(JNS) The state-owned Bank of China operates a branch in the Xinjiang Uygur Autonomous Region, where Washington has assessed that China is committing genocide against the ethnic Uyghur population. Still, the major U.S. investment advisory firm MSCI gives the bank a “green” score in its social and human-rights categories, meaning it “is not involved in any major controversies,” though it could be involved “in minor or moderate controversies.”
The only controversy for which MSCI cites the Chinese bank is a “yellow” score—meaning that it “is involved in severe-to-moderate level controversies”—for bribery and fraud, per public data accessible via a search tool on the MSCI website.
Four Israeli banks—Bank Leumi, Bank Hapoalim, Israel Discount Bank and Bank Mizrahi-Tefahot—get “yellow” MSCI ratings, or “severe-to-moderate” levels of concern, in the categories of social and human rights concerns, per public data on the firm’s site. A source with knowledge of the more comprehensive information that MSCI provides to clients told JNS that the advisory firm ranks all four Israeli banks with “severe” controversy scores for doing business in Judea and Samaria, citing anti-Israel sources to bolster its claims.
Headquartered in New York, MSCI is already under a multi-state investigation for potential BDS—boycotting the State of Israel—practices for assigning the controversial ratings to at least nine companies conducting business in Judea and Samaria, including the Israeli defense contracting company Elbit. MSCI flagged the latter for building security and surveillance barriers designed to protect Israelis from terrorists.
In March, Ashley Moody, the Florida attorney general, announced that she was leading a coalition of 18 state attorneys general in investigating whether or not discrimination against Israel was at play.
“The allegations against MSCI are deeply disturbing, and we have called for a quick response from the company’s leadership directly addressing our concerns,” she said at the time. (JNS sought further comment from Moody.)
Experts told JNS that MSCI’s ratings of Israeli companies amount to “backdoor BDS.”
‘Severe controversy’ score
Socially-conscious investors often turn to firms like MSCI, which rate environmental, social and governance (ESG) factors, for guidance on investment options. These investors could be dissuaded from investing in companies accused of improper corporate practices, including connections to human-rights violations.
MSCI assigns the “severe controversy” score to the four banks in the information that is available to clients who purchase MSCI’s data, the JNS source said. The source told JNS that Human Rights Watch, the United Nations Human Rights Council and Who Profits—all of which have supported boycotts of the Jewish state—are cited in the MSCI reports as sources of information that inform the controversy scores.
The alleged “controversy” that MSCI assigns the four banks centers on their providing financing and services to residents and businesses in Judea and Samaria, according to the source. The scores cite no other controversy that relates to alleged human-rights violations or other potentially damaging business practices in the “social” category, the source said. (JNS sought comment from the four Israeli banks.)
MSCI appeared to copy and paste the same report for all four banks, only changing the name of the alleged offender, per the source.
Its approach to the four Israeli banks appears to mirror the practices of Morningstar and its subsidiary, Sustainalytics, which were accused by a broad swath of U.S. Jewish and pro-Israel groups of relying heavily on anti-Israel sources to create “controversies” and penalize companies for doing business in what Morningstar called “occupied territory.”
“This is BDS. No doubt about it,” Richard Goldberg, senior adviser at the Foundation for Defense of Democracies, told JNS about MSCI’s practices. “No different from what Morningstar was doing with its ESG ratings.”
Goldberg, who was the architect of the first anti-BDS state law in Illinois and was part of a task force that reviewed Morningstar’s ESG ratings, told JNS that when it comes to MSCI’s reported practice, “state attorneys general should launch the same investigations, and both governors and state financial officers should invoke their anti-BDS laws.”
Elana Broitman, who is leading efforts by the Jewish Federations of North America to combat anti-Israel bias, told JNS: “Our work with Morningstar has been a model of how to root out systemic anti-Israel bias.”
After multiple states cut financial ties with Morningstar and others investigated it for potential BDS practices, Morningstar reached an agreement with pro-Israel groups in 2022 to reform its sourcing, ratings and other practices for companies that do business in Judea and Samaria and to commission an independent assessment on the subject.
“Morningstar still has to finish the job, but others in the industry that want to ensure they have not allowed anti-Israel bias to infect their ESG ratings, such as MSCI, can see exactly what they need to do,” Broitman said.
‘Vetting process’
JNS sought comment from MSCI and asked to discuss the source’s charges about the advisory firm’s controversy ratings of the four Israeli banks.
In past statements to JNS, MSCI has repeatedly denied endorsing or supporting boycotts of Israel in the use of its products and services.
“MSCI ESG ratings and controversies are based on a published methodology that is free from political influence or other biases,” Konstantinos Makrygiannis, an MSCI spokesman for Europe, the Middle East and Africa, told JNS in a statement.
Makrygiannis cited a “data vetting process” that relies on “credibility assessments by external sources to assess the integrity of the data sources.”
He added that the company “relies on public data from a variety of sources, including specialized academic, government and NGO datasets; public company disclosures (e.g., sustainability reports, proxy reports, regulatory filings, etc.); and global and local media and news sources.”
