(December 20, 2021 / JNS) The state of Illinois is expected to divest its pension funds of investments in Unilever this coming Wednesday, JNS has learned.
This looming decision in Illinois marks the latest domino to fall as the global conglomerate continues to come under fire after ice-cream maker Ben & Jerry’s, a wholly-owned subsidiary of Unilever, publicly announced in July that it intended to cease distributing its products in areas it deemed “occupied Palestinian territory.”
The Illinois Investment Policy Board (IIPB) is scheduled to vote on the matter at its regular meeting on Wednesday morning in Chicago. Multiple sources told JNS that a majority vote to divest is assured, barring a change in Unilever’s posture. The board will also consider taking action in another, perhaps more consequential matter related to the Israel boycott movement, involving the financial services firm Morningstar and its subsidiary, Sustainalytics. JNS has also learned that American Muslims for Palestine organization is attempting to organize a large-scale protest and potential disruption of the public meeting.
Currently, Illinois prohibits investment in certain companies that do business with Iran and Sudan, as well as companies that boycott Israel. In 2015, Illinois became the first state in America to pass such a law, in order to counter the anti-Israel BDS movement. According to Illinois law, to boycott Israel means “engaging in actions that are politically motivated and are intended to penalize, inflict economic harm on, or otherwise limit commercial relations with the State of Israel or companies based in the State of Israel or in territories controlled by the State of Israel.”
The IIPB was created to ensure that the state is not investing public money in entities contrary to that law.
“The concept was that Illinois had already passed a few divestment-related pieces of legislation surrounding the Save Darfur campaign and Iran. Illinois has multiple pension funds: one for teachers one for universities, the general assembly and others. Each fund was contracting out research on divestment, and the thought was that creating one board to oversee would lower costs of compliance,” Rich Goldberg, former chief of staff for then-Illinois Governor Bruce Rauner, told JNS. Goldberg spearheaded the legislation currently under consideration by the IIPB, and later led Iran sanctions legislation and negotiation efforts as a senior foreign policy adviser to former U.S. Sen. Mark Kirk (R-Ill.).
The IIPB is a seven-member board comprised of a mix of non-paid appointees of the governor and representatives of key pension systems. The chairman of the board’s Committee on Israel Boycott Restrictions, Andrew Lappin, said Unilever was warned over the summer to reverse Ben & Jerry’s decision or face divestment. The 90-day window given for Unilever to comply has passed.
In its buyout agreement with Unilever, Ben & Jerry’s retained a measure of independence in controlling its own social justice policies and licensing. Unilever, which does substantial business in Israel through a range of products, has pointed to that arrangement as the reason why it says it is helpless to counter Ben & Jerry’s stance. Unilever’s chief executive officer has said multiple times that the company remains “fully committed” to doing business with Israel, and has tried to put distance between Unilever and Ben & Jerry’s announcement. But Unilever CEO Alan Jope has never intimated that he would push Ben & Jerry’s to reconsider its plans.
“The board has given Unilever multiple opportunities to formulate its position on the matter, and explain why this situation may not fall under the state’s boycott law. As Unilever has done with similar inquiries from other states, it sent a boilerplate corporate letter, and has then refused to further clarify its position. Its response was flippant,” said Goldberg.
More than 30 states have some form of Israel-related anti-boycott laws, executive orders or other investment policies on the books, and many apply the standard to any area under Israeli control, including disputed territory in Judea and Samaria and any part of Jerusalem. In September, Arizona sold off $93 million in Unilever bonds and announced plans to sell the remaining $50 million it has invested in Unilever. Days later, Texas started a process that will likely end with the pulling of $100 million in state pension funds invested in Unilever. The 90-day window provided by Texas to Unilever to reverse course will close later this month. In October, Florida, which has about $139 million invested in Unilever, announced it would stop buying shares in the company. Earlier this month, New Jersey began pulling $182 million in Unilever stocks and bonds. Goldberg claims Illinois’ investments in Unilever are comparable to New Jersey’s, though exact figures were still being researched by individual Illinois pension funds as of last month. New York State’s comptroller said his late-October decision to divest the state’s pension fund of around $111 million of Unilever holdings was made in order to protect Israel’s economy – and, therefore, the state’s massive holdings in Israeli companies – from the BDS movement. Last month, New York Governor Kathleen Hochul opened a 90-day window for Unilever to reverse its position before the state ceased investments of any kind in the company.
The Investment Policy Board last took action in 2018, when Rauner called out online lodging marketplace Airbnb for announcing it would remove listings in Judea and Samaria. Airbnb avoided Illinois divestment by backing off its decision and certifying to state regulators in 2019 that it was not violating the restriction on boycotting Israel. There are currently 39 entities listed by the IIPB as companies that boycott Israel. Six of those are currently in talks with the IIPB on the issue, according to the board’s website.
Also on the agenda for Wednesday’s meeting is a discussion on Morningstar, which last year acquired a full ownership stake in Sustainalytics, a Netherlands-based investment research firm. Sustainalytics have been accused of voicing anti-Israel bias within their research findings.
One study claimed that within Sustainalytics’ analyses, companies that operate in Israel are tagged with higher negative controversy ratings, more so than other companies based in conflicted areas like China or Tibet, with its algorithm taking into account political factors out of proportion to business considerations. The firm used to be partly owned by PGGM, the Dutch pension that touted its own divestment from Israeli banks in 2014, but later reserved its decision in 2019. Many of Sustainalytics’ scores for Israeli companies are heavily based on the large, inflammatory blacklist of companies based in Israel compiled and published directly by the United Nations Human Rights Council – the only such list compiled by the Council.
“The board is going to have to make a finding based on facts. The fact that Sustainalytics doesn’t explicitly call for a boycott of Israel or Israel-controlled territories for political or social reasons like Ben & Jerry’s doesn’t mean they haven’t run afoul of Illinois’ law,” Marc Stern, an attorney and leading expert on BDS-related legislation, told JNS. “Business factors can legitimately keep companies out of Israel. Politically-motivated factors are something different when it comes to a lot of these boycott laws in various states. The Illinois board will have to make a determination.”
Goldberg indicated that Morningstar has maintained an open dialogue with the IIPB on the issue and, as a result, the board may be more inclined to continue discussions rather than voting for divestment on Wednesday. But the fact that a company that advises its clients of the potential pitfalls of doing business in Israel-controlled territory, without directly calling for a boycott, could run afoul of BDS laws — presenting an interesting test for how far the arm of some of these laws can reach.
A spokesperson for the Israeli Ministry of Foreign Affairs declined to comment on the potential outcome of Wednesday’s meeting, citing a desire to avoid publicly involving Israel in internal American political matters.
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