Groups say the ratings giant has not stamped out anti-Israel bias.

By Adam Kredo, The Washington Free Beacon

Advocacy groups are pressing state government officials to sanction financial ratings giant Morningstar for promoting divestment from companies that help the Israeli government combat Palestinian suicide bombers.

Morningstar subsidiary Sustainalytics “treats Israel differently from all other nations,” according to two pro-Israel community organizations, Christians United for Israel and the Orthodox Union. The organizations are urging the State Financial Officers Foundation, which represents officials in charge of implementing state laws against the anti-Israel Boycott, Divestment, and Sanctions (BDS) movement, to cancel lucrative contracts and investments in Morningstar.

Morningstar has been battling accusations that it fuels the BDS movement by downgrading companies that work with Israel, particularly in its security sector, making them less attractive to potential investors.

The pro-Israel groups say the financial ratings giant has not made good on its promises to address those concerns and implement reforms, according to a copy of the letter obtained by the Washington Free Beacon.

The Free Beacon reported in February, for example, that the company is still blacklisting several firms that help Israel combat Palestinian terrorism.

Those actions, the groups say, “constitute a clear violation of state laws prohibiting contracts with and/or investment in firms that boycott Israel.”

“It’s time for Morningstar to choose boycotts of Israel or state investments and contracts,” the groups write.

The groups also want to ease concerns that Morningstar could retaliate against the states by using its ratings systems to downgrade 529 accounts, an investment portfolio used to help pay for college education.

“Given that Morningstar already uses its ratings to advance a political agenda, we recognize and respect the concern the company might retaliate against states that faithfully implement their anti-BDS laws. For instance, by downgrading the ratings of state 529 accounts,” the groups write.

“Rest assured, we will urge attorneys general around the country to hold Morningstar accountable should such underhanded tactics be employed.”

Richard Goldberg, a former Illinois gubernatorial chief of staff who helped craft the state’s anti-BDS legislation, said there is “a credible fear among state officials” that going after Morningstar for its alleged support of the BDS movement “could prompt retaliation.”

“If Morningstar tried to retaliate,” he said, “that would be an issue for the Justice Department and the [Securities and Exchange Commission] to investigate.”

At least 10 major Jewish groups—including the Jewish Federations of North America and the Anti-Defamation League—informed Morningstar in late December that after months of close work with the company, they were frustrated with the lack of progress at reining in Sustainalytics’s anti-Israel bias.

Morningstar has promised to remove several companies from its do-not-invest lists and reverse policies that blacklist a company for providing services to Israel’s security sector.

“It appears that Sustainalytics is failing to do its part to implement the commitments that Morningstar made to eliminate the pervasive anti-Israel bias in Sustainalytics’s [environmental, social, and corporate governance] ratings,” the organizations wrote at the time.

“We do not believe that Sustainalytics is engaging with us in the spirit of Morningstar’s October commitments and have found a number of the steps it has taken to be directly contrary to those commitments.”

Morningstar maintains it has made reforms. Information published on its website claims that ESG Risk Ratings have been assigned to 140 Israel-based companies out of more than 15,000. Just 0.2 percent of the companies reviewed were “flagged for involvement in an Israeli-Palestinian conflict area,” according to the company.

Derek Kreifels, the CEO of the State Financial Officers Foundation, said his organization will encourage its members to investigate Morningstar for potential violations of anti-BDS laws.

“Morningstar is engaging in economic warfare against the Jewish state using American retirement dollars to impose an anti-Semitic BDS movement on many companies in the name of ESG,” Kreifels said. “We look forward to the results of the continued investigation into Morningstar’s anti-Semitic activities.”

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“It’s time for the Jewish community to take a seat at the table to use our power as institutional investors to ensure corporations are aligned with our values, and don’t fall for antisemitic pressures.”

By Dion J. Pierre, The Algemeiner

The Anti-Defamation League (ADL) will purchase JLens, a group that provides financial advice to Jewish investors.

ADL announced the move on Thursday, describing it as an effort to “expand” activities aimed at preventing providers of environmental, social, and governance (ESG) ratings — which encourage socially conscious investment strategies — from discriminating against Israeli companies and those that do business with Israel.

“ESG is the latest frontier in the fight against antisemitism, with radical Boycott, Divestment, and Sanctions (BDS) activists trying to push their agenda,” ADL CEO Jonathan A. Greenblatt said on Thursday. “It’s time for the Jewish community to take a seat at the table to use our power as institutional investors to ensure corporations are aligned with our values, and don’t fall for antisemitic pressures — that’s why we’re incorporating JLens, the leading Jewish organization on these issues.”

JLens is currently partnered with over 300 publicly traded companies, advocating closer relationships with Israel and discouraging involvement in the BDS campaign.

Recently, JLens was involved in assessing whether Sustainalytics, a subsidiary of the Chicag0-based firm Morningstar, assigned low ESG ratings to Israel affiliated companies and violated state laws against engaging in the boycott, divestment, and sanctions (BDS) movement. The group found that Sustainalytics created “BDS blacklists” and used in its internal reports “politicized anti-Israel language” to describe Israel.

Its work, which was the first to raise alarms about the issue, led to Morningstar’s cracking down on the practices and adopting policies ensuring that Sustainalytics will not become a BDS collaborator.

In Thursday’s announcement, ADL noted that BDS activists target firms managing ESG rated funds, which attracted over $500 billion in investments in 2021, a 55% increase from the previous year, according to JP Morgan.

During 2022’s proxy season, a time when publicly traded companies hold annual meetings to assess performance and weigh suggestions from shareholders, Israel was named in eight of 20 resolutions targeting foreign governments, “making the country only second to China.”

ADL’s purchase of JLens builds on previous efforts to encourage corporations to treat Israel fairly. Working with Unilever, it helped reverse Ben & Jerry’s decision not to sell ice cream in Israel and in 2021 stopped Airbnb from delisting properties located in the West Bank (i.e. Jewish communities in Judea and Samaria).

“The recent high profile examples of companies publicly announcing anti-Israel moves are just the tip of the iceberg,” Greenblatt continued. “In working with JLens, we hope to be able to prevent such actions before they even take off.”

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Investment firm Morningstar is under fire in multiple states for what critics call pro-BDS practices.

By Mike Wagenheim, JNS

After months of wrangling, the Morningstar investment firm has reached an agreement with pro-Israel organizations to alter its methodology in determining its risk ratings for companies doing business in and with Israel, JNS has learned.

At Monday’s Jewish Federations of North America General Assembly, an announcement will be made regarding an agreement between Morningstar and a working group including such organizations as Jewish Federations of North America, Christians United for Israel and the Combat Anti-Semitism Movement.

While the exact details have not been finalized, a source close to the process says that Morningstar has moved toward the working group’s demands on issues such as the assumptions and sources it uses in developing its risk ratings, which have drawn the ire of pro-Israel groups and the attention of officials from 20 states investigating whether Morningstar’s practices violate laws against boycotting Israel.

In a statement late Sunday, JFNA President and CEO Eric Fingerhut told JNS that “we’ve been working tirelessly to get Morningstar to adopt a strong set of safeguards and policies to ensure that their ESG ratings are not biased against Israel. We are hopeful at the prospects of reaching a broad consensus across the Jewish community to ensure that we root out anti-Israel bias.”

Morningstar and its subsidiary, Sustainalytics, are accused by critics of utilizing anti-Israel sources and weighing them disproportionately in assigning ESG (environmental, social and governance) risk ratings to companies as guidance for socially-minded investors. The ratings, which assign a higher risk simply for doing business in or with Israel or in Israel-controlled territories, amount to a de facto boycott of Israel, allege several American Jewish groups and state officials.

Morningstar has insisted it does not practice BDS, and has pointed to an independent report it commissioned which claims there is no inherent anti-Israel bias in its ratings process. The company promised to implement some 40 recommendations springing from the report to ensure any bias is eliminated, but opponents say the changes, if implemented, would do little to root out the core bias they say is in place.

According to the source, Morningstar has been resisting substantive changes in its discussions with the working group, only moving off its position over the last few days. The source indicates there was some dissension within the working group itself over how far Morningstar would need to go to satisfy the group’s demands.

In terms of the changes now on the table, the source says that “the question everyone is asking is whether Morningstar will actually change the ratings of specific companies after these steps are announced. It’s one thing to say you are against BDS. It’s another thing to stop engaging in BDS. That will be the cloud continuing to hang over Morningstar until they show companies are no longer being sanctioned.”

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White & Case is advertised as sponsoring University of Chicago Law School’s “Apartheid: International Law in the Israel-Palestine Conflict,” where calls were made to prosecute Israel in international bodies.

By Mike Wagenheim, JNS

While under investigation in 20 states for anti-Israel bias, Chicago-based investment firm Morningstar repeatedly pointed to an independent report purportedly absolving it of such behavior.

But White & Case, the law firm that authored the report, was listed this week as a sponsor of a program at the University of Chicago’s Law School that featured a virulently anti-Israel activist and perpetuated the notion that Israel practices apartheid.

A flyer for the program held on Oct. 12, entitled “Apartheid: International Law in the Israel-Palestine Conflict,” revealed White & Case’s involvement.

The event was initiated by Omar Shakir, Israel and Palestine Director at Human Rights Watch (HRW), in order to present his organization’s 2021 report declaring Israel an apartheid state. HRW has long been accused, including by the organization’s founder, of placing a disproportionate focus on and harboring institutional animus towards Israel.

According to a source familiar with the event, which was open to members of the university community, attendees were presented with reasons why Israel should be charged by international bodies with the crime of apartheid. Israel’s Law of Return was equated with affirmative action for Jews and a lack of the same privilege for Palestinians was presented as akin to America’s treatment of white immigrants as opposed to black slaves.

The program was presented by the school’s International Law Society, Human Rights Law Society and Southwest Asian and North African Law Students Association.

In response to a query from JNS, a White & Case spokesperson initially claimed that “the advertisement is incorrect. White & Case did not sponsor this event in any way.”

When asked whether White & Case had any involvement with the groups hosting the event, the spokesperson changed course, conceding that White & Case indeed sponsored the program but was listed without explicit permission.

“Our firm does provide support to International Law Societies, not just at the University of Chicago Law School, but at many other law schools across the country. We are not involved in or consulted on any of the programming decisions these student organizations make,” the White & Case spokesperson wrote to JNS.

“Had we known in advance of this event, we would have insisted that our firm not be associated with it in any way. We have conveyed this position to the ILS.”

Morningstar and its subsidiary Sustainalytics were called before the Illinois Investment Policy Board last year for potential violations of Illinois laws prohibiting boycotts of Israel.

Sustainalytics, which produces environmental, social and governance (ESG) risk ratings for socially-conscious investors, has been charged by critics with utilizing and giving disproportionate weight to anti-Israel sources, including HRW, when formulating its ratings. This, they argue, artificially elevates the risk rating for any company doing business in or with Israel, including in Israeli-controlled disputed territory in Judea and Samaria.

Morningstar is now under investigation by attorneys general in at least 19 other states for its practices, including those viewed as promoting a boycott of Israel.

In response to the Illinois Investment Policy Board’s action, Morningstar highlighted a 117-page report compiled by White & Case. The report proposed some 40 recommendations to curb any potential anti-Israel bias at Sustainalytics, but found no evidence that Sustainalytics’ products “recommend or encourage divestment” from Israel.

The law firm’s investigation also found no “pervasive or systemic bias” in the company’s products, with the exception of Human Rights Radar, produced by an outside vendor. Morningstar subsequently stopped using the vendor in question.

Morningstar pledged to adopt all of White & Case’s recommendations in full. Based in large part on this, the Illinois Investment Policy Board voted not to divest from Morningstar, though the specifics of that vote remain in dispute.

As a whole, White & Case is recognized as having advised investors on a broad range of significant transactions regarding Israeli industries. Accordingly, its sponsorship of an anti-Israel event is likely to raise red flags among state investigators.

JNS has learned that Morningstar specifically pointed to the White & Case report in a recent response to the Arizona State Treasurer’s Office, which told Morningstar it was found to be in violation of the state’s anti-BDS law and needed to prove otherwise or be placed on the Office’s list of prohibited investments.

A representative of the State Treasurer’s Office told JNS a final determination on the matter would be made “very soon.”

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Lang did not indicate that her departure is related to the investigation or allegations of bias.

By Alana Goodman, Washington Free Beacon

A senior executive at the ratings giant Sustainalytics—who spent years working at an anti-Israel advocacy group—announced last week that she is stepping down amid scrutiny of the company’s reliance on sources that critics say lead to bias and discrimination against Israeli companies.

Heather Lang, a onetime official at the anti-Israel activist organization B’Tselem, announced last week her departure as a senior vice president at Sustainalytics, a subsidiary of the corporate-ratings giant Morningstar, after 18 years at the company.

“Tomorrow is my last day at Sustainalytics after an incredible 18-year journey!” wrote Lang in a social media post last week. “It’s been an absolute privilege to work with such wonderful colleagues and friends.”

The news comes as Sustainalytics—one of the major ratings agencies that score companies based on their environmental, social, and governance practices—has faced allegations that its scoring system is biased against Israel and that it downgrades companies that help the Jewish state’s national security operations.

Prior to joining Sustainalytics, Lang worked at B’Tselem, a self-described human rights group that asserts that “Israel’s regime of apartheid and occupation is inextricably bound up in human rights violations,” according to its website. NGO Monitor, a watchdog group that monitors Middle East organizations, describes B’Tselem as “part of a network of NGOs that promote artificial and manufactured definitions of apartheid to extend the ongoing campaigns that seek to delegitimize and demonize Israel.”

Morningstar enlisted law firm White & Case to conduct an internal investigation into potential anti-Israel bias at Sustainalytics. This came after the Illinois Investment Policy Board, a state commission, launched a probe into whether the company was in violation of Illinois laws against anti-Israel boycotts.

Lang’s presence at Sustainalytics raises questions about the neutrality of its executives, a week after the Missouri attorney general launched an investigation into allegations of anti-Israel bias at the ratings giant.

Lang did not indicate that her departure is related to the investigation or allegations of bias. But Israel advocates said the company should be cautious about anti-Israel activism among its leadership.

“If Morningstar is serious about rooting out anti-Israel bias in their ranks, it would behoove them to ensure no more of their officers have a history of demonizing the Jewish state,” a former Israeli government official told the Washington Free Beacon.

Sustainalytics referred a request for comment to Morningstar. Morningstar declined to comment on Lang’s departure, telling the Free Beacon that the company “does not support the anti-Israel BDS movement. Matters related to an individual’s employment are confidential.”

According to an online biography of Lang, posted by a conference at which she spoke, she previously worked as a “corporate social responsibility consultant and spent several years living in Israel, working for leading human rights watchdog organization B’Tselem.”

While at B’Tselem, Lang was the editor of the group’s 1999 Human Rights Report, which accused Israel of various humanitarian abuses, including blocking water from Palestinians and discriminatory deportations.

Lang’s prior work for B’Tselem was not mentioned in the White & Case probe.

According to the White & Case investigation, Sustainalytics has relied on research from Who Profits, a group that supports boycott campaigns against Israel.

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Ratings produced by firms like Morningstar serve as a primary guide for investors and can greatly impact a company’s appeal.

By Adam Kredo, Washington Free Beacon

A financial services giant builds its ratings around the premise that any entity operating in “occupied Palestinian territories” is connected to human rights violations—a standard that one foreign policy analyst says is a key pillar of the Boycott, Divestment, and Sanctions movement, which tries to gin up an economic boycott of the Jewish state.

The research arm of Morningstar Inc., a firm that advises investors and rates companies based in part on their social ethics, may designate a company as participating in human rights violations just for working in an area it calls the “occupied Palestinian territories,” according to Richard Goldberg, a former U.S. national security official and Middle East expert who published an independent analysis on the matter for the Foundation for Defense of Democracies think tank.

Sustainalytics, the research arm, in its guidance documents says its “position is that in occupied territories where human rights are being systematically violated, any business activity in that region is connected to the violations in some direct or indirect way,” according to a review of Morningstar’s methods conducted by the law firm White & Case. This standard is also applied to other areas immersed in conflict, such as Yemen, the Western Sahara, Tibet, and the South China Sea.

Goldberg, who independently analyzed the White & Case report, said the reliance on this standard for the “occupied Palestinian territories” results in companies being downgraded just for performing work in a disputed area of Israel. He says these standards ultimately promote divestment from Israel, as companies seek to distance themselves to avoid a negative rating from the company. Ratings produced by firms like Morningstar serve as a primary guide for investors and can greatly impact a company’s appeal.

Morningstar is already battling charges that Sustainalytics unfairly downgrades companies working with Israel’s security and anti-terrorism sectors. Critics like Goldberg say the ratings system unfairly targets Israel’s partners and ultimately bolsters the BDS movement, which wages economic warfare on the Jewish state and its allies.

White & Case’s review of the company’s practices found some instances of bias in certain products. It recommended multiple reforms that Morningstar says it is undertaking to make its ratings products fairer to Israel. This includes altering the language in some of its ratings products and canceling others.

Sustainalytics classifies the “occupied Palestinian territories” as the West Bank, East Jerusalem, the Gaza Strip, and Golan Heights—areas that remain disputed.

“We’re now getting to the deepest root of the BDS activity inside Morningstar,” Goldberg said. “Every downgrade of an Israeli-connected company starts with a BDS campaign assumption that Jews have no right to live in East Jerusalem, the West Bank, and the Golan Heights. If you’re a Jewish business operating near the holiest site for Jews in the world, you’re an assumed human rights violator according to Morningstar.”

“Just like the BDS campaign,” Goldberg said, “Morningstar’s premise is that companies that legitimize a Jewish presence in these areas must be investigated and harassed.”

A Morningstar spokesman would not answer specific questions about the ratings practices but told the Washington Free Beacon that the company “does not support the anti-Israel BDS movement.” The spokesman said the company is working with Jewish advocacy groups, including the Jewish Federations of North America, to address concerns of bias and implement the reforms included in the White & Case report.

Sustainalytics relies on research produced by nonprofit groups that critics view as anti-Israel. This includes Amnesty International and Human Rights Watch, which describe Israel as an occupying force and apartheid state. Sustainalytics also has a relationship with a group called WhoProfits, which the watchdog group NGO Monitor has flagged as “a leader” in the BDS movement.

“Sustainalytics has the system rigged against Israel-connected companies from beginning to end,” said Goldberg. “You start with false anti-Israel assumptions and double standards that trigger unfair investigations, validate BDS claims with pro-BDS sources of information, and the unsurprising output is an unfair negative rating of Israel-connected companies.”

Pro-Israel organizations like the Jewish Federations, an umbrella group representing pro-Israel activities across the United States, say Morningstar’s ratings are more biased than the company acknowledges.

The White & Case report “makes clear that built-in bias against Israel infects Sustainalytics’s methodology and sources, and thus, its other [ethical] ratings products,” the Jewish group wrote in a recent letter sent to Morningstar’s top executives. “Morningstar should take the opportunity to cleanse its products of all anti-Israel bias and set an example of fairness and reliability for all companies providing [ethical] ratings, which represent one-third of dollars managed globally.”

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Morningstar is already fighting charges that its research arm, Sustainalytics, downgrades companies that help Israel combat terrorism, thereby bolstering BDS.

By Adam Kredo, Washington Free Beacon

The financial services firm facing accusations that it promotes Israel boycotts relies on research produced by “a leader” in the antisemitic Boycott, Divestment, and Sanctions movement (BDS) and other anti-Israel sources, according to an analyst tracking the situation.

The research arm of Morningstar Inc., a firm that advises investors, relies on research produced by a pro-BDS organization called Who Profits, which is known to push Israel boycotts, according to Richard Goldberg, a former U.S. national security official and Middle East expert who recently published an independent analysis on the matter for the Foundation for Defense of Democracies think tank.

Morningstar is already fighting charges that its research arm, Sustainalytics, downgrades companies that help Israel combat terrorism, thereby bolstering the BDS movement’s drive to economically damage the Jewish state.

Sustainalytics employees who were interviewed as part of an investigation into anti-Israel bias at the firm indicated they have a close relationship with and rely on research produced by Who Profits, which has been cited by a watchdog organization as one of the leading pro-BDS nonprofit groups.

The findings related to Who Profits raise new questions about how deeply Sustainalytics relies on organizations with direct ties to the BDS movement.

“Morningstar’s ratings system uniquely relies on a group that’s at the forefront of the BDS movement to blacklist Israel-connected companies,” said Goldberg.

Who Profits “maintains a public database of businesses that are often targeted in international BDS campaigns,” according to NGO Monitor, a watchdog group that monitors pro-BDS outfits. The reliance on Who Profits and other anti-Israel groups, such as Amnesty International and Human Rights Watch, is raising questions about Morningstar’s commitment to rooting out anti-Israel bias in its ratings products, Goldberg said.

Who Profits “is a leader in BDS efforts against Israeli and foreign companies,” according to NGO Monitor, and was founded “in response to the Palestinian call for boycott[s]” against Israel.

The organization is dedicated to “exposing the commercial involvement of Israeli and international corporations in the ongoing Israeli occupation of Palestinian and Syrian lands,” according to information published on its own website.

BDS manipulation increases

Goldberg analyzed evidence presented in a 134-page review of Morningstar’s methods conducted by the law firm White & Case that cleared Morningstar of any wrongdoing.

Sustainalytics employees interviewed as part of the White & Case report indicated that Who Profits “was used primarily for background information, and was consistently balanced against other sources.”

Others said the relationship is deeper, with Sustainalytics “research analysts often rely[ing] upon Who Profits for what they view as unique, boots-on-the-ground research regarding corporate involvement in the region, in part because Who Profits is one of the few organizations that actually operates on the ground in the Israeli/Palestinian conflict areas.”

The White & Case report also found that “communications between Sustainalytics employees and representatives of Who Profits suggest that the relationship between the entities is close, relative to Sustainalytics’ relationships with other organizations.”

Sustainalytics ratings products also rely on information produced by Amnesty International and Human Rights Watch, which have faced accusations of anti-Israel bias and of unfairly labeling Israel as an apartheid state.

The Washington Free Beacon previously reported on concerns that Sustainalytics may place a company on its investment “watchlist” for the “supply of arms” to Israel or other nations involved in conflicts. By downgrading companies that supply the Israel Defense Forces, for instance, Sustainalytics could be relying on metrics that negatively impact Israel more than others.

Gerald Steinberg, NGO Monitor’s founder, said the BDS movement is increasingly trying to manipulate firms that conduct corporate responsibility ratings, known in the industry as CSR ratings.

“As the NGOs leading the BDS movement increasingly try to manipulate CSR firms into advancing their agenda, these firms must be vigilant in vetting these sources,” Steinberg said. “Corporate due diligence is vital to ensure that ratings under the facade of human rights are not based on false claims by ideological activists and organizations.”

‘We have a mountain of evidence’

A Morningstar spokesman would not address questions related to Sustainalytics’s reliance on Who Profits, but said the company does not in any way endorse or support the BDS movement. Morningstar also said in recent months that it is discontinuing certain services that were found to unfairly target Israel and adjusting others to remove instances of anti-Israel bias.

As Morningstar attempts to distance itself from the BDS movement, a group of leading Jewish organizations raised concerns the reforms do not go far enough.

The Jewish Federations of North America, an umbrella organization that represents top Jewish groups across the country, says Sustainalytics’s Environmental, Social, and Governance (ESG) ratings unfairly target Israel. ESG ratings examine a company based on its social values and tend to unfairly target Israel as a result of its conflict with the Palestinians.

The White & Case report “makes clear that built-in bias against Israel infects Sustainalytics’ methodology and sources, and thus, its other ESG ratings products,” the Jewish group wrote in a letter sent to Morningstar’s top executives. “This bias is not only unfair and harmful to Israeli companies and those doing business in and with Israel, but such bias also threatens to tarnish the ESG ratings framework itself.”

“Morningstar should take the opportunity to cleanse its products of all anti-Israel bias and set an example of fairness and reliability for all companies providing ESG ratings, which represent one-third of dollars managed globally,” the organization said, echoing concerns from others in the pro-Israel advocacy world.

FDD’s Goldberg maintains that the biased metrics employed by Sustainalytics could amount to support for the BDS movement and trigger state and federal anti-BDS laws.

“We now have a mountain of evidence that Morningstar’s ESG subsidiary is engaged in a boycott of Israel through its sources and methods,” Goldberg said. “It’s time for states and Congress to intervene.”

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The investment firm has not been cleared of wrongdoing and will continue to be monitored. 

By World Israel News Staff

Multibillion-dollar investment firm Morningstar, which came under scrutiny earlier this month for providing investors with an analytics tool that was found to be biased against Israel, has committed to resolving “anti-Israel attitudes” within its company in a bid to avoid being blacklisted, the Jewish Insider reported on Wednesday.

The Committee on Israel Boycott Restrictions, a subdivision of the Illinois Investment Policy Board (IIPB), unanimously voted in a meeting last week not to place Morningstar on the state’s “prohibited investment list,” on the condition that the Chicago-based firm commits to implementing a series of measures combating its anti-Israel bias.

The recommendations were outlined in two reports: the first was published by the Foundation for Defense of Democracies (FDD) and the second was the result of an independent inquiry by the White & Case LLP law firm. They include a focus on transparency, internal consistency, addressing conflicts of interest and an end to Morningstar’s reliance on reporting from “anti-Israel sources.”

The FDD also requested that the firm “address [the] unfair policy of punishing businesses just for operating in Israel.”

Morningstar’s decision earlier this month to drop the human rights radar tool, which was employed by its subsidiary Sustainalytics, came after it received the findings from the inquiry.

The company concluded that the tool marketed to investors consciously steered them away from Israel by misguiding them on how the Jewish state deals with a range of environmental, social and governance (ESG) issues, including climate change, treatment of employees and impact on neighboring communities.

According to the Jewish Insider, Morningstar characterization of the meeting contradicted accounts provided by other attendees. Morningstar failed to mention the condition of implementing the FDD’s proposals, the report said, prompting one attendee to comment that the investment firm was “playing fast and loose with the truth to avoid a shareholder backlash.”

Andy Lappin, who chairs the Committee on Israel Boycott Restrictions, described Morningstar’s characterization of the meeting as “disturbing”.

A vote to clear Morningstar of all wrongdoing and end monitoring of the company failed to garner enough support to pass, Lappin told the news site, and added that the firm was due to face the board again in September.

“They’re still under the microscope and the investigation from our perspective is on a lower flame, but still ongoing,” said Lappin.

In 2015, Illinois became the first state to push a law requiring state pension funds to divest from companies that support the Boycott Divestment Sanctions (BDS) movement against Israel.

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The investment firm cut the biased Human Rights Radar tool amid pressure from Jewish groups. 

By World Israel News Staff

Multibillion-dollar investment firm Morningstar has severed ties with a human rights research product after it found that it was biased against Israel.

The Chicago-based company concluded that the Human Rights Radar marketed to investors consciously steered them away from Israel by misguiding them on how the Jewish state deals with a range of environmental, social and governance (ESG) issues, including climate change, treatment of employees and impact on neighboring communities.

Morningstar’s decision to drop the HRR tool, which was employed by its subsidiary Sustainalytics, came after it received the findings an independent inquiry by the law firm White & Case.

“The decision was made because Human Rights Radar, which Morningstar picked up in its acquisition of Sustainalytics, exhibited bias in its outcomes by overrepresenting firms linked to the Israeli-Palestinian conflict,” a letter from Mornigstar’s Executive Chairman Joe Mansueto and Chief Executive Officer Kunal Kapoor read.

While White & Case concluded that the HRR “sometimes used inflammatory language and failed to provide sourcing attribution clearly and consistently,” it found.that there was no evidence of pervasive or systemic bias against Israel across Sustainalytics products.

JLens, which represents a network of Jewish investors, put Morningstar on its “do not invest list” over alleged support of the anti-Israel boycott, divestment and sanction (BDS) campaign.

In its letter, Morningstar conceded that it had been “overly dismissive” of concerns raised by JLens and other groups.

“We stated then — and reaffirm today — that neither Morningstar nor Sustainalytics supports the anti-Israel BDS campaign. However, in retrospect, our initial review was overly dismissive of the serious bias concerns raised by the organization JLens, the Illinois Investment Policy Board (IIPB) and other entities,” it read.

Rachel Lerman, vice-chair of the Louis D. Brandeis Center for Human Rights Under Law, an advocacy group that fights antisemitism on college campuses, said that while “Morningstar is to be commended for halting its use of HRR, the investigators’ findings raise bright red flags, not only about HRR but about […] ESG in general.”

“Using the opinions of [BDS] groups to assess a company’s performance, legal status, or behavior raises series concerns about objectivity. ESG research companies should base risk assessments on verifiable facts and legal expertise, not biased reporting,” Lerman said in article published in The Jerusalem Post on Tuesday.

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