As more investors ride the wave of socially responsible investing (SRI), C-Suites are under pressure to ensure that stakeholder capitalism is enshrined in their company’s core values.
By proclaiming a duty to all stakeholders in their business – reaching beyond shareholders to include their communities, customers, workforce and suppliers, as well – these companies are likely boosting favorability in the environmental, social, and governance (ESG) arena. The use of ESG to assess business performance and prospects has gained tremendous steam despite lacking any global definition or metrics.
Working to capitalize on those nebulous ESG standards are backers of the Boycott, Divestment, Sanctions (BDS) movement, including many powerful Non-Governmental Organizations (NGOs), who recognize the cachet ESG now has in the business world.
BDS activists’ foray into the corporate world is facilitated by a number of instruments outlining guidance for business conduct on the international stage – several emanating from the United Nations, which has passed far more resolutions against Israel than all other countries combined. Those protocols contain wording that can be manipulated to bludgeon companies that do business in or with Israel while dissuading others from seeking such relationships.
The UN Guiding Principles on Business and Human Rights, unanimously endorsed by the UN Human Rights Council in 2011, clarifies that businesses’ adverse human-rights impacts could result from not only “their own activities” but also from “business relationships with other parties,” and activities include “both actions and omissions.”
While further noting the heightened risk in “conflict-affected areas” that a business is “complicit in gross human rights abuses committed by other actors,” the Guiding Principles also state that a grievance is considered “a perceived [emphasis added] injustice evoking an individual’s or group’s sense of entitlement…,” all of which can be brandished by malevolent actors to build a case against business ties with Israel.
What’s more, companies are expected to engage with potentially affected groups and other stakeholders, and undertake a human rights due diligence process, facing remediation if they have caused or contributed to adverse impacts.
These Guiding Principles are cited in a discredited Human Rights Watch report recently authored by Omar Shakir, the group’s director of Israel and Palestine, and a known BDS activist. While baselessly accusing Israel of “the crimes of apartheid and persecution,” the report urges businesses “active in Israel and the OPT (Occupied Palestinian Territory)” to stop providing goods and services “that will likely be used for such purposes.”
Human Rights Watch also touted its use of the Guiding Principles in urging banks to halt funding for settlement construction, noting that the document has “spawned an industry of consultants and auditors to help” businesses develop “processes to identify human rights risks.”
Likewise these Principles on Business and Human Rights were referenced in a UN Human Rights Council resolution that created the infamous open-ended “International Commission of Inquiry on the Occupied Palestinian Territory, including East Jerusalem, and Israel” stemming from Israel’s war with Hamas in May.
And they were cited, as well, along other similarly worded instruments like The UN Global Compact – which encourages companies to adopt socially responsible policies while outlining human-rights principles – in Morningstar Inc.’s response to an accusation that its products and services support the BDS movement in its influential investment research and asset-rating. Morningstar Inc. is a multinational firm headquartered in Chicago that also provides investment-management services.
JLens, a network of Jewish institutional values-based investors operating out of San Francisco, placed Morningstar on its “Do Not Invest” list and outlined its analysis in a document “Summary of Morningstar’s Support for BDS” that it posted on the JLens web site. It also filed a shareholder proposal for Morningstar’s 2021 annual meeting that asserted economic activism against Israel is found in Morningstar’s business lines.
“When Morningstar’s ESG research uses BDS activist sources to justify elevating a company’s controversy score, Morningstar is conducting economic warfare on companies with ties to Israel,” Julie Hammerman, JLens’ founder and CEO, stated as she presented JLens’ shareholder proposal at that annual meeting.
The Illinois Investment Policy Board, which added Ben & Jerry’s owner Unilever PLC to its “Prohibited Investment List” of companies that boycott Israel, has launched a formal inquiry into Morningstar. Further discussion will take place at the Board’s next meeting on March 21.
Responding to JLens’ shareholder proposal that it found no evidence of any bias from its internal investigation, Morningstar further countered (in a statement released March 16, 2021, titled, “Morningstar Affirms Integrity of ESG Research and Ratings”) that the company does not support the BDS campaign, nor do its research teams have “specific policies for or apply different standards to Israeli companies.”
But in describing its methodology for evaluating company prospects that steer investors, it acknowledged that assessing potential material risks of ESG issues on company value is complex and goes on to mention sources in its “Controversy Research” that clearly tip the scales against Israel: Human-rights NGOs and the media.
Morningstar’s Sustainalytics team performs “daily monitoring of 60,000 news sources from around the world to identify incidents that could be significant from an ESG perspective,” the company notes. But with the international press weighing overwhelmingly against Israel, reporting abundantly on BDS activities and leaning heavily on biased NGO analyses in its reporting, the Jewish state is naturally disadvantaged with this strategy.
As is the case with Sustainalytics’ Human Rights Radar, which identifies companies at risk of being complicit in human rights violations because they operate in conflict-affected areas. The company noted that countries and territories targeted for its research coverage are based on aggregate scoring by Freedom House. But according to that think tank’s description of its methodology for its 2021 “Freedom in the World” report, it used sources such as news articles, academic analyses, and reports from NGOs – and included specific references to two reports by Human Rights Watch – all of which are reflexively negative on Israel.
Ecosystem ripe for antisemitism
Morningstar (which reportedly hired a law firm in December to investigate the claims it supports BDS) is not the only organization employing ESG factors to screen companies, nor are the UN Guiding Principles and the UN Global Compact the only instruments seeking to hold businesses accountable for their conduct. Issues of complicity, stakeholder engagement and due diligence are common themes running through many of these international guideposts. Like the screeners using them, these guideposts also leverage sources, such as media and NGOs, and in addition each other, for influence. With those symbiotic ties, they create an ecosystem that is ripe for an antisemitic chokehold on Israel.
The newly released Amnesty International report will likely furnish even more nourishment, as it accuses Israel of apartheid from its very establishment and warns that businesses “have a responsibility to assess their activities in Israel and the OPT, and ensure that they do not contribute to or benefit from the system of apartheid.”
Jews can expect further turbulence ahead in this climate, particularly when coupled with the rise in companies pivoting away from the Milton Friedman approach to business and toward management of multiple stakeholders interests – a concept the late economist and Nobel laureate condemned in his authoritative essay a half century ago. This framework will continue to present challenges for the Jewish community and Israel, as more qualitative factors associated with ESG take center stage and pay dividends to Jew-haters.
However, there are opportunities as well. With businesses now engaging myriad community stakeholders, the Jewish community should work vigorously and strategically to establish a firm footing as a stakeholder whose concerns must not be overlooked. However, to build an effective voice in that tent we must drop our long-held tolerance of antisemitism – particularly from the growing chorus of defamers who attack us while insisting those assaults on our peoplehood do not constitute Jew-hatred. No more free passes.
It is also imperative that Jews and their allies mount an aggressive and coordinated push against antisemitism in all interconnected spaces.
Lesson plans attacking Israel and the Jewish community are poised to proliferate in US schools, with more districts adopting a “Liberated Ethnic Studies Model Curriculum” that openly embraces BDS. Such curricula will groom future corporate leaders and fund managers to shoulder that same animus, with our taxpaying dollars. Relentless footwork is required at the local level, including filling seats on school boards and other critical leadership entities that craft policy.
Defeatism today in the face of this onslaught will ripple across the business world and other power centers for generations to come, so it is our duty to reverse this worrisome trend. As in business, success here will require unity of purpose, sharp focus and unyielding tenacity.
The writer is an award-winning journalist, including recognition for business and economic reporting. She was a correspondent for The Boston Globe, reported for The Associated Press and has been published in The Wall Street Journal, as well as working for other news organizations as a writer and editor.
This is the final of three installments. The previous articles appeared over the past two Sundays in The Jerusalem Post.