Financial services giant Morningstar announced Sunday that it has completely overhauled how it rates companies doing business with Israel, ending what critics called a years-long practice of backdoor boycotting through investment ratings.
The Chicago-based firm, which manages over $264 billion in assets, will no longer issue negative "human rights controversy" ratings to companies simply for operating in eastern Jerusalem or the West Bank. This practice had effectively penalized more than 100 companies doing business with Israel through supposedly neutral environmental, social and governance (ESG) scores.
They were basically running a sophisticated form of BDS through the backdoor. Companies would suddenly find themselves tagged with human rights controversies just for doing normal business with Israel.
The reform comes after intense pressure from a coalition of Jewish organizations and scrutiny from 20 state agencies investigating potential violations of anti-BDS laws. Independent experts brought in to evaluate the changes have given Morningstar a clean bill of health, finding "no examples of Israeli companies or companies doing business in Israel whose ratings reflect biased processes."
"This is really a model process," said Elana Broitman, a consultant with the Jewish Federations of North America, one of the organizations that pushed for change. Sources familiar with the negotiations say Morningstar leadership was "aghast" when they discovered how their subsidiary Sustainalytics had been handling Israel-related ratings.
The change carries significant weight given Morningstar's massive footprint - the firm reported nearly $570 million in revenue last quarter and rates over 620,000 investments across 32 countries. Their ratings help guide billions in "socially conscious" investment decisions.
For critics of Morningstar's previous practices, this victory represents more than just a policy change at one financial firm. At a time when antisemitism is surging globally and BDS supporters are finding increasingly sophisticated ways to target Israel, the dismantling of what many called a "backdoor boycott" at one of Wall Street's most influential firms sends a clear message: attempts to isolate Israel through supposedly neutral financial metrics won't go unchallenged.
Also, when a company this size admits they got it wrong and makes real changes, hopefully others will take note.
JNS contributed to this article.
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