Gandhi, the Indian leader, said that at first they ignore you, then they laugh at you, then they fight you, and finally you win. The field of responsible investing, which integrates environmental, social, and corporate governance considerations into investment decision-making, fits this description exactly.
I myself began this journey in 2005, when I returned from the United States together with Alona Shafer-Caro, who at that time was the CEO of Life and Environment and later became the Director General of the Ministry of Environmental Protection. We attended a UN conference that was filled with more than 500 men in suits talking about the environment. I came back to Israel knowing that this was what I wanted to bring here: if it made sense for the world, why wouldn’t it work in Israel too?
But it took more than fifteen years for Israel to reach a point where people were ready to understand that this is part of how investments should be made.
In Europe, responsible investing has long since become an essential and inseparable component of investment practices, supported by both regulation and public demand.
In the United States, the situation is more complex. After a significant increase in responsible investments, a counter-movement has recently begun to emerge, seeking to reduce the influence of such considerations on investment decisions. One major factor behind this is the growing understanding of the damage caused by climate change, which has led to activism against fuel companies, and some American stakeholders fear this.
So, seventy-five years after the establishment of the State of Israel, and fifteen years of activity in this field in Israel, we are finally beginning to see change here as well.
Various financial regulators have begun to require it. The Supervisor of Banks now requires banks to manage climate risks. The Israel Securities Authority obliges companies to report on material environmental risks, recommends that all companies report on environmental, social, and governance issues, and has recently begun regulating investment advisors, requiring them to consider these factors. The Capital Market, Insurance and Savings Authority has required all institutional investors to integrate ESG considerations into their investment management, and recently has even allowed the creation of pension funds that invest in these areas.
We have not yet reached the ultimate vision. Some publicly traded companies have begun to incorporate environmental, social, and governance impact management, but still, only 65 companies out of more than 600 listed on the stock exchange have published corporate responsibility reports, compared to 90% of the companies in the U.S. S&P 500 index that have done so. On the other hand, in the world of startups – companies that seek to save the planet – there are many success stories.
Sir Ronald Cohen, the father of impact investing in the world and in Israel, says that we must transform from a “Startup Nation” into an “Impact Nation.” Hopefully this process will succeed. But in order for us to truly be a light unto the nations, or at least not lag behind them, we must integrate leading approaches of social and environmental justice so that we are worthy of our precious country. It is always hardest to begin; now we just need to accelerate.
