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The Israeli airstrike on a school in Gaza City this weekend, which killed more than 80 people, was the latest tragic incident in an all-out conflict that has been ongoing for more than 10 months and has sparked widespread reactions from institutional investors.
The debate over whether and when investors should ethically divest has been going on for years, with many arguing that selling shares does no harm to the companies involved and simply weakens the conscience of the shareholder base.
But a long-running divestment campaign targeting Israel has received new momentum from the war in Gaza and student protests calling for multi-billion-dollar university endowments to divest from Israeli assets, while new regulatory requirements in Europe that require investors to pay more attention to human rights risks are additional factors for fund managers to consider.
Divestment
UK pension fund sale of Israeli assets highlights pressure on investors
Most of the protests that swept university campuses in the United States and Europe over the Gaza war subsided while students were on summer vacation.
But the war that began with Hamas’ brutal attacks on Israeli civilians last October has raged — Israel’s ground offensive in Gaza has now killed more than 39,000 people, according to Palestinian health officials — and the centerpiece of the students’ agenda, divestment from Israel and Israel-related assets, is gaining some support.
The Financial Times reported on Thursday that the UK Universities Pension Fund has sold 80 million pounds ($102 million) of Israeli assets, including government debt. USS is the UK’s largest private pension fund manager, with 500,000 members, mostly higher education workers, and assets of 79 billion pounds. The Union of Universities and Colleges, which represents USS members, has been pressuring the fund to sell assets linked to Israel’s Gaza operations.
USS later issued a statement saying it was “false to state or suggest that our decision was made for other than financial reasons.”But the move was hailed as a victory for the pro-Palestinian Boycott, Divestment and Sanctions movement, which has come under intense scrutiny for nearly two decades as it lobbied investors, companies and government officials to cut ties with Israel. Modeled on the 1980s anti-apartheid movement in South Africa, the BDS movement aims to impose costs on Israel and pressure its government to improve treatment of Palestinians in the West Bank and Gaza Strip.
But publicly reported sales of Israeli or Israel-related assets are the exception, and most investors are cautious on the issue. Last month, the nonprofit Business and Human Rights Resource Center contacted 21 investors to ask for their reaction to UN experts calling on arms companies to immediately halt arms sales to Israel.
These institutions had been named by UN experts as major investors in arms companies. Of these, only three — Amundi Asset Management, Norges Bank Investment Management (NBIM), and Germany’s Union Investment — responded to the investigation. This is a much lower percentage than the BHRRC typically gets in such investigations, executive director Phil Bloomer told me.
Bloomer said the BHRRC does not pressure investors to divest from companies that do business with Israel or the Israeli government, but instead encourages them to conduct “enhanced due diligence” on potential human rights risks, which he argued is required by the UN Guiding Principles on Business and Human Rights whenever investors or companies face potential links to conflict.
Still, as the war in Gaza continues, the divestment movement is gaining momentum. The Danish Pension Fund, which has more than 800,000 members and manages 42 billion euros ($46 billion) in assets, told me in a statement last week that it had sold its investments in four Israeli banks because “it cannot be ruled out that they may be involved in the illegal practice of financing settlements in the occupied Palestinian territory.” The International Court of Justice issued an advisory opinion last month finding that Israel’s occupation of the occupied Palestinian territory and settlements is illegal.
Ireland’s finance minister announced in April that its 15 billion euro sovereign wealth fund would divest from six Israeli companies, including major banks, because of their activities in the occupied Palestinian territories, while the country’s most prestigious university, Trinity College Dublin, made a similar pledge to student protesters.
Other investors are critically reviewing their exposure to companies in or with Israel. In June, Norway’s largest pension fund, KLP, said it was selling $69 million in shares in Caterpillar over concerns that the U.S. company “may be complicit in human rights abuses and violations of international law in the West Bank and Gaza.” KLP said the bulldozer manufacturer had not reassured it about the possibility that its products could be used in military operations in Gaza or to demolish Palestinian homes for settlements in the West Bank.
Kiran Aziz, head of responsible investment at KLP, said the fund manager is required by new EU and Norwegian laws to conduct thorough due diligence on the human rights risks surrounding its investments. She added that Caterpillar had not responded in detail to KLP’s questions on the matter. “They can’t tell us anything concrete other than mention their policy, which is of no value.”
But while some investors are moving to reduce their investments in Israel, others are doubling down. Some Palm Beach, Florida, residents are suing the county auditor over the decision to invest $660 million of local taxpayer money in Israel bonds since the conflict began in October. Municipalities in other states, including Indiana, New York and Ohio, have also invested heavily in Israel bonds over the same period. Meanwhile, American universities, some of which have been accused of being soft on anti-Semitism, are overwhelmingly refusing to heed student calls for divestment.
For investors like KLP, divestment is a last resort if negotiations with companies prove fruitless, Aziz said. “I’m not sure if it will help the people of Gaza,” she added. “But the signaling effect could have an impact.”
This article has been amended to reflect a statement emphasizing that USS’ investment decision was based purely on financial considerations.
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