Ethical Investing Still Has Israel in Its Sights

Nov. 23 2022

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

Egypt Is Trapped by the Gaza Dilemma It Helped to Create

Feb. 14 2025

Recent satellite imagery has shown a buildup of Egyptian tanks near the Israeli border, in violation of Egypt-Israel agreements going back to the 1970s. It’s possible Cairo wants to prevent Palestinians from entering the Sinai from Gaza, or perhaps it wants to send a message to the U.S. that it will take all measures necessary to keep that from happening. But there is also a chance, however small, that it could be preparing for something more dangerous. David Wurmser examines President Abdel Fatah el-Sisi’s predicament:

Egypt’s abysmal behavior in allowing its common border with Gaza to be used for the dangerous smuggling of weapons, money, and materiel to Hamas built the problem that exploded on October 7. Hamas could arm only to the level that Egypt enabled it. Once exposed, rather than help Israel fix the problem it enabled, Egypt manufactured tensions with Israel to divert attention from its own culpability.

Now that the Trump administration is threatening to remove the population of Gaza, President Sisi is reaping the consequences of a problem he and his predecessors helped to sow. That, writes Wurmser, leaves him with a dilemma:

On one hand, Egypt fears for its regime’s survival if it accepts Trump’s plan. It would position Cairo as a participant in a second disaster, or nakba. It knows from its own history; King Farouk was overthrown in 1952 in part for his failure to prevent the first nakba in 1948. Any leader who fails to stop a second nakba, let alone participates in it, risks losing legitimacy and being seen as weak. The perception of buckling on the Palestine issue also resulted in the Egyptian president Anwar Sadat’s assassination in 1981. President Sisi risks being seen by his own population as too weak to stand up to Israel or the United States, as not upholding his manliness.

In a worst-case scenario, Wurmser argues, Sisi might decide that he’d rather fight a disastrous war with Israel and blow up his relationship with Washington than display that kind of weakness.

Read more at The Editors

More about: Egypt, Gaza War 2023