The major, New York-based investment advisory firm MSCI, which reported more than $743 million in operating revenue in the final quarter of 2024, appears to have removed damaging assessments it assigned to four large Israeli banks based on their provision of services in Judea and Samaria.
Meanwhile, MSCI has flagged Israeli defense giant Elbit Systems for providing weapons to Israel in its war against Hamas.
JNS confirmed that MSCI, a producer of ESG (environmental, social and governance) ratings reports, removed the human-rights “controversies” it had tagged on Bank Leumi, Bank Hapoalim, Israel Discount Bank and Bank Mizrahi-Tefahot, publishing a “report update” on each bank earlier this month.
JNS previously reported that the four banks got “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 in August 2024 that the advisory firm ranked all four Israeli banks with “severe” controversy scores for doing business in Judea and Samaria, citing anti-Israel sources to bolster its claims.
The “report update” issued this month removes those sources for all four banks. However, MSCI has not yet adjusted the ratings for any of the banks, leaving their previous scoring in place, with Bank Hapoalim holding an AA rating; Bank Leumi and Bank Mizrachi-Tefahot still assigned A ratings; and Israel Discount Bank holding a BBB rating.
Under investigation for potential BDS practices by agencies from some 19 states, MSCI has been under pressure to cease utilizing sources affiliated with the BDS movement in its ratings process, and to stop reflexively issuing damaging human-rights scores based only upon a company’s presence over the so-called Green Line and into eastern Jerusalem, and Judea and Samaria.
JNS reported in January that a coalition of American Jewish and pro-Israel organizations that worked with investment firm Morningstar to root out anti-Israel bias associated with that financial services company is now working with MSCI.
‘Like a bad movie all over again’
Asked for comment on JNS’ latest findings regarding the changes in the assessments of the Israeli banks, Elana Broitman, a consultant for the Jewish Federations of North America who is running point for the coalition, wrote that “rooting out anti-Israel bias in ESG financial ratings is a critical front in the battle against antisemitism. Following our successful process with Morningstar, we look forward to making further progress on this issue at other companies, including MSCI.”
Richard Goldberg, a senior adviser at the Foundation for Defense of Democracies, told JNS that “it’s like a bad movie all over again, watching MSCI follow Morningstar’s precedent of slowly but surely removing more and more BDS ratings as more and more states investigate its ESG practices.”
In January, JNS reported that MSCI removed damaging assessments it had levied on American behemoths Motorola and Caterpillar for their roles in providing anti-terror equipment and services to Israel for use in Judea and Samaria.
Socially-conscious investors often turn to firms like MSCI, which rate 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 previously assigned the “severe controversy” score to the four banks in the information available to clients who purchase MSCI’s data, a 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—were cited in the MSCI reports as sources of information that inform the controversy scores.
The alleged “controversy” that MSCI assigned the four banks centers on their providing financing and services to residents and businesses in Judea and Samaria, according to the source. The scores cited 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, according to the source.
‘Entering the economic battlefield’
Experts told JNS that MSCI’s ratings of Israeli companies amount to “backdoor BDS,” singling out and applying double standards to companies doing business in Israel-controlled areas.
They point to examples like the state-owned Bank of China, which operates a branch in the Xinjiang Uygur Autonomous Region, where Washington has assessed that China is committing genocide against the ethnic Uyghur population.
Still, MSCI gives the bank a “green” score in its social and human-rights categories, meaning that it “is not involved in any major controversies” though 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.
Meanwhile, JNS confirmed that while MSCI has removed BDS-affiliated sources in its ESG assessment of Elbit, it replaced them earlier this month with a “severe controversy” related to protests against the company.
The sources now used to generate the severe controversy include a number of articles from the BBC and other mainstream media outlets detailing protests by Palestinian supporters at factory sites used to make Elbit parts, as well as divestment by a French investment firm from Elbit. Most of the events cited took place following the Hamas-led terrorist attacks in southern Israel on Oct. 7, 2023, and Israel’s subsequent military response.
Goldberg, who crafted Illinois’s first-in-the-nation anti-BDS law, told JNS that “BDS is BDS whether it targets seven companies or just one company like Elbit. The Elbit case is perhaps one of the most egregious because MSCI is effectively entering the economic battlefield against Israel on behalf of pro-Hamas protesters.”
‘Inherent risk of consumer fraud’
A previous copy of MSCI’s ESG ratings for Elbit, dated January 2023, viewed by JNS suggests that MSCI deducted 2.4 points from the international defense technologies company’s ESG ratings due to controversies surrounding Elbit’s participation in the construction of security and surveillance barriers designed to protect Israeli civilians from terrorists.
In that document, MSCI described the controversies as “severe.”
The 2023 MSCI report cited Elbit’s construction of the security barrier in Judea and Samaria at the height of the Second Intifada, which stopped the flood of suicide bombers from crossing from Palestinian Authority-controlled territory to Israel.
The 2023 MSCI report cited criticism of the barrier by the “Palestinian civil society campaign for boycott, divestment and sanctions.” It also mentioned Pax Christi, a Catholic group that routinely demonizes Israel, and “Jewish Voice,” an apparent reference to Jewish Voice for Peace, which also denounces the Jewish state regularly.
In its damaging score of Elbit, MSCI also included the company’s construction of the “smart barrier” along the Gaza border—the one that Hamas terrorists destroyed on Oct. 7 en route to carrying out their killing and hostage-taking spree. (JNS sought comment from Elbit several times for this story.)
The barrier “would allegedly intensify Israel’s control over Gaza and
would further hinder peaceful resolution of the conflict,” the document states.
MSCI did not respond to a request from JNS for comment. MSCI has repeatedly indicated to JNS that it does not support a boycott of Israel.
“There’s an inherent risk of consumer fraud here because investors don’t realize that MSCI is blacklisting a company just for being an Israeli defense contractor at a time when Hamas supporters want to stop Israel from exercising its inherent right to self-defense,” Goldberg said. “Attorneys general and states with anti-BDS laws should be honing in on this Elbit rating immediately.”
An 18-state investigative cooperative of MSCI helmed by Florida cited JNS reporting in opening up its BDS inquiry. The Illinois Investment Policy Board also cited JNS reporting on the subject in multiple meeting agendas in its separate investigation of MSCI.