A climate bill will be submitted to the government in the coming weeks to ensure that the first roadmap unveiled Monday for drastically reducing Israel’s global warming gases is implemented, Environmental Protection Minister Gila Gamliel announced.
She also told the Eli Hurvitz Conference on the Economy and Society that the time had come for the country’s financial sector to step up to the plate by directing capital and investment toward a cleaner, more sustainable economy.
“Climate change and environmental degradation pose an existential threat to Israel and the world, ” she said. “Israel needs a new growth strategy that will make it a state with a modern economy. My vision is to turn it into a sustainable economy.”
The environmental advocacy organization Adam Teva V’Din welcomed the minister’s plans for climate legislation, having lobbied hard for it and assisted with the bill’s drafting.
Gamliel told the financial sector that it “must be an integral part of the environmental revolution in Israel, and allow investors to choose wisely how to act according to their worldview and invest in corporations and financial instruments that incorporate environmental considerations.”
The Israeli finance sector’s adoption of ESG — environmental, social, and corporate governance — lags way behind much of the developed world, Anat Guetta, chairwoman of the Israel Securities Authority, told the conference.
“It’s not yet part of the DNA of investment in Israel,” she said, although her department was “totally there.”
The supervisor of banks, Yair Avidan, said that his department was taking environmental risk into account, particularly in the management of credit portfolios. Israel recently joined the Network of Central Banks and Supervisors for Greening the Financial System, he noted. This seeks to strengthen the global response to the Paris agreement and to boost the role of the financial system to manage risks and to mobilize capital for green and low-carbon investments.
Avidan added that the Israeli banking system had been advised that ESG regulation was not far away.
Moshe Barkat, head of the Capital Market, Insurance and Savings Authority, which is responsible for financial services in the insurance, pension and provident funds markets, noted that the Geneva Association, the insurance industry’s leading international think tank, had ranked climate change as one of the biggest risks.
But, he cautioned, “We are not talking about values but about financial risk and yields.”
Anat Levin, CEO of the Israel office of the global investment management corporation BlackRock, reported on research undertaken by her company of investment firms managing more than $25 trillion across 27 countries. This found the Europeans to be leading in implementation of ESG because they thought it was right, while companies in the US and Asia were doing so because their boards and investors were demanding it.
Asked where ESG investments would be in another five years, the response was that they would increase fivefold, and asked which of the three ESG elements would dominate over the same period, respondents made clear that “climate is king.”
Investment in sustainable stocks was already racing ahead, and bonds and credit would follow, she said.
The change was like a slow but “tectonic shift,” and some managers did not feel any urgency to act. “But the long-term view is the right one when you’re investing long term,” she stressed.
Regulators worldwide were starting to limit investments in line with the Paris and other agreements on cutting carbon emissions, and this could more immediately affect investors, she went on, adding that Israeli investors were well advised to grasp that there were already tenders overseas that were closed to non-ESG companies.
Levin said that it was important to do more research to better pinpoint the link between sustainable investment and financial performance.
“But remember,” she warned, “when a company loses public faith, it happens in one fell swoop because it didn’t act properly socially, because it polluted… and regulation is likely to affect [our sector] much faster than we think.”
She added, “Companies, get your coronavirus vaccinations and start implementing ESG because in the end this will be the risk we will have to manage.”