Ethical Investing Still Has Israel in Its Sights

Last year, Morningstar—a leading provider of financial services—came under fire because its subsidiary, a company called Sustainalytics, had been systematically giving low “environmental, social, and governance” (ESG) ratings to companies that do business with Israel. Investors have come to rely on ESG ratings as a way of reassuring themselves and their clients that their money isn’t being used unethically. As a result, Morningstar announced last month that it had taken a series of steps to avoid further hostility toward the Jewish state. In an in-depth analysis, Richard Goldberg argues that there is reason to believe the underlying problems have not disappeared. In fact, Goldberg suggests, Sustainalytics seems to be acting in a way that supports the campaign to boycott, divest from, and sanction the Jewish state (BDS).

A core premise of the BDS campaign has permeated Morningstar Sustainalytics’ ESG risk assumptions: east Jerusalem, the entirety of the West Bank, Gaza, and the Golan Heights are deemed Occupied Palestinian Territories (OPT) where Israel is [supposedly] committing systemic human-rights violations against Palestinians, and all companies operating in these areas are—based simply on their location—at risk of contributing to human-rights abuses. This presumption of human-rights risk triggers the company’s incident team to investigate companies operating in or around these territories for controversy ratings.

In a document responding to questions on why an Israeli telecommunications company operating in the West Bank received a “Category 3 Significant controversy” rating, Sustainalytics wrote, “Our perspective is that the current operations in the Occupied Territories create an unmanageable human-rights risk for the company.” That presumption upends the Oslo Accords, however, which allowed for an Israeli presence in various parts of the West Bank and which envisioned Israel retaining portions of the West Bank. Notably, the presumption that any Israeli presence beyond Israel’s 1967 border is a human-rights violation is one of the same presumptions used by the BDS campaign.

This approach leads to the infliction of harm on Israeli and Israel-connected companies. Israeli banks, for example, receive a Category 3 Significant controversy rating simply for providing services to Jews living in parts of Jerusalem—the capital of the Jewish state and home to the Western Wall — or the disputed West Bank.

Read more at FDD

More about: BDS, ESG, Finance, Morningstar

To Save Gaza, the U.S. Needs a Strategy to Restrain Iran

Since the outbreak of war on October 7, America has given Israel much support, and also much advice. Seth Cropsey argues that some of that advice hasn’t been especially good:

American demands for “restraint” and a “lighter footprint” provide significant elements of Hamas’s command structure, including Yahya Sinwar, the architect of 10/7, a far greater chance of surviving and preserving the organization’s capabilities. Its threat will persist to some extent in any case, since it has significant assets in Lebanon and is poised to enter into a full-fledged partnership with Hizballah that would give it access to Lebanon’s Palestinian refugee camps for recruitment and to Iranian-supported ratlines into Jordan and Syria.

Turning to the aftermath of the war, Cropsey observes that it will take a different kind of involvement for the U.S. to get the outcomes it desires, namely an alternative to Israeli and to Hamas rule in Gaza that comes with buy-in from its Arab allies:

The only way that Gaza can be governed in a sustainable and stable manner is through the participation of Arab states, and in particular the Gulf Arabs, and the only power that can deliver their participation is the United States. A grand bargain is impossible unless the U.S. exerts enough leverage to induce one.

Militarily speaking, the U.S. has shown no desire seriously to curb Iranian power. It has persistently signaled a desire to avoid escalation. . . . The Gulf Arabs understand this. They have no desire to engage in serious strategic dialogue with Washington and Jerusalem over Iran strategy, since Washington does not have an Iran strategy.

Gaza’s fate is a small part of a much broader strategic struggle. Unless this is recognized, any diplomatic master plan will degenerate into a diplomatic parlor game.

Read more at National Review

More about: Gaza War 2023, Iran, U.S. Foreign policy