Israel’s first fossil fuel-free stock index aims to put investors in the green

Environmental groups hope new index excluding oil and gas firms from TA-125 will help wean institutional investors off industries driving harmful climate change

Sue Surkes is The Times of Israel's environment reporter

View of the oil refineries in Haifa Bay, May 5, 2017.  (Yaniv Nadav/Flash90/File)
View of the oil refineries in Haifa Bay, May 5, 2017. (Yaniv Nadav/Flash90/File)

The Tel Aviv Stock Exchange on Sunday launched a fossil fuel-free index, in a move that green organizations hope will make it easier for institutional investors to wean themselves off some of the oil and gas companies that contribute to global warming.

The launch of the TA-125 Fossil Free Index marks the first market cap index on Israel’s main stock exchange that is designed to exclude oil and gas firms.

Last month, the Ramat Gan-based exchange launched a Cleantech sector-based index, which also provides an opportunity for those wishing to invest in green businesses. Those interested in investing in fossil fuels have the option of indices such as the dedicated Oil and Gas Index, which has operated since 2011.

The Fossil Free index features 112 of the biggest companies across all sectors listed on the stock exchange’s regular TA-125 Index (which actually lists 128 companies at present), minus 16 companies involved in oil and gas exploration, fossil-fuel based power stations or oil refineries.

It is the brainchild of The Clean Money Forum, established earlier this year to deal with financial aspects of the climate crisis, under the aegis of Life and Environment, the umbrella organization for the country’s green nonprofits.

According to the contract it signed with the stock exchange, Life and Environment is responsible for deciding which companies to exclude.

Roy Mimran, founder of the Israel Forum for Pension Savings. (Courtesy)

Roy Mimran of the Israel Forum for Pension Savings, a member of the Clean Money Forum, explained that the idea was born in August out of discussions on how to encourage institutional investors such as banks, investment and pension funds to invest the public’s money in ways that will not worsen climate change and the quality of life on the planet.

Some of these big investors like to buy into general indices, which provide a spread of companies, rather than going into the detail of each individual concern, he said.

The somewhat belated arrival of environmentally conscious investing in Israel will start to bring the country in line with a growing trend across the developed world.

Companies such as Standard & Poor’s and the MSCI Inc. already run fossil fuel-free indices, while major overseas banks, pension funds and insurance companies have been announcing their divestment from fossil fuels in growing numbers, using the power of finance to help bring down carbon dioxide and methane emissions, major drivers of climate change.

The Hadera coast line with the Orot Rabin power plant, April 16, 2013. (Flash90)

Israel’s fossil-free index is a first shot across the bow. It excludes the most obvious players in the field such as Delek and Ratio, which are invested in Israel’s natural gas fields.

Things are less clear with regard to the investment houses on the list, some of which may invest in oil and gas.

While Migdal, which deals in insurance, pensions and savings, announced last month that it intends to integrate environmental, social and governance (ESG) criteria into all of its investment decisions, and the Altschuler Shaham investment house has almost ceased to invest in fossil fuels (and has run a Green Fund for some years), the situation is blurrier with some of the other names on the fossil-free list.

“We can’t correct everything at once,” said Mimran, noting that large companies such as Menorah, Clal and Phoenix — which was sold by the oil and gas company Delek Group a year ago — had not replied to requests for information about their investment strategies.

“First, we need to get all of the investment houses to offer this new index,” he told The Times of Israel, adding that Life and Environment was planning to publish a green ranking of investment houses in the coming weeks.

Mimran, a longtime environmental activist, established the Israel Forum for Pension Savings 10 years ago. In the wake of the 2008 world financial crisis, which hit pension savings hard, he noticed that unlike the banks, insurance companies and big workers’ unions, individuals with pensions were neither united nor represented.

View of the Tel Aviv Stock Exchange, December 25, 2018. (Adam Shuldman/Flash90)

He also realized that “even if I earned more [from investing in fossil fuel companies], what would it be worth? I’ll be living in a hotter world, with less available water… What world will I leave for my children and grandchildren? Our pensions should work for us, not against us.”

In an interview on Sunday with the business daily Calcalist, Mark Haefele, chief investment officer at UBS Global Wealth Management, said that the performance of sustainable or green investments during the pandemic was identical to conventional investments, sometimes surpassing them, in a trend that is expected to increase. Oil and gas stocks were hit hard during the pandemic, and while other sectors have bounced back, this one has remained in the gutter.

“While traditional investments can still fit everyone, UBS believes that a sustainable investment portfolio can provide similar or higher returns than traditional investment portfolios, and allows for a more varied investment portfolio,” he said.

A view of the Leviathan natural gas processing rig from Dor Habonim Beach Nature Reserve, January 1, 2020. (Flash90)

Israel’s government and Energy Ministry still plan to have the country rely largely on natural gas, which emits global warming methane, following large gas discoveries off the country’s Mediterranean coast.

But with the cost of renewable energy now cheaper than fossil fuels, and with public pressure growing, Energy Minister Yuval Steinitz has increased the target for renewable energy by 2030 from 17 percent to 30 percent — a move still criticized as insufficient by the Environmental Protection Ministry and green organizations.

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