How can Israeli Market Leaders Attract Sustainable Investors | Maala Conference Summary 2017
Maala International Con(fair)ence 2017
Innovation for Good Life | Finance, IR and CSR Sessions
"How can Israeli Market Leaders Attract Sustainable Investors"
Moderator: Yael Almog, Head of Stakeholders Engagement Division, Bank Hapoalim
SasjaBesilik, Head of Group Sustainable Finance, Nordea Bank
Anette Andersson, Portfolio Manager & ESG Investment Specialist, SEB Wealth Management
Ulrika Hasselgren, Global Head of Responsible Investment Strategy and ESG Integration, ISS
Shai Ingber, Assistant General Counsel, Opic Bank
Main Discussion Points
Materiality is key in sustainability and CSR issues. In terms of the investors, the issues reported have to be integrated into the company's core business.
More dialogue is needed from both sides; both companies and investors must make the effort, share information, get closer, get stories together. Companies shouldn't be defensive.
Political issues are not so special for Israel, they happen all over the world. Israeli companies should not feel they are being mistreated, but deal with things objectively and matter-of-factly; get the message out and it will be heard.
Israeli companies can actually excel, we have many good points – innovation, good governance. We should work collaboratively to build this ecosystem.
Yael Almog, Bank Hapoalim
Bank Hapoalim is a market leader in ESG activities, and can serve as a test case. We have a long term commitment to social responsibility: social causes, values such as diversity, accessibility, inclusiveness, small businesses. We lead the market in corporate donations, and in local and international ESG ratings. I head a new division which develops the shared values approach with our stakeholders. We drive innovating within the bank, integrating ESG into business practices and with this evolution we are facing the international arena. In the world of impact investments there are always new trends and demands, and you can easily lag behind if you don't keep up with development.
Anette Andersson, SEB Wealth Management
In order to keep up with the demands of the world of responsible investment, first of all you must have transparency. Sometimes it feels like companies are afraid to be transparent, because they are getting blamed when they are not so good. We are on a journey, it is a process and you need to analyze what is really important for your company or sector. In the Nordics, when we invest have to publicize the carbon footprint of our holdings, we see how our investments keep in line with the target.
The Nordic investors are leading the issue of impact investments, Sweden has been pushing us. We are a small country, which enables collaboration, sharing of information and engaging with the companies and our clients. Companies meet us together, rather than having 10 separate meetings. We know what the competitors are doing and we can share how they address issues. Conferences like this are key to creating a similar eco-system. Regarding the strengths of Israeli companies: tell the story of innovation, we are going to love it.
Sasja Besilik, Nordea Bank
On the issue of transparency, Israeli companies are not as transparent as they could be. You need to give us information. When information is being given, it is not validated. Due to the big gaps on the information side, we cannot make investment decisions. It has nothing to do with philanthropy, but rather how you manage the core business. It depends on the sector. Traditionally, corporations talk about financial markets and not about sustainability. It is a chicken and egg situation – we need to talk about sustainability to generate the discourse. One of the challenges is in translating the local challenge into a global narrative, telling the story in the CSR world.
There is a process of communicating and starting dialogue with sustainable investors, to close the gaps. Although the main guidelines are in place, gaps still exist. Israeli companies – and not only Israeli ones, which are under scrutiny because of the way they operate their business, have been passive and never reached out to any of us with any narrative to explain. The investors and banks need to spend a lot of time in order to make investment decisions. Very few companies are reaching out to us, but actually it is not that complicated.
We must also address the elephant in the room – the political challenge, the Israeli-Palestinian conflict. Some investors are more understanding and others take a more negative approach. It is not about Israel, conflicts happen anywhere in the world. I have seen this in Egypt, in Indonesia and other places. The question is what this particular business in doing. I don't care which political party. I don’t see them as Israeli companies, but as companies that have solutions. Money has no religion. But we need to understand the context.
Ulrika Hasselgren, ISS
We must understand the whole story. It is crucial for any company to own their sustainability agenda. The world is full of initiatives, agendas. In the area of sustainable finance, it is crucial for companies to understand who they are talking to. There is a difference between Japanese and Nordic investors. The Nordics address risk perspectives, whereas in Japan it is all about return on investment. We need to understand the difference, then we can ask the questions and create meaningful stories. The farther away the local story is from the context of the investors, it is more difficult for them to understand – or care – about local issues, and you need to use other means to make them understand the story in global terms (such as employment of ultra-Orthodox people in Israel). Transparency is also crucial.
But we also need to talk about what investors should do. When we talk about ESG, there is a range of investors with crucial differences between them. There are values-based investors, and investors with a particular view, hedge fund or investment fund that works with a holistic view. It is crucial for the investor too, to say: "this is what I want, for this and that reason". We are lost in translation. You need to open up the floor and communication challenge also for investors. It is a healthy exercise to have face to face conversations. There is also an actual language issue. Only 6 companies of 150 in TASE report in English. In relation to innovation, tell the story, keep it short but share the highlights in English.
The key trends today on corporate governance are the quality of boards: structure, diversity, tenure of board members, profile. We should aspire to a good diverse board with the right skills, attesting to how they would be able to address challenges.
Shai Ingber, Opic Bank
Presenting the American perspective. Opic is a bank which is a US government agency, investing primarily in developing countries. Most countries have a development bank, but Israel doesn’t have one. There is constant investment in private sector development, with a social responsibility perspective. Because it is a governmental agency, we must ensure that the US is not adversely affected, such as by an influence on job losses in the USA as a result of our investments. We want to engage and understand the companies, and help them improve their business. The message is that we need to get closer to you, but you need to get closer to us. Focus on the positive – where can Israeli companies shine?
We fund a very large solar project in the Negev – Ashalim, as well as a smaller project in Nigeria. We have very rigorous CSR criteria. Each of the two companies were able to meet our high standards, which are similar to those of the World Bank in terms of transparency, but it is also important to maintain good relations with your investors. It is a crucial component – the interaction and the relationship with the investor. As a lender we have a different perspective than that of investors: the companies have to abide by our loan agreement. The risk is great to default on the loan.
Questions from the Audience.
Daniella Finn, Director of Investor Relations, Strauss: In meetings we have held, we hardly had any meetings in which people asked us about CSR issues. What can we do to make investors more aware of issue?
Anette Andersson: We need to teach the analysts what's important, an integration between financial analysis and CSR. We need to see both of them. Financial analysts aren’t trained to ask sustainability questions, but only those regarding financial performance. We are on a learning curb. You must ask what is important for your company, sustainability needs to be value-creating the company.
Sasja Besilik: If you provide CSR report or efforts, post it up on a site where your sustainability work will be available to the sustainable investor. We don't have a reference point, how to ask questions and how to make evaluations. Eventually these things will merge. If you tell me you do things that are not material to how I evaluate you, it will be irrelevant. We need to get more understanding on how material it is, how the sustainability efforts relate to the company's core business.
Ulrika Hasselgren: Over the past 10-12 years we have been slowly coming together. The core is to identify the material aspects, and that can be done in the companies. Business strategy that is sustainable, is better than a sustainability report that is detached from the business.
The role of regulators: Should the Israel Securities Authority (ISA) demand integrated reports from public companies?
Ulrika Hasselgren: There is an EU directive that large companies must report on material environmental matters. It will have impact, whether it should it be as soft law or subject to regulator.
Sasja Besilik: Institutional investors play a role, can provide example like soft laws. They are making it easier for customers to make investment decisions.