Dr. Moshe Barkat, in charge of Capital Market Insurance, Insurance and Savings, recently announced at the “Environment 2050” conference that pension savers will be able to choose to deposit their money in a sustainable path, based on the 17 principles of sustainability and the environment of the UN sustainable development goals ) – SDG. This means that investment paths will be opened in companies that develop sustainable products and services, which will not be possible until the final regulation. Dr. Moshe Barkat should be congratulated on the move, which will probably have broader meanings.
As is well known, the SDG mainly dictates investments in companies whose part of the revenue component is based on products and services that meet the SDG goals as defined by the UN that also include social goals such as reducing inequality and human rights. In a company that develops a sustainable product without regard to its very conduct? Is it possible to invest in a company that produces an electric vehicle that is a sustainable product even though its conduct is, for example, in disgraceful corporate governance? In the energy efficiency of the company’s operating track – it is clear that the answers to this are negative.
It must be said explicitly: the thought of going in the direction of investing in companies that produce sustainable solutions is right. It is estimated that $ 1.4 trillion is currently flowing into these companies and the expectation is that this amount will increase to more than 3. At the same time, it will not be possible to ignore investment considerations that take into account the environment, company and corporate governance (ESG) in the companies’ conduct. And while the commissioner has explicitly objected to the ESG values, it would be almost inevitable that ESG considerations would go in the back door to those funds that would want to make real responsible investments.
Dr. Barkat, speaking at the conference, distinguished between the SDG and the ESG against the background of a growing trend of financial entities offering ESG products, some of which, it is said, are too flexible and in fact are very far from being ESG investments. Take the MSCI index as an example. The global ESG, the weights of which are not seriously different from the weights of the regular MSCI index.
In light of this, in many parts of the world the regulator has entered the beam thickness of the ESG to prevent cynical use of the term that leads to a loss of confidence of investors in the field. For example, the EU’s Sustainable Finance Disclosure Regulation (SFDR) are rules that lead a welcome move that will help to understand in depth and clearly which companies have chosen to focus on ESG rules throughout the production chain and distinguish between green and green washing. A key part of the fight to “whiten” pollutants and turn them into green focuses on SDGs, sustainable development goals, which focus on future international development as proposed by UN agencies, by regulating rules and drafting clear laws on the subject.
In conclusion, the financial entities that manage trillions of shekels, and manage the finances of all of us have the ability to help in those ills of companies, not as philanthropy but out of a desire to make huge profits. If more and more financial entities invest in real responsible investments under tighter regulatory rules, it could be said that the way environmental and social organizations are treading year after year, with no warning results, will begin to give its signals. The step announced by Barkat is the first step on the long road to real change in the Israeli market as well.
The author is the founder of Value2 Investment House and the founder and CEO of greeneye