A South Carolina state treasurer on Wednesday threatened to cut ties with multibillion-dollar investment firm Morningstar Inc over alleged anti-Israel bias as part of ongoing attacks against the company by Republican officials.

Republican state leaders have accused Morningstar of supporting an anti-Israel boycott, divestment, and sanctions (BDS) campaign because of the conduct of one of its subsidiaries, Sustainalytics, and have imposed legislation in some states. repeatedly accused of violating

In response, the company investigated Sustainalytics’ anti-Israel bias, took steps to address the issue, and repeatedly refused to endorse BDS.

The Republican campaign also ties in with the party’s opposition to environmental, social, and governance (ESG)-based investments. This is an industry trend that Republicans believe is sacrificing business interests for left-wing politics. Sustainalytics provides his ESG guidance.

In a letter to Morningstar CEO Kunal Kapoor, South Carolina state treasurer Curtis M. Loftis Jr. said the company may have violated state laws banning support for BDS. rice field.

“We need evidence that Morningstar meets the legal requirements,” the letter said. “If there is no evidence of compliance, [State Treasurer’s Office] Choose to terminate the service. “

South Carolina uses Morningstar guidance for the state’s 529 education savings plan, which has nearly $6 billion in assets, Loftis said. The state also uses Morningstar Advisor Workstation, a financial research and planning tool.

On Thursday, Loftis said it would attend its annual ratings conference call with Morningstar to show its “solidarity with Israel.”

“Our state does not support companies that are involved in the boycott, sale or sanctions of Israel,” Loftis said.

“Therefore, we will continue to trade with Morningstar until we can confirm that Morningstar’s decisions are based on sound financial data and investment policies and are not on radical agendas that have nothing to do with the fiduciary duty of our treasurers. I don’t mean to,” he said.

Real-life example: BDS supporters protest the Israeli parade in New York City on May 22, 2022 (Luke Tress/Times of Israel)

Loftis and South Carolina’s attorney general signed a letter to Morningstar with other Republican officials demanding action against the company’s anti-Israel bias.

The Republican onslaught on Morningstar demonstrates the growing role of corporate investment in the Israeli-Palestinian conflict in the United States, the pitfalls of progressive corporate activity, and the overlapping of US political interests.

The battle began in 2020 when Morningstar announced plans to acquire Dutch company Sustainalytics, one of the leading companies to rate companies based on social responsibility. Some investors are increasingly turning to such ratings for ESG-based investments.

JLens, an organization that advocates for Israel in the investment world, has expressed concern over Sustainalytics’ alleged anti-Israel bias, claiming to support the BDS movement. JLens said Sustainalytics’ product, Human Rights Radar, is alienating investors from Israel by inappropriately inflating assessments of the country’s risks and controversies. JLens said Human Rights’ biased assessment on his radar amounted to an anti-Semitic boycott of Israel.

Morningstar dismissed the accusations, but after a lengthy dispute with pro-Israel supporters, it hired an outside law firm to conduct an investigation into the matter. It said it was withdrawing its Human Rights Radar after the review found it “showed bias” against Israel.

Morningstar said the White & Case law firm report found no evidence that Sustainalytics’ products recommended or encouraged divestment from Israel, and that Sustainalytics’ products were biased against Israel. It said it found no evidence of prevalent or systemic bias. However, Human Rights found that his radar product “biased its results by overrepresenting companies involved in the Israeli-Palestinian conflict.”

Pro-Israeli demonstrators protest against Ben & Jerry’s and anti-Semitism over the West Bank boycott in Manhattan, New York City, August 12, 2021. (Luke Tress/Flash90)

The report also found that Human Rights Radar “occasionally used inflammatory language and failed to provide clear and consistent source attribution.” The product broadly links all business conducted in Israel’s “occupied territories” to human rights abuses, it said, considering the occupied Golan Heights, Gaza and East Jerusalem. Sustainalytics was also funded by groups highly critical of Israel.

Morningstar also admitted that it had “overly downplayed” the concerns.

As a result, Morningstar said it would retire the Human Rights Radar and work to make Sustainalytics more transparent.

Morningstar began the review weeks before the Illinois Investment Policy Board blacklisted the company. This will ban the state pension plan from investing in Morningstar.

Morningstar earlier this month sent a letter to the Times of Israel citing the company’s favorable assessment of Israel and Israeli companies, denying its endorsement of BDS.

Despite the changes, Jewish groups and Republican state officials continue to press Morningstar on the issue.

Attorneys general from 17 U.S. states, including Texas, Florida, Ohio, Arizona and Utah, sent letters to the company last month expressing “serious concerns” and demanding a written response. Also last month, financial officials from 17 states emailed Morningstar, accusing Sustainalytics of giving ratings “deeply steeped in anti-Israel bias,” calling the issue “deliberately He accused the company of misleading the public.

19 state attorneys general also announced they would investigate Morningstar and Sustainalytics for “suspected consumer fraud and unfair trade practices” following allegations of anti-Israel bias.

Example: May 15, 2021, anti-Israel BDS activists in New York City.. (Luke Tress/Times of Israel)

The initiative is part of a larger Republican campaign against ESG-based investing. The letter to Kapoor was led by the State Treasurer’s Foundation, a Republican group that supports free markets and opposes ESG investing, including condemning the withdrawal of funds from fossil fuel companies.

Even after Morningstar published its review, dozens of Jewish and pro-Israeli groups signed a letter in July demanding further action. He said the prejudices ingrained in

Morningstar is a leading financial services company based in Chicago. He offers investment research and management products, employs over 9,000 people, and has a market cap of over $9.5 billion on the Nasdaq Stock Exchange.

Corporate investment is increasingly weaponized in the Israeli-Palestinian proxy war in the United States. After Unilever, the parent company of Ben & Jerry’s, tried to boycott the sale of Israeli ice cream in its West Bank settlements last year, the state withdrew hundreds of millions of dollars in investments.

Unilever reached a deal with Ben & Jerry’s Israel earlier this year amid mounting financial pressure, but Ben & Jerry’s sued Unilever after the deal was announced.

Both Unilever and Ben & Jerry’s have embraced a socially responsible image, and the lawsuit between them is the unprecedented legal battle between a major US company and its parent company. The complex case is a thorn in the side of Unilever, highlighting both the difficulty of enacting an economic boycott intended to isolate Israel and the risks of corporate activity for large companies.