The draft circular published today (Tuesday) suggests that the institutional bodies Will be charged Address both ESG aspects and technological aspects Insofar as they may affect the performance of the investment portfolio, including risks arising from climate change, they have a significant impact on the performance of the institutional bodies in the long run.
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In recent years, there has been a growing recognition of considerations relating to environmental, social and corporate governance aspects. This is due to their significant impact on the performance of the investment portfolio of the saving public in Israel. Following accelerated technological development in the last year, new aspects are also being added such as technological aspects and cyber risks. Therefore, it is proposed that institutional entities address these considerations in their investment policies and as far as these are relevant to the performance of the investment portfolio and may affect savers.
In accordance with the draft circular, the determination of the policy of the institutional bodies in these matters will be brought to the attention of savers as part of the publication of the investment policy, which the bodies will be required to publish once a year. Moreover, it is also proposed that the institutional body formulate rules and procedures of expertise development independent of external factors. In the interim period until the development of expertise, the institutional body will be able to contract with external service providers with expertise in ESG provided that there are no conflicts of interest between the services provided by the expert to the institutional body and its other activities. This is in order to ensure transparency and maintain the good of savers in Israel.
Examples of notable ESG considerations that will be included in the investment considerations of institutional entities are environmental issues – which include, for example, dealing with air, water and soil pollution, and promoting clean energy infrastructure, as they may affect the return on investment and the risks inherent in it.
Corporate governance issues – which examine the way companies conduct themselves and include reference to risk management, incentive policies and conflicts of interest, and protection of shareholders ‘and investors’ affairs, are also considered according to the research literature and the position of the Authority.
As factors that may affect the return on investments and the risks inherent in them.
Dr. Moshe Barkat, Head of the Capital Market, Insurance and Savings“The responsibility imposed on the institutional bodies in the management of public funds that save in Israel is enormous, so they must ensure the good of savers in the management of their funds. This responsibility also includes consideration of considerations concerning the environment, corporate governance, society, technological risks and cyber risks. “The performance of the investment portfolio and the risk management of savers’ money. The move is part of a number of steps taken by the Authority in the past year to increase supervision of investment management in institutional entities along with releasing existing barriers and introducing new players and expertise to the Israeli capital market.”