Sustainability partnerships to drive Israel-India ties and green finance

Mutual benefits from partnerships

At a time when high-technology innovations have dominated the discourse on Israel in large emerging economies like India, the conclusion has almost always been that India, and similar others, need Israel more than the other way around. However, recent data shows Israel might just need India as much as India needs Israel.

For instance, while the growth in Israeli GDP (at constant prices) remained flat in the 3% range, the growth in its exports of goods and services slid from 5% to 3% from 2017 to 2019, as per IMF estimates. The growth in exports of goods alone held firm at 1%, hence slide is more on account of services – where high-tech largely resides! Hence, while Israel has earned global reputation for its creativity, innovation and entrepreneurship, and become the home of R&D centres of several global companies, it must also scale up its trading partners in rapidly growing emerging markets like India. That would help not only further its brand as a global tech-leader, but more importantly, it would drive technology-based services exports from Israel and help its exports contribute towards incremental economic growth. At the end, Israel remains a relatively small market domestically to absorb the scale of technology that it has the capacity to produce, not to mention that economic growth, and the benefits it can provide for security infrastructure, remains essential given Israel’s immediate neighbourhood.

At the same time, India has been a leading voice from the Global South when it comes to the Paris Agreement on Climate Change or the UN Sustainable Development Goals (SDGs). The current government is committed to achieve national targets on key development areas. For instance, in clean and renewable energy where Israel has made significant headway, India has announced commitments to increase its installed renewable energy capacity from 78 GW to 175 GW by 2022 and double the share of renewable power within the country’s total power capacity to 40% by 2030. India, along with Sweden, has been championing the multilateral International Solar Alliance, another sector where Israel holds prowess. But all this is easier said than done, and this is where partnerships with Israeli technology leaders in areas like clean technologies, etc. are crucial to scale up India’s capacity and its ability to move closer to achieve the SDGs. With ~30% of farmland in India undergoing degradation or desertification, sustainable land and water management technologies for agriculture is another obvious area of partnership for India with Israel.

With India’s insatiable demand for sustainability-related technologies backed by a committed government, and Israel’s prowess in developing such technologies coupled with its need to push the exports of such technology services, the case for deepening sustainability partnerships between Israel and India is clear!

But how does this connect with green finance?

While every market worth its salt today is looking to scale up green finance and ESG investments, the field is surprisingly still relatively nascent in Israel. This is complete contrast to its efforts to develop sustainability technologies, which offer a strong opportunity for global investors to drive green finance into Israeli companies. Apart from green finance (which looks at the project or asset being financed), the case for deepening ESG investments (which looks at the issuer rather than the project) from international institutional investors is equally high. Linking sustainability innovations with ESG or green finance creates a natural incentive to convert this into a virtuous cycle. With trading partners like India which offer a scale that not many developing countries can match, the Israeli companies most suited to gain are those who can scale up their export of sustainability technologies.

The direct benefit to Israel aside, it has an indirect benefit to India since co-financing options can be explored with that investor to fund the scaling up of the Israeli project in India. In case the opportunity expands as per plan, and there emerges a rationale for the Israeli tech-company to set up a production or research centre in India instead of solely exporting to it, the same consortium might be called up to assist the expansion. With investments (capital formation) as a percent to GDP declining below 30% in India, it needs to keep all the options open, and tying up of green or ESG finance with sustainability-linked partnerships with Israel may be a way to customize this.

Keep the wheel moving

There remains an urgent need to renew the visit schedules of the Indian and Israeli heads of states to take such initiatives forward. Israel’s recent elections slowed the pace of scheduled visits in recent months. And irrespective of the person in power, the relationship between the two countries should continue to move ahead in mutually beneficial target areas!

About the Author
Sourajit Aiyer is a financial services professional, author, writer, guest-lecturer. He has worked with both traditional & sustainable finance organizations.
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