Morningstar CEO Kunal Kapoor says the investment firm does not support the BDS movement and never will. Kapoor made the statement in a Jerusalem Post a post in which he defended his company’s environmental and social governance (ESG) rating system against alleged “anti-Israel” bias.
In 2020, Morningstar Inc. acquired Sustainalytics, an Amsterdam-based company that assesses business sustainability. Sustainalytics has been dogged by accusations of singling out Israel for years, but the Morningstar acquisition helped bolster those claims, as anti-BDS laws exist in dozens of US states.
In June 2022, the Israel Boycott Restrictions Committee arm of the Illinois Investment Policy Board (IIPB) agreed to refrain from placing Morningstar on their “no-investment” list if the company accepted a series of recommendations. One of those recommendations was to scrap the Human Rights Radar (HRR), a research product that provides information on issuers in areas where human rights abuses occur. The product naturally identifies businesses in the West Bank.
In addition to severing its relationship with HRR, Morningstar also hired an outside law firm, White & Case, to conduct a comprehensive investigation of its practices to uncover any potential bias. White & Case produced a 117-page report detailing their findings, which Morningstar made public. “The investigation found neither widespread nor systematic anti-Israel bias in Sustainalytics’ products and services,” he concluded.
Those moves haven’t stopped political pressure on Morningstar. On August 17, Missouri Attorney General Eric Schmidt announced that eighteen other state attorneys general had joined his investigation into Morningstar’s rating system, which Schmidt called “a wake-up call to ESG investing.”
This month, Arizona Treasurer Kimberly Yee informed Morningstar that its ESG system violates the state’s anti-BDS law. While White & Case’s report found no evidence of systemic bias, Yee said it still reveals an anti-Israel agenda and suggests that the very idea of reviewing Israeli companies at all is a violation of state law.
“Morningstar’s ESG rating subsidiary, 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 his statement, the Government 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 monitor Sustainalytics’ practices [as] a direct attack on these investments,” it said. “As Americans who strongly support Israel—a close democratic ally of the United States—we are also deeply troubled by the corporate culture at Morningstar that would allow researchers to rely on sources associated with the anti-Semitic BDS movement.”
In his post, Kapoor acknowledged that bias can sometimes occur in “less obvious ways,” but said Morningstar was committed to transparency. He also says the company has begun working with the Jewish Federations of North America and other major Jewish groups “to review 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 last summer that it would stop selling its products in illegally occupied West Bank settlements, US and Israeli lawmakers targeted its parent company Unilever. Unilever eventually sold Ben & Jerry’s Israeli business to local licensee Avi Singer, who hailed his purchase as a victory against BDS. “There is no place for discrimination in the commercial sale of ice cream,” Singer said. “BDS lost. I now have the right to sell Ben & Jerry’s using its name in Hebrew and Arabic… forever. In court documents, Unilever acknowledged that the move was intended to ease pro-Israel pressure. Ben & Jerry’s is currently suing Unilever over the sale.
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