Sovereign Wealth Fund rules out investing its earnings in fossil fuels

Sovereign Wealth Fund established in Israel to collect revenues from gas production. offshore will not reinvest money raised in oil and gas companies, the official in charge of the fund said Tuesday.

The Board of Directors of the Israel Citizens’ Fund has made a decision to “avoid direct investment” in oil and gas upstream and downstream companies, Yarom Ariav told the committee overseeing the funds in the Knesset. He said that about $350 million has been contributed to the fund so far.

Speaking on his own behalf, Ariav said that there are ethical as well as economic reasons for not investing in fossil fuels.

The fund was created in recent years after the discovery of natural gas and for investment purposes in the face of this unexpected energy income. It will also receive income from other natural resource extraction activities such as mining and mining.

The fund only came into use on June 1 – long after the initial projections – after passing the required income threshold of one billion shekels.

Before the committee, it was announced that the fund received 1.14 million shekels, which had already been converted into dollars, that is, 342 million dollars.

No revenue is expected until May.

Ariav, an economist, former CEO of the Ministry of Finance, and former President and CEO of ICL Fertilizers Europe, is required to report the fund’s activities to the Knesset every three months. The report, which was made on Tuesday before the parliamentarians, is the first since the Fund began to be used.

Yarom Ariav. (Source: Lisa Molko, CC BY-SA 4.0, Wikimedia Commons)

He explained that the steering group would seek investment over the course of forty years to limit the risks and achieve the goal pursued by law, which is to benefit future generations.

To avoid fluctuations in exchange rates, the Fund will use dollars for its investments, although it may also invest in other currencies.

Until a long-term investment strategy is finalized, the commission will take a conservative approach to the money already in the fund and invest it in notes traded on the European and US stock markets, Ariav said.

The fund will enter the market as the market is currently shaken by large losses caused by soaring inflation. For example, on Wall Street, the market is in a constant decline.

He added that to hedge the risks, the money currently in the fund will be slowly invested in weekly investments over four months.

The fund’s annual operating budget in 2022 and 2023 is expected to be NIS 3 million, said Amir Katznelson, senior adviser to Finance Minister Avigdor Lieberman, who chairs the fund’s board.

ICL will have to pay its share in the sovereign fund for the development of minerals in the Dead Sea. (Credit: Oded Rahav)

A representative of the Bank of Israel said that the funds are already in the Federal Reserve and that an account is being opened with the Bank of New York, as well as the finalization of documents that allow banking operations, such as SWIFT transfers.

Regarding investment transparency, an economist at the Knesset Research and Information Center said he had read the rules governing similar funds in Australia, South Korea, Singapore and Norway.

According to him, Norway provided information on the 20 companies that received the largest investments, while the remaining three countries announced how the money was invested, without specifying where.

The Knesset passed legislation establishing the fund in 2014 as the country prepared to become an energy exporter thanks to gas fields discovered in the eastern Mediterranean.

Leviathan natural gas platform in the Mediterranean Sea. Photo taken from Dor Beach in northern Israel on December 31, 2019. (Jack Ghez/AFP)

The law determined that the fund’s capital could only be invested abroad, in foreign currency, to protect the stability of the shekel. It was determined that a maximum of 3.5% of investment income could be directed annually to social, economic and educational projects during the first nine years. He also created a council to approve investments and broader initiatives taken at the strategic level.

This seven-member council includes representatives from the Prime Minister’s Office, the Ministry of Finance and the Bank of Israel, as well as economists and public experts. Its role is to determine investment-related policies and oversee their implementation. He also submits annually to the Minister of Finance a proposal on how to spend the funds and is responsible for appointing the director of the department, who in the Bank of Israel is responsible for the day-to-day work.

You are one of our regular readers!

This is what we work for every day: to provide astute readers like you with up-to-date media coverage of Israel, the Middle East and the Jewish world. Unlike many other sources, our content is available for free – no paid access pops up from the first paragraph. But our work is getting more and more expensive. That is why we invite readers who can and for whom Israel Times in French has become important to support us by joining Community Israel Times In French. For the amount of your choice, once a month or once a year, you too can contribute to this quality independent journalism and enjoy ad-free reading.

Join the community Join the community Already a member? Sign in to never see this message again