Investors who aspire to use their money in “socially responsible” ways—or to appear to be doing so—have in recent years sought out evaluations of firms based on “environmental, social, and governance criteria,” or ESG. Perhaps foremost among the firms offering ESG ratings is Sustainalytics, which in 2020 was acquired by the financial-services giant Morningstar. As the author and businessman Scott Shay has detailed, Sustainalytics’s analyses were infected with anti-Israel prejudice. These revelations eventually led Morningstar to hire a law firm to conduct a formal investigation into the subject. Richard Goldberg comments on the lawyers’ report, which presents itself as an exoneration, when, in fact, it is something else:
On a full reading of the report, rather than exonerating Morningstar, [it] instead demonstrates conclusively that Sustainalytics’s processes and products—including its flagship ESG Risk Ratings product—are infected by systemic bias against Israel. . . . Companies that are in any way involved in the Israeli economy are automatically identified as complicit in human-rights abuses . . . and are thus disproportionately punished in Sustainalytics ratings compared to companies doing business in any other country.
One of the primary drivers of Sustainalytics’ pervasive and systemic bias against Israel is its use of radical anti-Israel sources. Indeed, Sustainalytics is at least partially aware that this is a problem that leads to erroneous ratings and reports. The report recounts a series of actions taken by Sustainalytics to prevent reliance on certain extreme and unreliable sources of anti-Israel propaganda, including the Electronic Intifada website, BDSMovement.net, Iran Daily, and the Venezuelan regime-sponsored television network Telesur.
Despite these efforts, the report makes clear that Sustainalytics continues to rely on other anti-Israel sources. For example, both Human Rights Watch and Amnesty International, which the report identifies as primary sources for Sustainalytics in its assessment of Israel-related companies, are well known for their anti-Israel bias.
More alarmingly, the report makes clear that “in the context of research involving the Israeli/Palestinian conflict areas,” Sustainalytics relies on an NGO called Who Profits, . . . an extremist anti-Israel organization and leading BDS proponent [that] was instrumental in helping the Office of the United Nations High Commissioner for Human Rights construct its blacklist of Israeli-connected firms. . . . Worse still, the report indicates that Sustainalytics may engage directly with companies to try to dissuade them from doing business in and with Israel.
Read more on FDD: https://www.fdd.org/analysis/2022/06/17/how-to-curb-anti-israel-bias-inside-esg-risk-ratings/