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In the past decade, Israel has faced a major challenge that parallels to the challenges in many systems around the world – the “Fiscal Trilemma”. The trilemma consists of three conflicting goals: budgetary stability (reducing the deficit and public debt), efficient and tax collection, and the provision of quality and accessible public services, especially in the areas of health, education and welfare. The struggle between these demands, which sometimes contradict each other, directly affects the standard of living, the economy, and governance – both at the state level and at the corporate level. In this post, I will argue that the solution to the fiscal trilemma in Israel requires a transition from a traditional governance model to an innovative multi-layered model that integrates ESG (environmental, social and governance) principles at both the public and corporate levels. The need to rehabilitate the Israeli North and South is a strategic opportunity for the implementation of this model. The model can serve as an engine for sustainable growth and for reducing social gaps in the country. Such a combination will enable Israel to successfully address the complex challenge of balancing fiscal stability, social justice and economic efficiency. The Current Fiscal Situation in Israel: Data and Findings The fiscal trilemma in Israel is well analyzed in the report "Fiscal Aggregates and a New Budgetary Priorities for Israel" by Prof. Karnit Flug, Tzachi David, and Roy Kenneth Portal. The trilemma describes, among other things, the challenge of balancing its three components in the face of a large erosion in public expenditure – as a percentage of GDP. The  state budget for the years 2023-2024 reached a low of 32.6% of the projected GDP, a low level in reference to the OECD average, which stands at about 45%.The large gap between net civilian expenditure in Israel (excluding defense expenditure and interest) and this expenditure in other countries leads to gaps in social services and a sense of disappointment among citizens in Israel. The report emphasizes the need to change budgetary priorities and the importance of focusing on investment in infrastructure, education, and health, especially in the periphery, to cope with the current social and economic challenges. Israel also suffers from a high level of budgetary concentration: a significant proportion of the municipalities' revenues come from the government. Moreover, there are gaps between the center and the periphery, and these gaps attest to a failure in the mechanisms of division between the government and the authorities, and to a lack of coordination and authority. The need to invest in the reconstruction of the North and South is an opportunity to implement multi-layered policies with goals to build a sustainable environmental, social, and governance model (ESG). To understand how multi-tiered governance and ESG provide a direct response to these problems, it is necessary to dismantle the existing failure mechanism: today, high budgetary concentration means that the government determines the scope and type of social services provided in the periphery, but it is not intimately familiar with local needs, and therefore resources are not allocated efficiently. Multi-layered governance is intended to correct this failure by transferring executive, planning, and control powers to local authorities, while maintaining budgetary and strategic responsibility at the national level. In other words, the government is still setting policy, but implementation is adapted to the field. For example, in Scandinavia, education, health, and transportation are managed at the local level, but budgeted at the national level according to differential distribution formulas. Moreover, ESG principles are not a conceptual addition, but rather a useful tool for managing and measuring social and environmental performance. They can be used to define and monitor clear indicators such as average travel times to health services, the rate of participation in early childhood education frameworks and the level of public investment in disadvantaged areas. Once the government, local authorities and corporations are committed to publicly reporting this type of data, a data-based control system is created that allows for the identification of gaps, the setting of priorities and the intelligent routing of resources. Thus, the integration of ESG principles improves public service, increases transparency and enables more effective management of local social and environmental risks. Each of the three components of the trilemma carries a critical weight: a balanced budget is the basis for macroeconomic stability and it lowers risk to the economy. Fair taxation ensures efficient and fair budgeting of public activity, and quality public service is a socio-economic necessity that leads to growth and ensures equal opportunities. But in Israel's economic reality, which is expressed in deep inequality and budgetary difficulties, the trilemma becomes particularly problematic. Proper management of the trilemma requires strong public and corporate governance that is capable of operating with full transparency, accountability, and based on long-term planning and innovation in risk management. Without quality governance, the trilemma threatens to weaken stability and damage social resilience. Public Governance in Israel: Challenges and Solutions Public governance in Israel faces structural challenges: from the division of powers between ministries, through the lack of transparency and efficiency in budget control, to the difficulties in implementing long-term changes. Still, corporate governance – part of the economic economy – must come into play by implementing ESG (environmental, social, governance) principles in business management. Investing in ESG aspects improves transparency of operations, reduces risks, and increases social and environmental responsibility – thus helping to create trust and market positioning. Social inequality in Israel, especially in peripherals such as the north and south, is a clear manifestation of the trilemma's failure. Widespread gaps in income, health services, and education increase the sense of alienation, impair social mobility, and prevent great economic potential. A weak health system in the periphery is characterized by low life expectancy and poor quality of life, and education systems with few resources. They harm the economic opportunities of the future generation. Public service is the bridge between budget policy and the needs of the citizens, and therefore it must be of high quality and equitable, otherwise public expenditure is liable to be wasted and useless. The business sector, especially in its activity in the periphery, can and should also participate actively in reducing the gaps, not only through limited corporate responsibility, but also through systematic contribution to community development, a broad ESG strategy. For example, we can see regional ventures in which corporations collaborate with local authorities, government ministries, and communities to promote employment, education, and technology. Partnerships of this type illustrate how corporations can transform from external actors into strategic partners in the fabric of socio-economic governance and contribute to strengthening local resilience over time. The Solution: Implementing ESG Principles and Multi-Layered Governance International studies  categorically state that high-quality and equitable investment in education and health in the periphery, along with high-quality physical and managerial infrastructure, increase productivity, increases social mobility, reduces income and health gaps, and increases public trust in institutions. And not only that: it is emphasized that the quality of governance, which is expressed in transparency, accountability, and public participation, directly affects the success of fiscal policy, inter alia by improving the efficiency of the budget and its social efficiency. The reconstruction of the North and the South is not just a socio-economic need – it is a strategic opportunity to design a sustainable model of governance, ESG, and economic growth. To succeed, an innovative public governance model is needed that combines digital technologies for transparency and monitoring, high accountability, and civic involvement indecision-making mechanisms. In addition, the government must promote economic incentives and involve the private sector and the third sector in social and environmental initiatives to increase the scope of investment and ensure long-term economic resilience. For example, governments in countries such as Germany have shown that the implementation of multi-layered governance methods, along with targeted incentives in the periphery, yields optimal results: they reduce inequality, increase employment, and promote economic growth and quality services in disadvantaged areas. Multi-tiered governance is a method of cooperation and division of powers and responsibilities between three entities: the state, local government, and non-state actors (such as civil society, the private sector, and academia). A local example of the realization of the principles of multi-layered governance is the activities of the Negev Development Authority and the Galilee Development Authority. These authorities promote projects in the fields of employment, infrastructure, and education in the periphery, and have cooperated with government ministries, local authorities, the business sector, and the civil society – thus implementing the principles of multi-layered governance. This concept of governance enables better adaptation of infrastructure to local needs and improves the efficiency of public investment. In terms of social equality, it contributes to a precise response to peripheral gaps and disadvantaged groups. In terms of productivity, it strengthens coordination between employment, transportation, and education systems at the local level. In terms of transparency, it increases civic involvement and public trust in institutions. Economic analyses show that a lack of sufficiently high investment in the periphery could lead to a slowdown in productivity, a decline in growth, and increased inequality. All of these weaken the stability of the economy. In contrast, combined investment in improving education, health, and infrastructure systems increases the productivity of the population and enables sustained and stable growth. In recent years , studies have emphasized  that this is not only a matter of specific economic improvement, but also the creation of more equal opportunities for the entire population.  Opportunities that lead to greater social mobility and a reduction in gaps in society. Implementation Challenges and Practical Methods of Implementation At the same time, it should be recognized that these proposals, in the form of multi-layered governance and the implementation of ESG principles, are not without implementation challenges – both on the political and operational levels. First, the division of powers between the government and the local authorities requires a profound structural change, including legislation that establishes mechanisms of responsibility, budgeting, and coordination. The development of planning, measurement, and analysis units at the local level will be required, alongside administrative infrastructures that do not exist in most of the municipalities in Israel. This is a complex process that requires not only resources, but also training, accessibility of distributed data, and inter-ministerial cooperation (a field that in Israel often encounters bureaucratic difficulties). Second, the implementation of ESG in the public sector is nota trivial matter. Mandatory reporting requires supporting information systems, institutional incentives, and professional guidance to ensure that the indices do not become just another report. ESG indicators should be integrated as an integral part of the decision-making process: for example, linking the budgeting of a local authority to an improvement in health transportation accessibility indicators or investment in disadvantaged populations. Third, there is a fundamental political constraint: in order for such a model to mature, government continuity and multi-year budgeting are required. Without them, such initiatives are liable to get stuck in the way, especially politicians, bureaucrats, and the public believe that they depend on short-term political will or a single term of office. Therefore, broad agreements between government ministries, local authorities, corporations, and civil bodies must be formulated at an early stage, and concrete practical goals must be set (e.g., a selection of several ESG indicators that will enter current budgetary use as early as 2026). Effective management of the fiscal trilemma therefore requires not only budgetary balance, but also data-based public and corporate governance. Public governance includes transparency, tight budgetary control, multi-year policy planning, and inter-ministerial collaborations. Corporate governance requires ESG reporting as an institutional obligation and management of social and environmental risks as part of the business strategy. It also requires active contribution to social development in the periphery, in cooperation with the government and the third sector. Conclusion and Recommendations The fiscal trilemma in Israel is more than a budgetary challenge – it is a test of the degree of governance and the ability of the leadership to lead sustainable socio-economic change. The trilemma emphasizes the need for a precise balance between economic and social goals, strengthening public and corporate governance, and implementing ESG principles to ensure sustainable economic growth and reduce social gaps. The combination of strong public governance, corporate responsibility through ESG principles, and the opportunity to rehabilitate the periphery allows not only to succeed in the budget balance, but also to promote a more equitable society and stable growth. The government, the business sector, and academia must cooperate to promote governance reforms, invest in the periphery, and encourage an ESG culture at all levels of management. The key lies in strategic leadership, leadership that is willing to take responsibility, innovate, and act for the common good. Only in this way can we turn the trilemma into a real opportunity for rehabilitation and growth.   Yair Avidan, Chair of the Advisory Committee, Arison Center for ESG, Reichman University

This post explores the gap between formal ESG reporting and meaningful brand communication. While ESG reports often fulfill regulatory requirements, they rarely resonate with employees, customers, or the public. True impact comes not from spreadsheets—but from stories, design, and cultural relevance.   Today's audiences—especially younger generations—expect companies to live their values and communicate them authentically. ESG is not just about compliance; it is about identity. Brands that translate ESG into engaging, visual, and narrative-driven content can build stronger emotional connections and trust.   Drawing on examples from companies like Lemonade, Driftime, Dell, and Microsoft, the post illustrates how organizations can turn dry data into experiences. Whether through interactive design, minimalist summaries, or emotionally driven storytelling, these brands have aligned their ESG communication with their mission and audience.   Done right, ESG becomes more than a report—it becomes a strategic expression of who the company is and what it stands for.   To read the full article, visit our Hebrew main blog

This post offers a philosophical and historical critique of ESG as a framework for corporate responsibility. It argues that while ESG was intended to integrate environmental and social ethics into business practice, it often reduces these concerns to external compliance—checklists, ratings, and metrics that fail to reflect authentic moral commitment.   Tracing the roots of business ethics from ancient economies to modern corporations, the author highlights how economic activity was once embedded in community values. Today’s institutionalized responsibility models—especially ESG—risk reinforcing the very separation between ethics and enterprise they seek to repair.   The piece calls for a return to an internal, values-driven approach: ethics as a natural part of business identity, not an afterthought. This shift begins with education—embedding ethical thinking in business curricula from the outset, shaping future leaders who see responsibility not as a regulatory burden but as a core principle of their profession.   To read the full article, visit our Hebrew main blog

This post examines Israel’s experience in attempting to reduce single-use plastic consumption, highlighting how environmental regulation intersects with behavioral economics, social equity, and political realities.   While environmental taxes can be effective in theory, their success depends on cultural and social context. In Israel, a tax on single-use plastics led to a significant initial decline in consumption but was later repealed amid political backlash—especially from the ultra-Orthodox community, which viewed the measure as unfairly targeting them.   Drawing on field research with ultra-Orthodox communities, the post suggests that "soft regulation"—including nudges, health messaging, and cultural framing—can encourage more sustainable behavior without creating resistance. Small, practical behavioral shifts can have a cumulative impact when embedded in a supportive policy environment.   Ultimately, sustainable change requires policies that are not only environmentally sound but also socially sensitive. Effective ESG-oriented governance must consider local norms, motivations, and barriers to ensure long-term impact.   To read the full article, visit our Hebrew main blog

The debate over corporate social responsibility and ESG principles has reached a critical juncture, with companies facing unprecedented pressure to balance shareholder interests against broader stakeholder concerns. This tension has intensified amid political backlash against ESG initiatives, exemplified by Trump's recent "Drill, baby, drill" rhetoric. However, traditional economic analysis – which assumes purely rational decision-making – may be insufficient to understand this complex transformation in corporate behavior and legal expectations. This article introduces behavioral economics as a powerful but underutilized lens for examining corporate responsibility. Unlike classical economics, behavioral economics recognizes that human decisions are influenced by emotional factors, cognitive biases, and perceptions of fairness – not just profit maximization. Through examples like the famous "ultimatum game," the research demonstrates how people consistently make decisions that prioritize fairness over personal gain, willingly sacrificing economic benefits to maintain ethical standards or punish unfair behavior. It explores how this behavioral perspective is reshaping corporate law and governance. Legal frameworks are increasingly incorporating stakeholder fairness principles, transforming fundamental corporate law doctrines and moving beyond the traditional focus on shareholders alone. Professor Bukspan argues that integrating behavioral economics insights into corporate strategy offers companies a compass for navigating legal risks, seizing business opportunities, and building sustainable cultures of cooperation, trust, and social responsibility. To read the full article, visit our Hebrew main blog

Responsible Business Conduct – The OECD and the National Contact Point in Israel This position paper outlines the OECD's leading role in advancing responsible business conduct and highlights Israel's National Contact Point (NCP) as a key mechanism for implementing these principles both locally and internationally. The OECD Guidelines for Multinational Enterprises – widely regarded as the "gold standard" of corporate responsibility – provide non-binding yet highly influential standards across areas such as transparency, environmental protection, taxation, labor rights, and anti-corruption.   The paper presents the OECD's six-step due diligence framework, stressing that it is a dynamic and preventive process aimed at continuous improvement rather than perfection. It describes how Israel's NCP, operating under the Ministry of Economy and Industry, handles complaints, facilitates mediation, and raises awareness across sectors.   The paper emphasizes how NCPs in over 50 countries help companies align with ESG principles through non-judicial, constructive engagement. Looking ahead, the analysis identifies challenges including fragmented regulation, increasing compliance burdens, and the potential misuse of complaint mechanisms – while reaffirming the critical importance of professionalism and impartiality.   To read the full article, visit our Hebrew main blog

Shareholder meetings serve as a vital mechanism for influencing corporate behavior, offering insight into how values translate into real-world decisions. This post therefore explores how institutional investors in Israel use shareholder voting to express their views on key ESG-related issues such as executive compensation, board diversity, and corporate governance.   The analysis reveals meaningful differences between the voting patterns of institutional investors and controlling shareholders, particularly in how they approach topics like executive pay and board appointments. Notably, it highlights the gap between support for diversity in principle and the actual representation of women on boards. While institutions often back female candidates, few are nominated—especially for roles influenced by controlling shareholders. Furthermore, compared to investors in other countries, Israeli institutions tend to be significantly more critical and selective in their voting behavior.   Overall, a series of identified patterns ultimately underscore the role of shareholder engagement as a tool for advancing accountability, transparency, and ESG principles in the Israeli market.   To read the full article, visit our Hebrew main blog

This position paper argues that behavioral economics provides essential tools for bridging the gap between consumers' environmental values and their actual purchasing behaviors. Drawing on empirical research, Prof. Hochman demonstrates how psychological factors often prevent environmentally-conscious intentions from translating into green consumer choices.   The paper presents compelling evidence from two recent studies. The first reveals that simple taste testing can double consumer willingness to purchase aesthetically imperfect "ugly" produce – showing how direct sensory experience can overcome visual bias and potentially reduce significant food waste. The second study identifies a counterintuitive finding: consumers are generally more willing to sacrifice time than money for environmental benefits, despite money being renewable while time is not.   These findings support Prof. Hochman's central position: green consumer choices are driven less by environmental information or values, and more by subjective experience at the decision point. The paper advocates for practical applications of behavioral economics principles, including strategic placement of tasting stations, designing green defaults into purchasing systems, and simplifying environmental impact messaging.   For organizations committed to ESG principles, Prof. Hochman presents a clear stance: offering green alternatives isn't sufficient—these options must be perceived as accessible, worthwhile, and aligned with consumers' immediate needs. By incorporating psychological insights into business strategy, companies can create choice environments that enable consumers to act in accordance with environmental values without feeling they're making burdensome sacrifices. To read the full article, visit our Hebrew main blog

This blog post, written by Prof. Hillel Schmid and Prof. Itay Greenshpan, explores the relationship between philanthropic foundations and environmental organizations in Israel. Drawing on recent research, the authors analyze the sources of funding for environmental NGOs and the structural dependencies that arise as a result. The post highlights how the limited number of philanthropic foundations operating in Israel—alongside a decline in government funding and insufficient corporate support—creates challenges for environmental organizations striving to maintain both financial stability and ideological independence. The authors offer several recommendations to strengthen the sector, including the development of new partnerships, diversification of funding sources, and efforts to build trust between donors and NGOs. They emphasize the importance of maintaining a balance between values and pragmatism in order to preserve the critical role of environmental organizations in Israeli society. To read the full article, visit our Hebrew main blog.

This position paper explores the critical interplay between adaptation and mitigation as complementary strategies for effective climate risk management. The paper distinguishes between adaptation (managing preparedness for climate impacts) and mitigation (reducing factors causing climate change), showing how businesses and governments must balance short-term resilience with long-term risk reduction. Examining financing challenges, the analysis highlights how immediate climate impacts require emergency funds and public-private partnerships, while long-term transformation demands innovative financial instruments like green bonds and climate investment funds. The paper identifies key stakeholders — governments providing regulatory frameworks, regulators ensuring financial stability, and institutional bodies directing capital flows — and demonstrates how their coordinated action integrates physical risk management with transition risk management, as evidenced by recent Israeli initiatives like the Green Taxonomy and Banking Directive No. 345. By integrating these approaches, organizations can not only reduce climate risks but also unlock new economic opportunities within a sustainable green economy. To read the full article, visit our Hebrew main blog

This post explores how political dynamics in the United States are shaping the availability and design of ESG (Environmental, Social, and Governance) investment products offered to the public—particularly through pension funds. As partisan divisions around ESG deepen, state-level political leadership is playing an increasingly active role in defining which investment options are promoted or restricted. Drawing on recent empirical studies, the post highlights a stark divide between Republican-led and Democratic-led states. While the latter tend to support broader access to ESG-aligned financial products, the former often impose limitations or even bans on them—citing concerns about politicization or financial performance. These regulatory decisions, often motivated by political ideology, may ultimately impact not only the range of choices available to savers, but also the long-term effectiveness of ESG strategies themselves. The post also discusses the legal and public implications of such political interference. A notable example is a recent court case involving American Airlines’ pension fund, where the balance between fiduciary duty and ESG preferences came under judicial review. This and similar cases point to a growing legal complexity in aligning ESG considerations with institutional responsibilities in polarized environments. Ultimately, the post raises important questions about who decides which investment products citizens are allowed to access, and whether ESG-related decisions should be driven by political agendas—or by evidence-based financial and sustainability considerations. To read the full article, visit our Hebrew main blog.

In recent years, major figures in the tech industry have positioned themselves as champions of progressive values, including those reflected in ESG (Environmental, Social, and Governance) principles. However, this article explores a surprising shift: the increasing fusion between business leaders and political power structures, even under administrations whose policies may contradict those same progressive ideals. The authors examine how tech billionaires such as Elon Musk, Jeff Bezos, and Mark Zuckerberg have navigated the political landscape. They show how corporate leaders, once external actors advocating for change, are now becoming key players within government institutions. This movement raises complex questions about the authenticity of corporate ESG commitments, as well as about the risks to democratic processes when private economic interests and public governance become intertwined. Through recent examples and a critical lens, the article highlights the gradual erosion of boundaries between corporate power and state authority. It warns that what once seemed like a theoretical concern—capital increasingly controlling government—has now materialized into an observable and urgent phenomenon that challenges the ideals of democratic oversight, public accountability, and responsible governance. To read the full article, visit our Hebrew main blog.