The major, New York-based investment advisory firm MSCI, which reported nearly $725 million in operating revenue in the third quarter of 2024, appears to have removed damaging assessments that it assigned to Motorola and Caterpillar based on their operation in Israel-controlled territory, according to environment, social and governance reports for the two companies that were provided to JNS.
MSCI appears to have made the changes after a probe, which the Illinois Investment Policy Board opened last year about whether the firm was violating state law by flagging the companies with “controversy” ratings for doing business in eastern Jerusalem, Judea and Samaria, and in internationally recognized Israeli territory along the Gazan border.
A telecommunications behemoth, Motorola is based in Chicago. The construction equipment manufacturer Caterpillar was headquartered in Deerfield, Ill., before moving to Irving, Texas, in 2022. (JNS sought comment from MSCI, as well as from Motorola and Caterpillar.)
Richard Goldberg, a senior adviser at the Foundation for Defense of Democracies, told JNS that “while it’s good news to see less BDS going on at MSCI, we are obviously left wondering why BDS controversies still remain targeting so many Israeli companies.” (BDS refers to the movement to boycott Israel.)
“This appears to be a politically motivated change in ratings that proves MSCI’s ESG controversy system is anything but objective,” added Goldberg, who helped write the Illinois law that bars boycotting Israel. “It stands to reason that if states like Florida, New Jersey or New York now open their own investigations, the remaining BDS controversies would magically disappear soon, too.”
JNS reported previously that MSCI seemed to rely heavily on anti-Israel sources and news articles to develop its environment, social and governance (ESG) ratings, which are designed to guide socially conscious investors in their decision-making.
MSCI was already under investigation by 18 states for possible violations of anti-Israeli boycott laws when the Illinois Investment Policy Board began its own probe.
The board, which ensures that investment of public money follows state law, stated in its June 5, 2024 meeting minutes that it had directed Monica-Kaye Gamble, the board’s executive secretary and counsel, to invite MSCI “to appear before the board to discuss its rating process and response to the article,” referring to a “Jewish News Syndicate news article.”
The board also asked Gamble “to follow up on her previous requests that MSCI provide the reasons for removing companies from the lists and furnish details of the actions that led to their deletions,” per the minutes.
An agenda for the board’s next meeting—on Sept. 11, 2024—referred and linked to a JNS article on Aug. 26, 2024, headlined: “Already under multi-state probe, MSCI allegedly penalizes Israeli banks that operate in Judea, Samaria.”
“MSCI was invited to present to the Illinois Investment Policy Board. In-person attendees included Neil Acres, Laura Nishikawa and Michael Zalewski from Taft Stettinius & Hollister LLP, along with Richard Hu from the same firm,” per the meeting minutes. “Participants attending via Zoom were Melanie Blanco, Julie Mansmann and Dominic Jones.”
“Following the presentation, the board determined that no action would be taken at this time and that discussions would be continued with the board and relevant stakeholders,” per the minutes. “MSCI through counsel will continue to engage with the board and the chairman.” The minutes again noted the Aug. 26 JNS article under “media.” (The board did not invite JNS to present on the reporting in the article.)
Neither MSCI nor JNS was mentioned in the agenda for the board’s meeting on Dec. 4. At press time, the board hadn’t posted the minutes.
A source with knowledge of the board’s activities told JNS that MSCI did not appear at the Dec. 4 meeting nor was it obliged to do so. The board is scheduled to meet next on March 17.
Scrubbed ‘controversies’
JNS viewed the most recently updated MSCI environment, social and governance reports for Caterpillar and Motorola, both of which are dated Dec. 19, 2024. There did not appear to be any “social controversy” score in either report related to business in Israeli-controlled territory.
Caterpillar’s score jumped from an A to an AA classification in the report, although it wasn’t clear if that change was solely or largely due to the removal of the Israel-related “controversies.” A prior 2023 MSCI report about the company cited an article in the Palestine Chronicle about British college students calling on their university to divest from Caterpillar because the company makes equipment used for demolitions in Judea and Samaria.
In an ostensible news article published less than a week after the Hamas-led terrorist attacks in southern Israel on Oct. 7, 2023, the publication wrote that “the Palestine Chronicle family” calls “for worldwide condemnation of Israel’s deliberate targeting of journalists.”
Abdallah Aljamal, a former spokesman for Hamas’s labor ministry in Gaza and a writer for the Palestine Chronicle in Gaza, was found to have held three Israeli hostages in his home.
MSCI used information in its prior Caterpillar report from other groups that support boycotting the Jewish state, including Al Jazeera, Human Rights Watch, War on Want and Amnesty International, per a source who viewed the report.
Motorola’s score also rose from A to AA in its Dec. 19 report, which JNS viewed. It also wasn’t clear what role, if any, the scrubbed “controversy” rating about operating in Israeli-controlled areas had on that score.
The source who viewed Caterpillar’s 2023 report said that MSCI previously tagged Motorola with three controversies, including a “severe” one related to the company’s dealings in Israel-controlled territory.
The “severe” controversy is based on Motorola’s supply of surveillance equipment used to detect human movement near the security barrier that Israel built in response to Palestinian suicide bombings during the Second Intifada from 2000 to 2005. The systems also monitor perimeters around Jewish communities beyond the Green Line to prevent terrorist attacks.
MSCI classifies a class action wiretapping lawsuit filed against Motorola this year in U.S. district court as only a “minor” controversy, per the source, who viewed the report. The suit was brought against the company and the Massachusetts State Police, which used Motorola technology to record citizens without a warrant, in violation of the state wiretap law.
A state police audit found more than 180 likely cases of covert recordings that weren’t turned over to prosecutors. The controversy listing related to the wiretapping suit remains in the latest Motorola report.
JNS previously reported that MSCI assigned controversy ratings to Israeli defense giant Elbit and a host of Israeli banks, using the same methodology as it did in its previous ratings for Motorola and Caterpillar. It is not clear whether the changes to MSCI’s Motorola and Caterpillar ratings process have been applied elsewhere.
MSCI has consistently denied that it boycotts Israel or supports such boycotts.