Investment advisory behemoth under fire for discriminating against companies with ties to Israel

MSCI manages some $5.4 billion in assets and offers investing guidance for clients.

By Jessica Costescu, The Washington Free Beacon

Montana, Iowa, and Tennessee have launched investigations into whether the investment behemoth MSCI has engaged in Boycott, Divestment, and Sanctions (BDS) practices by issuing harmful ratings to companies over their Israeli ties, potentially encouraging clients away from investing in them.

As part of its environmental, social, and governance (ESG) scoring, MSCI flagged at least nine companies as controversial for doing business in Israel, a Jewish News Syndicate investigation found.

In response, the three U.S. states are demanding MSCI turn over documents showing how Israeli ties affected ESG ratings or inclusion in any exchange-traded funds.

They also demanded information about what the investment firm advised clients about doing business in the Jewish state or with Israeli parties.

MSCI manages some $5.4 billion in assets and offers investing guidance for clients.

Investors who are socially conscious or fear getting flagged themselves may avoid putting money into companies marked with human rights concerns.

“My support for Israel will not waiver and neither will Montana’s. I’m deeply concerned by the reports of discrimination against Israeli companies,” Montana attorney general Austin Knudsen told the Washington Free Beacon.

“Should we find MSCI has been involved in any illegal business practices, I will do everything in my power as attorney general to hold them accountable and continue to protect Montanans from unlawful and discriminatory business practices.”

Iowa attorney general Brenna Bird issued a similar statement to the Free Beacon.

“After the barbaric terror attacks on October 7, it is more critical than ever that we support our allies in Israel and root out anti-Semitic hate,” she said.

“MSCI’s silence when asked whether it is targeting companies for doing business in or with Israel is deafening. I am leading an investigation to get to the bottom of MSCI’s concerning practices and to prevent companies from polluting the corporate world with anti-Semitism.”

MSCI flagged Bank Hapoalim, Bank Leumi, Bank Mizrahi, Caterpillar, CEMEX, Elbit Systems, Heidelberg Materials, Motorola, and PayPal as controversial in its ESG ratings because the companies conduct business in the Judea and Samaria regions of Israel, the Jewish News Syndicate’s investigation found.

Elbit, an Israeli security firm and frequent target of BDS activists, was marked for building security and surveillance barriers meant to protect the Jewish state from terrorists.

MSCI also relied on anti-Israel sources in deciding to flag the three banks, as well as a fourth, the Israel Discount Bank, as having “severe-to-moderate” levels of social and human rights concerns, according to Jewish News Syndicate.

A Chinese bank avoided that flag, despite operating a branch in Xinjiang, where the United States and other authorities have determined China is committing genocide against the ethnic Uyghur population.

A coalition of 18 state attorneys general led by Florida’s Ashley Moody in March launched a similar probe into MSCI’s possible BDS practices.

“Israel is our greatest ally in the middle east, and in Florida, we unequivocally support their right to exist. The BDS movement has one goal, the complete elimination of Israel as a Jewish state,” Moody said.

“The allegations against MSCI are deeply disturbing and we have called for a quick response from the company’s leadership directly addressing our concerns.”

MSCI did not respond to a request for comment.

Iowa and Tennessee each have laws prohibiting American companies from boycotting Israel, though similar legislation has repeatedly failed to pass in Montana.

Morningstar faced similar anti-Israel and BDS accusations in recent years, eventually reaching an agreement with pro-Israel groups in 2022 to reform its sourcing, ratings, and practices and to commission an independent assessment on the subject.

Still, Florida launched an investigation into the financial services firm in 2023 over its BDS practices, eventually leading Morningstar to remove Elbit from its blacklist.