Expert hopes green version of Israel Bonds could help world fund better future
An internationally renowned Israeli expert in insurance and risk has proposed that the world’s governments issue a special bond to raise the long-term cash they need to meet sustainability goals agreed by all member nations of the United Nations in 2015.
The idea, developed by professor emeritus Yehuda Kahane and described at the UN Middle East and North Africa climate conference last month, is based on the Israel Bonds, which helped the Jewish state to fund infrastructure and create jobs in the four first decades of its existence.
Prof. Kahane, who has held executive, teaching and research positions at universities in Israel and around world, is one of a growing number of thought leaders who believe that the current economy, based solely on maximizing monetary profit, no longer suits a world in which social and environmental costs and benefits must be taken into account.
In an attempt to align the visions and management practices of businesses and other organizations with the social and environmental demands of the future, he co-founded the YKCenter with Tal Ronen and Yoram Lavi.
Kahane, 77, who is still undergoing rehabilitation after a massive stroke in August 2019, was not at the MENA event. The bond idea was presented by Ronen.
The UN targets, distilled into 17 Sustainable Development Goals (SDGs), reflect a global consensus on the economic, social and environmental character of the world that humanity should aim to create.
The SDGs range from alleviating poverty and hunger and providing equal access to health and education to building sustainable cities and ensuring responsible consumption.
The problem, as Kahane describes it, is that the $30-$40 trillion spent annually by governments worldwide is not enough to cover the massive investments needed.
Private investors are not attracted to investments that may benefit society and the planet as a whole when they do not necessarily bring the kinds of high returns the investors are looking for.
According to Kahane, it is the global pension entities (social security, pension funds and life insurance) that have the necessary cash, managing more than $100 trillion.
Governments would use the income raised from selling the bond to fund long-term, positive impact investing, shift to an economy that better reflects social justice and environmental protection, and create green jobs.
By providing a stable income stream and high yields (interest), the bond would also help the pension, life insurance and social security industries to make the kind of returns they need to provide pensions and other payments during what has been a long period of low interest rates.
The purchase of these long-term bonds would not only increase the public’s long-term savings, Kahane says. It would give the buyers of pension and other savings schemes the feeling that they are contributing to a better world in a concrete way.
For the bonds to work, though, governments would have to provide tax incentives, subsidies or other inducements to make the yields — and the risk-return profile of the impact investments — attractive to the financial institutions, Kahane believes.
Complementing the bonds would be a sustainability budget, established separately from a government’s national budget and made up of fines paid by companies employing unsustainable practices.
Those advancing sustainability might be given bonds as a reward.
A new national accounting system would be needed to accurately measure an investment’s positive and negative impacts in much the same way as accountants consider assets and liabilities, income and expenses.
Negative impacts might include using fossil fuel energy or creating pollution. Positive ones might range from recycling and rehabilitating soil to conservation.
Kahane is a fellow of the World Academy of Art and Science and winner of the world’s most prestigious insurance award, the Insurance Founders Award (John S. Bickley Award).