Investment houses ‘breaking promises’ to shun fossil fuels – report

After Altshuler Shaham and Migdal fall in Clean Money Forum’s quarterly index, Altshuler Shaham says: ‘Better to engage with companies for change them than to boycott them’

Sue Surkes is The Times of Israel's environment reporter

FILE - A sign reading "fossil fuels out" is displayed during a demonstration at the COP27 UN Climate Summit, on November 12, 2022, in Sharm el-Sheikh, Egypt.  (AP Photo/Peter Dejong, File)
FILE - A sign reading "fossil fuels out" is displayed during a demonstration at the COP27 UN Climate Summit, on November 12, 2022, in Sharm el-Sheikh, Egypt. (AP Photo/Peter Dejong, File)

Two investment houses that have traditionally performed well on a green investment index have dropped to near the bottom ,with the environmental organization behind the ranking accusing them of reneging on promises to slow or halt new investments in fossil fuels, a report published Sunday charged.

During the fourth quarter of last year, Altshuler Shaham, which dropped to seventh out of 10 in the Clean Money Forum ranking, poured just under NIS 5 billion ($1.4 billion) of the public’s money for pension plans, long-term savings (provident funds) and insurance policies into companies that are helping to speed climate change, up from just over NIS 3 billion ($940 million) in early 2021, the figures show.

This was despite a pledge made in July 2021 to halt new investments in fossil fuels.

Migdal committed at the end of 2020 to avoid investments in new fossil fuel production capacities and to divert existing investments from fossil fuels until 2030 at a rate of at least 10% per year.

But according to the report, it made new investments in fossil companies last year, and failed to reduce its holdings as promised.

The new ratings from the non-profit Clean Money Forum were published in a quarterly report on Sunday, which found that the ranked firms had at least NIS 57.5 billion ($16 billion) invested in coal, oil, and gas concerns during the last quarter of last year — down from NIS 64.5 billion ($20 billion) during the first quarter of 2022.

A statement from Altshuler Shaham said that the investment house attached great importance to environmental, social and corporate governance considerations, pioneered the establishment of the country’s first green fund, and invested heavily both in green startups and companies and in conventional companies willing to take steps such as energy saving.

But it had discovered that there was no other large investment house without fossil fuel investments. And given that the firm’s chief priority and legal obligation was to make money for its clients, it had decided to try investing in companies involved with natural gas and crude oil (although not coal, mazut, or diesel), though only in those that had policies to reduce fossil fuels that could be monitored over several years in addition to a declared sum to be invested in transitioning to renewable energies.

At Migdal, the ups and downs of fossil fuel investment were less dramatic in absolute terms, the figures show, with the sums hovering around NIS 9 billion (then approximately $2.8 billion) during the first quarter of 2021, then rising to over NIS 11 billion before dropping back to around NIS 9.3 billion (roughly $2.6 billion) in the fourth quarter of last year.

But those sums made up a growing proportion of the total invested in stocks and company bonds for pensions, savings and insurance — reaching 14.23% during last year’s fourth quarter and causing Migdal to drop to ninth place, Clean Money Forum figures show.

Overall, 13.3% of all investments made by the companies for pension funds, provident funds and insurance were put into fossil fuels.

An oil tanker approaches an oil facility jetty in Fujairah, United Arab Emirates, Sept. 21, 2016. (Kamran Jebreili/AP)

The Clean Money Forum, a coalition of 28 environmental and social justice organizations, seeks to encourage financial institutions to divest from fossil fuels sand provide information for investors looking for green funds. It ranks the country’s ten largest financial institutions with publicly available information according to their investments in fossil fuel companies in Israel and overseas.

The organization looks at investment policies and analyzes the actual investments in corporate bonds and shares that the country’s pension, savings, and insurance institutions are obliged to publish. It lacks access to other transactions by such institutions, such as loans, which the companies do not have to reveal. Banks are excluded from the ranking as they are not obliged to publish pension data.

The classification of investments is based on the Tel Aviv Stock Exchange’s Fossil Free Index as well as a worldwide roster maintained by As You Sow, based on data from ratings giant Morningstar.

One of the Orot Rabin power station’s chimneys still spews out smoke from coal burning, Hadera, central Israel, November 25, 2017. (Gili Yaari/Flash90)The report noted that at the end of 2021, Migdal met its obligations and even led the index.

But at the beginning of 2022, a new investment division manager, Erez Migdali, took up his post.

“Migdal did not officially withdraw from the written commitment on the website, but in practice made new investments in fossil companies. And they did not meet the goal of reducing the holdings in these companies, as they committed to at the end of 2020,” the report said.

An oil tanker approaches an oil facility jetty in Fujairah, United Arab Emirates, Sept. 21, 2016. (Kamran Jebreili/AP)

A company statement said, “Our main consideration in every investment is to bring returns to the public’s savings and to protect its money. ”

It added that Migdal was a major investor in renewable energy and complied with its environmental, social, and governance policy, but that this was “a long and complex journey.”

In the US, and possibly also in Israel (depending on interpretation), the law actually prohibits portfolio managers from investing in products that could benefit the environment if they are not profitable.

And fossil fuel company shares have looked attractive partly because of rising demand tied to Russia’s invasion of Ukraine.

A company’s ranking in the Clean Money Forum index — where those placed at the top of the list have the lowest fossil fuel investments — depends on the performance of the other nine.

For the fourth quarter of 2022, Yellin Lapidot — which has gradually improved its position — came first, having invested 11.21% of the public’s pension, provident fund, and insurance money in fossil fuels.

This was followed by Meitav (12.01%), Harel (12.52%), Clal (12.88%), Menorah (13.07%), Phoenix (13.49%), Altshuler (13.91%), Migdal (14.23), Analyst (15.4%), and Mor (16.81%).

For international comparison, companies in the S&P index invest an average of 10.06% of the public’s pension funds in fossil fuels. The average for MSCI ACWI companies is 10.04%.

The forum provides each institution with its fossil exposure report before issuing the rankings, to allow them to respond.

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