For years, Concerned Women for America Legislative Action Committee (CWALAC) has supported Israel, as we believe in the Abrahamic covenant between God and the Jewish people and the importance of standing with them. CWALAC is also standing against environmental, social, and corporate governance (ESG), as it is a vehicle for progressive ideals to be pushed onto the American people. This month, the two worlds have collided.
Morningstar is a highly reputable mutual fund and exchange-traded fund rating agency that serves over 170,000 advisors. Due to the thousands of users that trust and depend on the investment data Morningstar provides, it has strong influence with individuals’ investment decisions. In April 2020, Morningstar bought Sustainalytics, a company that rates the sustainability of companies based on their environmental, social, and corporate governance (ESG) performance. Thus, Morningstar fully adopted ESG factors into its consideration when creating their final investment ratings.
With Morningstar’s acquisition of Sustainalytics, Morningstar came under fire for participating in the Boycott, Divest, and Sanction (BDS) antisemitic campaign. Although Morningstar has publicly denounced and says they are not participating in BDS efforts, the investment ratings they have provided might prove differently.
Morningstar gave Richard Goldberg, Foundation for Defense of Democracies’ Senior Advisor, access to the company’s Global Access platform to evaluate its participation in the BDS campaign. Goldberg found that companies’ ratings automatically downgraded due to their presence in Israel or Israel-controlled territories. In other words, Sustainalytics views Israel as problematic, and any company that works alongside it should be canceled. This rationale encourages investors to steer clear from investment of any company that works alongside Israel.
In October 2022, Morningstar reached an agreement with American Jewish and pro-Israel coalition groups to divest from any anti-Israel and BDS biases that existed in their evaluation processes for investment ratings, including leaving behind terminology like, “occupation.” However, as time has progressed, Morningstar has seemingly yet to make any large meaningful change and coalitions groups have been quick to point this out. Morningstar’s slow walk to addressing this precarious situation has provoked states to start their own investigations into the company.
More than 35 states have varying anti-BDS laws in statute. In essence, Anti-BDS laws discourage boycotts of Israel largely addressing public investment funds and government contractors. They can provide protections against ESG mandates whenever ESG—particularly the “S” in ESG—is interpreted by investment companies to steer clients towards anti-Israel behavior.
This should be on the radar for any state with an anti-BDS law or that works alongside Morningstar through a state contract. Indeed, Morningstar is under investigation in around 20 states for its alleged practices. Florida has become the most recent state to join the action due to its current working relationship with Morningstar. On May 24, 2023, Florida Gov. Ron DeSantis signed into law an amended anti-BDS bill. This law bans Florida from conducting business with any company, “taking adverse action, including changes to published commercial financial ratings, risk ratings, and controversy ratings based on non-[financial] factors, to inflict economic harm on Israel or persons or entities doing business in Israel or in Israeli controlled territories.” The law differs from other BDS enacted legislation, as it addresses the rising concerns with investment and research companies providing investment rankings that utilize ESG factors to provide rankings, like Morningstar.
Jimmy Patronis, Florida’s Chief Financial Officer, has assigned Florida’s State Board of Administration to ask Morningstar why they appear to be blacklisting companies that associate with Israel. Florida is no stranger to having to cut ties with companies over this issue. In 2021, Ben & Jerry’s started participating in a BDS campaign by stopping all sales in Judea and Samaria. Due to Ben & Jerry’s decision, Florida stopped all investments into their parent company, Unilever. Only time will tell if Florida must do the same to Morningstar.
CWALAC will continue to stand with the country of Israel by opposing all ESG efforts that aim to harm Israel through partnership with the BDS campaign.