sustainable in emerging markets with positive populations of focus. For example, funds compared to traditional funds, and governance practices, particularly if investments can be made in an emerging they demonstrate lower downside risk.”18 the mutual fund employs shareholder market’s private equity fund focused on In the area of Jewish values specifically, engagement as a tool to continually providing access to affordable and low- there are many ways in which your improve the practices of the companies in which the strategy is invested. • For thematic exposure to issues aligned with Jewish values: – Invest in a custom separately managed account made up of global publicly traded companies whose global operational and governance practices are aligned with Jewish values. Criteria for customization can be selected by each organization Attendee polling at recent or family. – Invest in a bond fund whose lending Morgan Stanley Jewish Values activity supports community economic development, including Consortiums revealed a widespread affordable housing, elder care, interest in aligning investment policies schools, hospitals and community centers in the U.S. and practices with personal or – Invest in an equity ETF that focuses on companies with better-than- organizational missions. industry-norm gender diversity in the form of employee practices and policies, as well as representation in senior management and on the board of directors. THIS TOO IS FOR THE GOOD

Median Total Returns of Sustainable and Traditional Funds, 2004-2018

Annual Return Annual Return -1

Sustainable Funds - median -2 Traditional Funds - median Difference between medians -3 Sustainable-Traditional

-4 24 25 26 27 28 29 21 211 212 213 214 215 216 217 218

Difference in median returns -1�5 -1�17 �18 -�37 -�8 �84 -1�37 -�8 �63 1�38 1�18 � -�23 3�63 -�3 Sustainable - Traditional

Statistical Signiﬁcance 99%+ *** 95%+ ** 90%+ *

Source: Morgan Stanley Institute for Sustainable Investing. Sustainable Reality: Analyzing Risk and Returns of Sustainable Funds. New York: Morgan Stanley, 2019.

• Thematic support of Israel can be Stock Exchange or with tax status or • Identify investments that leverage incorporated through ownership incorporation in Israel/headquartered shareholder engagement, including of Israeli bonds and investment in Israel; corporate dialogue, voting proxies and in companies with high levels of – Non-Israeli companies with deep filing shareholder resolutions based involvement in Israel, including: business ties and direct investment on broad environmental, social and – Companies with at least 20% of in Israel; governance practices and/or defined employees or long-lived assets – Non-Israeli companies with less Jewish values. in Israel; significant, though material, business – Companies listed on the Tel Aviv relationships in Israel.19

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Approaches to Mission-Aligned Philanthropy

PROGRAM-RELATED INVESTMENTS GRANTS are a donation of employ various financing methods nonrepayable funds to nonprofit “How wonderful it is to achieve the mission of the family entities, and in some cases individuals, that nobody need wait or foundation. These might include that advance the mission of the loan guarantees, lines of credit, equity family, foundation or donor- a single moment before investments and others. While these advised fund. Jewish values-aligned investments may generate income, they philanthropists make donations starting to improve are different from impact investments to a broad spectrum of Jewish and the world.” in that their primary objective is to secular medical, educational, arts further the philanthropic mission. For and cultural, environmental and — Anne Frank example, one might make a small, low- social organizations. interest loan to a developing country agricultural co-op.

Advancing Mission Alignment Through Shareholder Action and Engagement

In addition to giving and investing their dollars, investors of all sizes have opportunities to further the missions of their organizations and generate positive impact through a variety of individual and collective actions.

SHAREHOLDER INDUSTRY PROXY VOTING REPORTING GIVING CIRCLES ENGAGEMENT AFFILIATIONS

Contributing to Voting on company Dialoguing with Disclosing Engaging in external discussion resolutions companies investment impact collective action about key issues

Broadly supporting Hiring an investment Using an impact report Entering industry Sharing knowledge environmental, social manager that frequently or shareholder report discussion on of new strategies for and governance engages with the that quantitatively and investment in Israel. investing in global resolutions — for leadership of the qualitatively measures the health solutions. example, a resolution companies in your outcomes generated by Supporting progress that encourages portfolio, to influence the investment. of the Sustainability Leveraging external increasing the diversity business strategy and Accounting Standards experts to bring of the board. corporate behavior. • For example, the Board, which seeks to forward potential number of affordable develop a framework funding, advocacy Voting against a • For example, dialoguing housing units funded for corporations and mission-aligned resolution to support with a company to by bond to government to regularly report investments Boycott, Divestment, disclose its pay gap housing authority. on the most as a group. Sanctions movement. across demographics financially material and ethnicities. environmental and Supporting a board social issues. candidate with a strong commitment to the global Jewish community. Jewish Values in Action, Now and in the Future Maimonides instructed his community are moving forward with a mission- One hundred percent to “give graciously, cheerfully and aligned approach. Working as an sympathetically.” In the modern context, extension of our Financial Advisors’ of participants at it might be wise to add, “And invest teams, Morgan Stanley Philanthropy wisely, efficiently and in accordance Management and Investing with recent Jewish Values with your values.” At Morgan Stanley, Impact teams can support efforts to we have been working to support these align all pools of capital with mission Consortium events efforts. Over the past year, we have and faith-based objectives. These view philanthropy conducted extensive research and set efforts include helping you engage out on a nationwide listening tour younger members of your family or and investing as a through our series of Jewish Values future leaders of your organization in Consortium events. We have heard from conversations about family wealth, way to engage families religious leaders and scholars, individual values and the intersection between philanthropists and board members of them. Our goal in creating this guide is across generations. Jewish federations. Our goal is to create a to facilitate meaningful conversations giving and investing framework that leads about the religious wellspring of these to clear action, yet is flexible enough to values among families, boards, and accommodate a broad range of financial, the Financial Advisors, Institutional impact and faith-based goals. Consultants and Investment Managers We have also created efficient mechanisms who serve them. to implement the decisions of those who

MORGAN STANLEY | 2019 17 THIS TOO IS FOR THE GOOD

Through collaborative Investing with Impact

initiatives such as In 2012, Morgan Stanley’s Investing with Impact group was launched to Mission Align 360°, provide a range of client-centered sustainable solutions to deliver positive environmental and social impact. Working with a Morgan Stanley Financial Investing with Impact Advisor, clients can identify a solution that is most appropriate, which may and Philanthropy be implementing a partially or completely activated sustainable investment portfolio across asset classes. Our approach enables clients of all account Management partner to sizes to achieve their financial and impact goals, leveraging the firm’s advise clients seeking market position as a leading Wealth Management firm. to better align and leverage their financial Philanthropy Management

and philanthropic capital Established in 1998, Morgan Stanley Philanthropy Management supports to generate positive individuals, families, corporate and private foundations, and nonprofit organizations by offering a suite of advisory services, publishing thought impact across the entire leadership, and hosting experiential opportunities to help clients define and capital spectrum. realize their charitable goals. The team assists individual and family clients in areas such as mission and vision creation, grantee research and due diligence, and philanthropic legacy and succession planning while advising nonprofit clients on topics such as fundraising strategy, strategic planning, and board governance, recruitment and development.

“Wealth is fleeting, To learn more about Investing with Impact honor winged, and Philanthropy Management at Morgan Stanley, but charity abides.” contact your Financial Advisor or Institutional Consultant and visit www.morganstanley.com/impactinvesting — Mischele Yehoshua Steinberg and www.morganstanley.com/what-we-do/ wealth-management/private-wealth-management.

18 MORGAN STANLEY | 2019 1 Nachum Ish Gamzu, Talmud, Taanit, 21a. This material does not provide individually tailored investment advice. It 2 Pew Research Center. “Israel’s Religiously Divided Society.” Religion & has been prepared without regard to the individual financial circumstances Public Life, Polling and Analysis. March 8, 2016. https://www.pewforum. and objectives of persons who receive it. The strategies and/or investments org/2016/03/08/identity/. discussed in this material may not be suitable for all investors. Morgan Stanley Smith Barney LLC recommends that investors independently evaluate 3 United States Conference of Catholic Bishops. Socially Responsible particular investments and strategies, and encourages investors to seek the Investment Guidelines. November 12, 2003. http://www.usccb.org/about/ advice of a Financial Advisor. The appropriateness of a particular investment or financial-reporting/socially-responsible-investment-guidelines.cfm. strategy will depend on an investor’s individual circumstances and objectives. 4 Board, Islamic Financial Services. Defining New Standards in Islamic Finance. This material is not an offer to buy or sell any security or to participate in n.d. https://www.ifsb.org/. any trading strategy. Asset allocation and diversification do not guarantee 5 Presbyterian Church of the United States. “Social Responsibility and a profit or protect against a loss. Past performance is no guarantee of Investments.” The Corporate Witness of the General Assembly Presbytarian future results. Church in the United States. March 20, 1976. https://www.presbyterianmission. Alternative investments often are speculative and include a high degree org/wp-content/uploads/mrti_ga_policy_-_19761.pdf. of risk. Investors could lose all or a substantial amount of their investment. Alternative investments are suitable only for eligible, long-term investors 6 Darren D. Levine. “Positive Judaism.” Wisdom for a Life of Happiness and who are willing to forgo liquidity and put capital at risk for an indefinite Wellbeing. 2017. https://www.google.com/search?q=Levine,+Darren+D.%3B+Po period of time. They may be highly illiquid and can engage in leverage and sitive+Judaism+Wisdom+for+a+Life+of+Happiness+and+Wellbeing.&rls=com. other speculative practices that may increase the volatility and risk of microsoft:en-US&ie=UTF-8&oe=UTF-8&startIndex=&startPage=1&gws_rd=ssl. loss. Alternative Investments typically have higher fees than traditional 7 My Jewish Learning. “Tikkun Olam: Repairing the World.” My Jewish investments. Private Funds (which include hedge funds and private equity Learning. n.d. https://www.myjewishlearning.com/article/tikkun-olam- funds) often engage in speculative investment techniques and are only suitable repairing-the-world/. for long-term, qualified investors. Investors could lose all or a substantial 8 Morgan Stanley Institute for Sustainable Investing. Protecting Real Assets amount of their investment. They are generally illiquid, not tax-efficient Amid Climate Extremes. September 11, 2018. https://www.morganstanley. and have higher fees than many traditional investments. com/ideas/real-assets-climate-resilience. Investing in the market entails the risk of market volatility. The value of all types of investments may increase or decrease over varying time 9 Arnow, David. “Reflections on the Family, Tzedakah and Transmitting periods. Fixed Income investing entails credit risks and interest rate risks. Jewish Values.” Sh’ma: A Journal of Jewish Ideas (Stanford Berman Jewish When interest rates rise, bond prices generally fall. Policy Archive), November 1993: 3-6. To the extent the investments depicted herein represent international 10 Gunther W. Plaut. The Torah: A Modern Commentary/English Opening. securities, you should be aware that there may be additional risks associated Union of American Hebrew Congregations, 1981. with international investing, including foreign economic, political, monetary 11 Giving USA. “American Jews and Charitable Giving: An Enduring Tradition.” and/or legal factors, changing currency exchange rates, foreign taxes, The Conversation. December 10, 2017. https://theconversation.com/ and differences in financial and accounting standards. These risks may american-jews-and-charitable-giving-an-enduring-tradition-87993 (accessed be magnified in emerging markets and frontier markets. Small- and August 1, 2019). mid-capitalization companies may lack the financial resources, product diversification and competitive strengths of larger companies. In addition, 12 Charities Aid Foundation. CAF World Giving Index 2017: A Global View of the securities of small- and mid-capitalization companies may not trade as Giving Trends. Charities Aid Foundation, 2017. readily as, and be subject to higher volatility than, those of larger, more 13 Giving USA. “American Jews and Charitable Giving: An Enduring Tradition.” established companies. The Conversation. December 10, 2017. https://theconversation.com/ The returns on a portfolio consisting primarily of sustainable investments american-jews-and-charitable-giving-an-enduring-tradition-87993 (accessed may be lower or higher than a portfolio that is more diversified or August 1, 2019). where decisions are based solely on investment considerations. Because 14 Giving USA. “American Jews and Charitable Giving: An Enduring Tradition.” sustainability criteria exclude some investments, investors may not be The Conversation. December 10, 2017. https://theconversation.com/ able to take advantage of the same opportunities or market trends as american-jews-and-charitable-giving-an-enduring-tradition-87993 (accessed investors that do not use such criteria. August 1, 2019). An investment in an exchange-traded fund involves risks similar to those of investing in a broadly based portfolio of equity securities traded on 15 Morgan Stanley Institute for Sustainable Investing. Sustainable exchange in the relevant securities market, such as market fluctuations Reality: Analyzing Risk and Returns of Sustainable Funds. New York: caused by such factors as economic and political developments, changes in Morgan Stanley, 2019. interest rates and perceived trends in stock prices. The investment return and 16 Javier Rodriguez. Rodriguez, Javier. “The performance of socially responsible principal value of ETF investments will fluctuate so that an investor’s ETF mutual funds: a volatility-match approach.” Review of Accounting and shares, if or when sold, may be worth more or less than the original cost. Finance 9 (2010). Indices are unmanaged and investors cannot directly invest in them. They 17 Balcilar, Mehmet, Riza Demirer, and Rangan Gupta. “Do Sustainable Stocks are not subject to expenses or fees and are often comprised of securities Offer Diversification Benefits for Conventional Portfolios? An Empirical and other investment instruments the liquidity of which is not restricted. Analysis of Risk Spillovers and Dynamic Correlations.” Sustainability, MDPI, A particular investment product may consist of securities significantly Open Access Journal 9, no. 10 (2018). different than those in any index referred to herein. Composite index results are shown for illustrative purposes only, generally do not represent the 18 Morgan Stanley Institute for Sustainable Investing. Sustainable performance of a specific investment, may not, for a variety of reasons, Reality: Analyzing Risk and Returns of Sustainable Funds. New York: be a suitable comparison or benchmark for a particular investment and Morgan Stanley, 2019. may not necessarily reflect the actual investment strategy or objective 19 BlueStar Indexes. “BlueStar Indexes and Aperio Launch Israel Exposure of a particular investment. Consequently, comparing an investment to a Tilt Strategy”. Press Release. September 13, 2017. particular index may be of limited use.