ESG in Israel

In the absence of regulated ESG reporting in Israel, investors face significant difficulty comparing companies and assessing ESG-related risks. While some voluntary initiatives exist, reporting remains inconsistent, non-comparable, and often prone to greenwashing. Global developments — including the EU’s CSRD directive, the US SEC climate disclosure rules, and the IFRS’s ISSB standards — highlight the urgency for Israel to align with international practices or risk falling behind in the global investment arena.

We believe it is time for regulators in Israel to adopt mandatory annual ESG reporting for all public companies (excluding small ones) based on the ISSB standards. This approach balances comprehensive disclosure with cost considerations and ensures compatibility with global financial reporting frameworks. Public companies should be the initial focus given their greater public accountability, stronger internal reporting infrastructure, and significant role in attracting foreign investment.

Implementing ISSB-based ESG reporting will:

• Provide investors with reliable, comparable, and decision-useful ESG data.

• Reduce the risk of misleading or selective disclosures (greenwashing).

• Strengthen the competitiveness and transparency of Israel’s capital market.

• Encourage companies to improve environmental and social practices.

While the first stage should apply only to public companies, we see merit in considering future expansion to large private corporations after assessing the regulation’s impact, costs, and benefits. Acting now will allow Israel to bridge the gap with leading economies, reinforce investor trust, and promote a more sustainable, responsible corporate culture for the long term.