The sovereign wealth fund precludes investing its income in fossil fuels

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

The board of directors of the Israeli Citizens’ Fund has decided to “avoid direct investment” in oil and gas companies, Jarom Ariav told the fund’s oversight committee. Funds in the Knesset. According to him, about $ 350 million has been contributed to the fund so far.

Speaking on his behalf, Ariav said that the move away from fossil fuel investments was justified for both ethical and economic reasons.

The fund was established in recent years after the discovery of natural gas and to invest in the face of this unexpected energy supply. It will also collect revenue from other natural resource extraction activities, such as mining and mining.

The fund began to be used only on June 1 – a long time after the initial forecasts – after overcoming the required income threshold of one billion shekels.

It was announced before the committee that the fund had received 1.14 million shekels, which have already been converted into dollars – 342 million dollars.

No receipts are expected until May.

Ariav, an economist, former director general of the Ministry of Finance and former president and general manager of ICL Fertilizers Europe, is required to report to the Knesset every three months. The report, which was made to parliamentarians on Tuesday, is the first since the fund was used.

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

He explained that the steering group will seek investment for forty years to limit risks and achieve the goal of the law, which should benefit future generations.

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

Until the final definition of a long-term investment strategy is finalized, the commission will be conservative about the money already in the Fund and will invest it in notes traded on the stock market in Europe and the United States, Ariav said.

The fund will enter the market as the market is now shaken by large losses caused by rapid inflation. The market, for example, is constantly falling on Wall Street.

To insure against risk, the money currently in the fund will be slowly invested in weekly investments for four months, he added.

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

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

A spokesman for the Bank of Israel said the funds were already in the Federal Reserve and that an account with the Bank of New York was being opened, as well as that documents allowing banking transactions, such as SWIFT transfers, were being finalized.

Regarding investment transparency, an economist at the Knesset Research and Information Center said he had revised 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, and the other three countries announced how the money was invested, without specifying where.

In 2014, the Knesset passed a law establishing the fund as the country prepared to become an energy exporter through gas fields discovered in the eastern Mediterranean.

Leviathan natural gas field platform in the Mediterranean in a photo from Dor beach in northern Israel on December 31, 2019. (Jack Guez / AFP)

The law stipulates that the fund’s capital can be invested abroad only in foreign currency to protect the stability of the shekel. It is established that during the first nine years, a maximum of 3.5% of investment income can be spent annually on social, economic and educational projects. He also set up a board to approve investments and broader initiatives at the strategic level.

The seven-member council includes representatives of the Office of the Prime Minister, the Ministry of Finance and the Bank of Israel, as well as economists and community experts. Its role is to define investment policy and oversee its implementation. He also makes an annual proposal to the Minister of Finance on how to spend the money, and he is responsible for appointing the director of the department, who is responsible for the day-to-day work of the Bank of Israel.

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