"ESG investments protect returns and reduce risks”

"ESG investments reduce risks and future investment issues, which is no less important than maintaining a high return," said Ran Oz, CEO of Migdal Insurance, in a conversation with Calcalist’s Sophie Shulman at Calcalist's ESG Investment Conference.

Migdal has become the largest institutional investor in renewable energy, and Oz says this is due to two intertwined perceptions: "On the one hand our investment strategy, in which we focus on many fields, one of which is infrastructure investments, and in this case renewable energies. And on the other hand, we are Israel’s most prominent ESG institutional investor. This is our worldview, an investment policy with a vision that we can do both good for our clients and influence social trends. Therefore, we apply an ESG strategy to our entire investment portfolio."

There are two approaches to ESG investing: the first is by using a score and setting benchmarks. The second is through communication, by having a dialogue with the companies in order to see improvement over time. "Because we see this matter as a way to create leverage to generate momentum and change, we believe in acting through dialogue and seeing change and improvement within companies. Accordingly, this is one of the metrics by which we examine investments," Oz said.

According to Oz, Migdal Insurance's policy should lead the company to a measurable goal: "On the one hand, we have made a commitment - to reduce every year by 10% the number of companies that do not meet the guidelines we set. On the other hand, we pledge NIS 3 billion every year for investment with positive added value. The combination of these two components should lead us, by 2030, to have our entire investment portfolio being ESG compliant. Meaning, we take on a commitment regarding our entire investment portfolio. Anyone who is left behind and does not adapt will find themselves facing a business environment with more limitations and more difficulties."

One energy source Oz does not see as green is natural gas, "but it is some sort of middle ground, which brings us back to what steps to take. No company is completely clean, and usually, no company is completely black either. Even the best companies still have room for improvement. The question is if those companies are adopting this perception and address the effects."

Concurrent with Migdal’s announcement on its ESG investment policy, the company is also focused on setting its own example. "We are taking a large number of steps, and it starts with the issue of saving electricity through investing in smart systems, saving water, banning the use of disposable utensils, reducing printing to the near extinction of physical mail. There are many steps we take within the company, with many of the ideas coming from the staff."

You can watch the full interview in the video above.