The ICMA in a disappointing move

In a surprise move (?) The Israeli Capital Market Authority decided not to approve the opening of pension investment paths based on social responsibility principles. The authority said: "Sharia and kosher routes have been opened due to religious restrictions. The authority has not approved in the past and does not intend to approve ideological routes."

The background to the decision stems from the Authority's view that the social aspect of the ESG track is an ideological aspect and that an ideological investment is not suitable for pension funds. The Authority does not consider it appropriate to allow institutional investors to choose ideological parameters for savers, but only to achieve the highest return, when an ideological investment may sin for this purpose. Therefore, in pension funds, which as stated are required by law, financial entities should remain loyal to the pursuit of maximum return alone.

Institutional bodies such as Altuler Shaham, companies Migdal and Harel applied to the authority to open a n ESG focused route in provident and pension, but were refused. The refusal included, among other things, the argument that there are not enough people in Israel who want a "green" pension track.

Migdal announced the adoption of an ESG investment policy about a year ago and stated that the company has committed to directing more than NIS 3 billion a year to Net Positive investments while meeting the usual standards of risk-adjusted return. At the same time, the company is gradually withdrawing from investments that do not comply with the policy, at a rate of at least 10% per year. Harel has also taken steps in this direction by stating that the company's investment policy adopts of quantitative indices in the matter of ESG, which will form part of the parameters for making investment decisions.

The ICMA's decision is in contrast to the dominant trend in the global investment world, in which investment portfolios that contain a significant impact component are gaining momentum among the various audiences, especially the millenials and gen-Z. The refusal of the Israeli Capital Authority is a flightless step and does not comply with the Israel's commitment to the UN's sustainable development goals.