Increasingly, investors and investment managers have made much of evaluating companies based on “environmental, social, and governance criteria” (ESG) in order to allocate funds ethically. This isn’t a mere fad, but big business: in 2020, Morningstar—a large financial-services firm, whose ratings of stocks and bonds have tremendous sway—bought Sustainalytics, a firm specializing in ESG ratings, for nearly $60 million.
Among the activities deemed unethical by Sustainalytics is doing business with Israel. Public scrutiny, and the danger of running afoul of state laws meant to counter the boycott, divestment, and sanctions movement (BDS), have led the company to conduct an internal investigation and promise some changes. But it is too soon to declare victory, argues Scott Shay:
The report [resulting from the investigation] clearly shows that Morningstar has a de-facto boycott of Israel despite its official rejection of BDS. If Morningstar is allowed to maintain this de-facto boycott of Israel, while adding some polite words that this is not its official policy, this sets a dangerous precedent in the fight against BDS. Pro-Israel individuals and foundations should cease using Morningstar for their investment portfolios, otherwise they are participating in a boycott of Israel that they do not intend and allowing Morningstar to continue with its pretense that it does not support BDS.
And this is hardly a minor issue, as Shay explains:
ESG investing accounts for $17 trillion of investments in 2022, a huge proportion of the $45 billion total of U.S. stocks. Almost all Americans are influenced by ESG ratings whether it be in their pension funds, mutual funds, or personal portfolios. Much of the screening for ESG, is being done by Morningstar (through its subsidiary Sustainalytics) and by [another corporation], MSCI. In other words, these two companies direct where this money goes.
Morningstar is screening for BDS on behalf of all investors. In fact, going further, they even screen out non-Israeli companies that simply sell products to Israel on the basis that these products might be retrofitted to somehow cause harm. . . . . Currently the majority of pro-Israel individuals and foundations are likely using Morningstar for ESG investments whether they are aware of it or not and thus unwittingly boycotting Israel.
Read more at E-Jewish Philanthropy
More about: Anti-Semitism, BDS, Finance