Impact Investing in Israel G8 Taskforce Plenary July 9 th, 2015 Yaron Neudorfer CEO, Social Finance Israel July 2015

2 ISRAEL During 2014  8.3 million people  176,000 children born  23,000 immigrants arrived Projection to 2020  9 Million people  ~50% of the population will be either Israeli Arabs or Ultra-Orthodox Jews GDP $40k per capita (raised from $19 K 10 years ago) Unemployment Rate 5.4% (down from 6.2% in 2013) An innovation driven economy  140 scientists, technicians, and engineers per 10,000 employees – the highest rate per capita in the world.  Israeli tech startup exit amounts increased by 980% over the past five years to a record $9.2 billion in GINI Index 0.42 (Level of post-tax-and-transfer inequality)

3 Key initiatives in Israel began to emerge in recent years, but only now starting to take form and gain traction – conditions align with recommendations from the G8 taskforce, but guidance and a steering body is needed. First impact fund, with matching investment from government, focused on the Israeli Arab sector Establishment of a social-financial intermediary A surge in accelerators with social goals 2 Impact funds, with matching investment from government, focused on social enterprises tackling unemployment Expected 2015/2016  Launch of 4 social impact bonds  Creation of an Israeli wholesaler of impact capital (Big Society Capital model) – funded with unclaimed assets ($65M)  Establishment of a Venture impact fund in Israel Social Impact Investing in Israel

4 Al Bawader is the first venture fund focused on the Israeli Arab private sector, to extend “Start-up Nation” to include Arab entrepreneurs.  Establishment of the fund was the first Israeli government step to support an impact fund.  Government tender offered $22~ million in government funds to match $26 million from private investors.  Conditions of the tender encourage investment in companies operating within Israeli Arab population centers and companies owned and operated by Arabs.  Investments focused on sectors such as: trade, tourism, healthcare, internet content and advertising (Arab speaking population in the Middle-East totals over 350 million)  Fund has invested over 1/3 of its capital in 8 companies, each a leading force in its sector. Al Bawader $48 M. for Arab private sector development

5 An Israeli government initiative to establish and operate Social “Entrepreneurship” funds, to invest in social businesses creating employment for populations facing high unemployment. Goals Implementation  Impact investment: opening the path for cross sector collaboration, philanthropy & investors  Developing the social business sector  Exploring new solutions for employment of disadvantaged population  2015: Two funds - $7 m each  Investment period: 4 Years  Partners: Government, Philanthropy, Investors (about 1/3 each)  Comprehensive impact assessment analysis Yozma Funds Philanthropy Investors Gov. incentives to corporate First lossTax Credit Social Business Capital Yozma Social Funds $14 M. for social businesses tackling unemployment

6 A surge of entrepreneurial programmes managed by non-profits, offering potential investments in tech-for-good start-ups and social enterprises tech for impact Tech for Good High-tech In the Arab sector Business to tackle disabilities Social business Social enterprises in the Israeli Arab sector Bedouin entrepreneurship Innovation in peripheral areas Social entrepreneurship in Jerusalem Grass Roots – Forming Accelerators With Social Goals

7 Reducing Dropout Rates (Higher education) Tackling Type 2 Diabetes Improving K-12 Maths Ultra-Orthodox Male Employment Arab Financial Empowerment Child Care Reducing Recidivism SFI has developed innovative models to tackle pressing social issues, and will launch two SiBs in the next few months. Final Stage Agreements and Financing Development Stage In-depth Research & Coalition Building Early Stage Initial Feasibility Launch Social Finance Israel ~$10 M. in SIB’s this year

8 The two SiBs approaching launch have been presented to the G8 Taskforce, bringing innovation through unique models developed for the Israeli market – both models built for scaling up immediately, to include additional outcome payers Reducing the incidence of Type 2 Diabetes in high-risk pre-diabetics Reducing Dropout Rates from Higher Education (Computer Science & engineering) Outcome Payer H.M.Os and the National Insurance Institute Universities and colleges Scale Intervention in up to 2,250 high-risk pre- diabetics Cost: $5.4m Working with two institutions, 550 students with high-risk of dropping out Cost: $2.1m Innovation Financing of prevention of healthcare problems, blending of economic and health outcomes Multiple outcome payers pooling resources across different phases of the disease to address a common challenge An integrated, personalized intervention, supplemented with latest technology Non-governmental outcome payers Economic model based on cashable increases in revenues. Creating employment opportunities for intervention graduates Launch November 2015October 2015 Social Finance Israel

9 THANK YOU

10 The fund will be the first international impact fund entering the Israeli market – a $75m fund that aims to deliver market rate financial returns and positive social impact. Investing in high growth, high impact and high returns  Targeting the needs of Israel's underserved populations and harness the Israeli "tech for good" opportunity  Uncompromising focus on returns and impact Experienced Team  Extensive investment and management experience, with the capability to build high growth, high impact businesses Global Impact fund in Israel

11 SFI and The Portland Trust are working with the Ministry of Justice and Custodian General to establish an Israeli Fund of Funds similar to Big Society Capital in the UK, utilizing unclaimed assets as the fund’s equity. BSC Israel Custodian General Suggested allocation of $65 Million Social Impact Funds & Financial Intermediaries Establishment of an Israeli “Big Society Capital” $65 M. to stimulate the social impact investment market

12 Accelerator program for social-technological ventures, managed by the 8200 Alumni Association.  The programme’s goal is the promotion and acceleration of social-technological ventures (using technological solutions for social problems), by supplying practical tools and a development-supporting environment, resource gathering and executing social ventures in Israel  The program emphasizes the use of business methodologies and creates a clear financial model for the different ventures, all while striving to create both internal and external cooperation in the third and fourth Sectors  The program was founded with the vision of harnessing the human capital of vast 8200 alumni network and the sponsoring partners’ experience so that they can ultimately invest back into Israeli society Social Program