“Israelis are a few steps behind Europe on ESG but they're obligated by regulators to state their stance”

Dorit Zak, Principal, HarbourVest Partners announced during a panel she moderated at this year’s Israel Private Markets Summit in Tel Aviv that 30% of considerations in LP investment noted ESG as an important factor in decision-making, just below 40% that takes reputation into account. Sharing the stage with Ronny Zakay, Head of Alternatives and Direct Equity at Migdal Group, Merav Levin, Head of Private Debt and Alternative Investments at Harel Insurance, and Liat Hazut, Head of Private Debt and Alternative Investments at Clal Insurance, the four women spoke about the current state of the market in a panel called "The role of private capital within LPs’ portfolio in different market cycles".

“I’m not sure that 30% includes Israeli investors, but it is becoming an important factor,” said Zakay. “Israelis are a few steps behind Europe on that Issue but they're obligated by regulators to state their ESG stance. People are trying to find the balance between ESG characteristics and seizing opportunities in the market that aren't necessarily considered positive at the ESG level.”

Ronny Zakay, Merav Levin, and Liat Hazut spoke to Dorit Zak on stage

Migdal Group is an insurance, pension, and financial group in Israel which provides economic security for 2.3 million customers. Zakay highlighted how European countries are already aware of the importance of ESG, citing the real estate industry as an example of a sector with a lot of regulators setting environmental standards. “If buildings won't meet those standards then they will have a hard time getting finance. In the long term companies that can adapt to the environment will thrive. It seems like it is here to stay,” she added.

Merav Levin, Head of Private Debt and Alternative Investments at Harel Insurance, addressed how the reputation of managers is an important factor in whether they are promoted or invited to join existing firms. “Reputation is a large word. We would look for teams or managers that have a long-standing duration of working together,” she said. “The culture will glue people together, see economics spread, and incentivize the way across the organization.”

Harel Insurance accounts for 22.4% of premiums in Israel and is the largest insurance and finance group in the country. Its product portfolio includes health, life, business, and motor insurance as well as investment services such as pension and mutual funds. “When you invest in a fund you give people a check and you hope everyone will be happy,” she added. “It's a mix of factors you need to consider. The people and their achievements over time. It’s a people business and we value that a lot.”

Managers and team members can bring new perspectives to the market process that might benefit the firm as a whole, although it might not always be ideal to bring in new members. “Our first choice is to support our managers. We have 140 in our portfolio and we value them a lot,” explained Liat Hazut, Head of Private Debt and Alternative Investments at Clal Insurance. “There are three reasons to add a manager. The first is to create exposure to a strategy we haven't been exposed to yet. The second reason is if we want to diversify, and if we meet a manager that will provide to a creative way to invest then we will consider adding him. A third reason is that if we are not satisfied with an existing manager and in order to maintain diversity, we will prefer to replace him with a new manager instead of further increasing commitments to an existing manager,” she said.

Clal Insurance owns insurance agencies, pension funds, provident funds, training funds, and credit-granting companies. It has 4,600 employees and works with 2,000 insurance agents, and has been ranked as one of Israel's leading long-term insurance and savings groups.

The three women shared insights on stage during the Israel Private Markets Summit in Tel Aviv. The Summit took place over a day and brought together Israeli and global senior industry professionals, including Israeli limited partners, global fund managers, and field experts. It featured keynote LP sessions, workshops on secondaries, and insights from the industry GPs such as HarbourVest Partners, CD&R, and TJC.