Arizona treasurer puts investment firm on notice of anti-Israel stance | Arizona

(The Center Square) – Arizona Treasurer Kimberly Yee told Morningstar Inc. told that it has 30 days to prove that it is not violating Arizona law regarding its stance on Israel.

If Morningstar cannot prove that it is actively boycotting the State of Israel, it will be placed on the Arizona Treasury’s prohibited investment list.

State law prohibits public entities or public funds from entering into contracts or investing capital with companies or individuals involved in boycotts.

The Arizona treasurer’s office said Morningstar’s environmental, social, and corporate governance (ESG)-focused subsidiary, Sustainalytics, “uses antisemitic and anti-Israel sources to negatively impact the scores of companies doing business in Israel,” according to a press release. Office of the State Treasurer.

Treasurer Kimberly Yee condemned Morningstar in a press release issued by her office.

“As treasurer, it is my duty to ensure that Arizona does not do business with companies that seek to undermine Israel’s economy and violate Arizona’s anti-BDS laws,” Yee said in a news release. “Morningstar’s ESG rating subsidiary, Sustainalytics, appears to have violated Arizona law by negatively influencing ratings of companies doing business in Israel.”

In a letter to CEO Kunal Kapoor, Yee said Morningstar must provide a “written report” proving it will not engage in any future anti-Israel boycotts and that its ESG rating does not violate state laws. .

“As Arizona’s chief banking and investment officer, I will stand with Israel, and I will not allow taxpayer dollars to fall victim to the political gamesmanship fueled by ESG ratings. ESG ratings are a political scorecard, not a financial scorecard,” Yee said in a press release. “I will not allow companies to promote policies that are anti-Semitic and discriminatory against Israel, a longtime friend and ally of America and an important trading partner with Arizona.”

The company has previously denied any connection to the boycott and divestment (BDS) movement.

morning star A public letter has been issued On June 2, 2022, it hired an outside company to investigate Sustainalytics’ possible connections to the BDS movement and denied that such a connection existed.

“White & Case completed that investigation and documented its findings and recommendations in a 117-page report that we Publication in its entirety. It identifies limited areas of bias that are outside the scope of our work but, nevertheless, do not live up to Morningstar’s standards,” Morningstar wrote.

Morningstar said White and Case determined that:

  • There was no evidence that Sustainalytics products recommended or encouraged divestment from Israel.
  • There was no evidence of widespread or systemic bias against Israel in Sustainalytics products, including the Sustainalytics ESG risk rating.
  • A Sustainalytics product, Human Rights Radar, exhibited a bias in its results by overrepresenting firms linked to the Israeli-Palestinian conflict. Human Rights Radar is a silent product that aims to provide information on issuers involved in areas of the world where serious human rights violations allegedly occur. It also used inflammatory language at times and failed to provide clear and consistent sourcing attribution.
  • Although not comprehensive, the research found scattered examples of processes and procedures that could be improved to address and reduce the potential for implicit or confirmation bias.

Morningstar said it took some actions in response to the report.

“Based on these findings, White & Case made various recommendations in the report, which we have decided to adopt in full,” the company wrote. “Morningstar has turned off the human rights radar, and additional steps we are taking include, but are not limited to: (1) embracing greater transparency in the form of Sustainalytics research sources and evaluation methodology, (2) monitoring our internal processes and our methodology to ensure greater sustainability. compliance, (3) adopting a style guide to ensure all research products are free of biased terminology, and (4) discontinuing further bespoke research on behalf of clients.

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