Morningstar CEO Kunal Kapoor says the investment firm does not support the BDS movement and never will. Kapoor made the statement in one Jerusalem Post writing in which he defended his company’s environmental and social governance (ESG) rating system against alleged “anti-Israel” bias.
In 2020 Morningstar Inc. bought Sustainalytics, an Amsterdam-based company that assesses the sustainability of businesses. Sustainalytics has been dogged by accusations that it singles out Israel for years, but the Morningstar acquisition helped embolden those claims as anti-BDS laws exist in dozens of US states.
In June 2022, the Illinois Investment Policy Board’s (IIPB) Israel Boycott Restrictions Committee subsection agreed to refrain from placing Morningstar on their “prohibited investment” list if the company adopted a series of recommendations. One of these recommendations was the removal of the Human Rights Radar (HRR), a research product that provides information on issuers in areas where human rights violations occur. The product naturally identified businesses on the West Coast.
In addition to terminating its relationship with HRR, Morningstar also hired an outside law firm, White & Case, to conduct an exhaustive investigation into its practices to uncover any potential bias. White & Case produced a 117-page report detailing its findings, which Morningstar made public. “The investigation found neither widespread nor systematic anti-Israel bias in Sustainlytics’ products and services,” it concludes.
These moves have not stopped the political pressure on Morningstar. On August 17, Missouri Attorney General Eric Schmitt announced that eighteen other state attorneys general had joined his investigation into Morningstar’s rating system, which Schmitt called “ESG smart investing.”
This month, Arizona Treasurer Kimberly Yee informed Morningstar that its ESG system violated the state’s anti-BDS law. While the White & Case report found no evidence of systemic bias, Yee said it still revealed an anti-Israel agenda and suggested the very idea of reviewing Israeli companies was a violation of state law.
“Morningstar’s ESG rating arm, Sustainalytics, appears to be violating Arizona law by negatively impacting the ratings of companies doing business in Israel,” Yee said in a statement. “I will not allow companies to promote policies that are anti-Semitic and discriminatory efforts against Israel, which is America’s longtime friend and ally and an important trading partner with Arizona.”
Just days after Yee released her statement, the State Chief Financial Officers Foundation organized a letter, signed by eighteen state treasurers, who expressed concern about the company’s ESG system. “Many of our countries have investments in Israel and we look at the practices of Sustainalytics [as] a direct attack on these investments,” it says. “As Americans who strongly support Israel—a close Democratic ally of the United States—we are also deeply troubled by a corporate culture at Morningstar that would allow researchers to rely on sources associated with the anti-Semitic BDS movement.”
In his op-ed, Kapoor acknowledges that bias can occasionally occur in “less than obvious ways,” but says Morningstar is committed to transparency. It also says the company has begun working with the Jewish Federations of North America and other major Jewish groups “to reexamine our methodologies and processes to ensure that any possibility of anti-Israel bias is removed.”
Morningstar is not the only company facing political pressure on Israel in recent months. After ice cream maker Ben & Jerry’s announced it would stop selling the product in illegally occupied West Bank settlements last summer, US and Israeli lawmakers targeted its parent company, Unilever. Unilever eventually sold Ben & Jerry’s Israeli business to local licensee Avi Zinger, who hailed his purchase as a victory against BDS. “There is no room for discrimination in the commercial sale of ice cream,” Zinger said. “BDS lost. I now have the right to sell Ben & Jerry’s using its Hebrew and Arabic name… forever.” In court filings, Unilever admitted the move was intended to ease pro-Israel pressure. Ben & Jerry’s is currently suing Unilever over the sale.
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