Summary: JLens’ Campaign to Combat BDS at Morningstar

JLens’ campaign to combat Morningstar’s support for the anti-Israel BDS campaign started in 2020 and is the genesis of the current advocacy efforts with Morningstar. For over a decade, BDS activists have manipulated the ESG (environment, social, governance) responsible investing field to promote an anti-Israel, antisemitic, and hate fueled one-sided political campaign intended to harm Israel's economy and question its legitimacy. While Morningstar initially claimed JLens’ concerns were ‘grossly inaccurate and without merit,’ the company has since changed course and agreed to address the anti-Israel bias and promotion of BDS while expressing ‘a debt of gratitude to JLens for pushing Morningstar to be a better company.’

Morningstar Corporate Overview:

Morningstar Inc. is a U.S. public company headquartered in Chicago that sells investment research and oversees $215 billion in assets. In 2020, Morningstar acquired Sustainalytics, a Dutch company that sells ESG (Environment, Social, Governance) research to support socially responsible investing. Sustainalytics is one of the most sophisticated enablers of the anti-Israel BDS (Boycott, Divestment, Sanction) campaign in the global investment field.

About JLens:

JLens is a nonprofit investor network established in 2012 that explores a Jewish lens on investing and serves as a bridge between the Jewish community and the socially responsible investing (SRI) and corporate social responsibility (CSR) arenas. JLens oversees the Jewish Values Global Index (ticker: SHALOM), and the Jewish Advocacy Strategy US, a $200 million Jewish values-based offering that invests in 300 US companies and conducts investor advocacy on Jewish communal concerns.

JLens’ Engagement History with Morningstar:

• April 2020: Morningstar announced plans to acquire Sustainalytics. JLens contacted Morningstar’s CEO to share concerns related to Sustainalytics anti-Israel bias and BDS support. Morningstar refused to speak with JLens until after the Sustainalytics acquisition was finalized.

• November 2020: JLens again reached out to Morningstar’s CEO and a meeting was arranged with Sustainalytics employees.

• January 2021: After unproductive dialogue with Sustainalytics employees, JLens determined that Morningstar was not committed to engaging in good faith dialogue and the company was added to JLens’ Do Not Invest list.

• February 2021: JLens submitted a bylaws shareholder proposal to be presented at the Annual Shareholders Meeting.

• March 2021: Morningstar released a statement on their website claiming an internal investigation found JLens concerns to be false, while at the same time acknowledging that BDS news reports influence their ESG research and providing examples of companies they score as controversial due to Israeli military contracts.

• May 2021: JLens presented the resolution related to Morningstar’s support for BDS at the Annual Meeting. Morningstar’s Chairman read a statement claiming JLens concerns are false and announced the board voted unanimously against JLens resolution.

• October 2021: The Jewish United Fund of Metropolitan Chicago, an investor in JLens’ Jewish Advocacy Strategy, facilitated a dialogue between JLens and Morningstar’s Executive Chairman. The discussions addressed Morningstar’s support for BDS, the lack of moral leadership by Morningstar to date with the publication of misleading statements and the company’s failure to address the serious concerns that have been raised by stakeholders, and JLens’ request for an independent third-party investigation.

• December 2021: Morningstar announced that the law firm White and Case had been hired to conduct an independent investigation, and Morningstar committed to publishing the final report.

• June 2022: Morningstar releases the White and Case report and agrees to implement the report’s recommendations, dealing a significant blow to the BDS campaign by eliminating Morningstar’s role as a key conduit of BDS activism in the economic arena. However, the White & Case report is a work of legal acrobatics whereby the findings conclude Morningstar is primarily innocent of extreme definitions of wrongdoing, while the report body and recommendations clearly demonstrate the extensive role Morningstar (Sustainalytics) has played in promoting and profiting from the BDS campaign. Transparency and clarity on the implementation of the report's recommendations are required to assess whether Morningstar has truly ceased supporting the anti-Israel BDS campaign.

• July 2022: A letter organized by the Jewish Federations of North America is sent to Morningstar urging the company to “take additional measures to comprehensively address and eliminate anti-Israel bias in all Sustainalytics’ products and practices, including by making broader changes in some of the areas where W&C’s recommendations make only partial progress.” This letter is signed by nearly 90 Jewish organizations.

• August 2022: A working group convened by JFNA that includes JLens and other organizations begins dialogue with a Morningstar task force focused on addressing issue areas. Additionally, following the State of Illinois’ lead, 18 states contact Morningstar to inquire about the firm’s support for BDS to assess whether Morningstar is in violation of the states’ anti-boycott laws.

• October 2022: Morningstar’s Chairman and CEO announced detailed plans for the removal of anti-Israel bias and BDS support from Morningstar’s products and services. These plans follow concerns first raised by JLens in 2020, a review and recommendations prepared by the law firm White & Case, and engagement with Morningstar by leading Jewish institutions including JFNA, ADL, and AJC. JLens is pleased by the proposed changes agreed to by Morningstar’s leadership. After 22 months on JLens’ Do Not Invest List, Morningstar was removed from the list and cleared for investment.

• May 2023: JLens met with Morningstar’s CEO in and was satisfied with the progress the company is making towards addressing its anti-Israel bias.

• May 2023: ADL, the Brandeis Center, AJC, and CIJA conducted a three-part series of workshops on antisemitism and anti-Israel bias for Morningstar-Sustainalytics research staff. These workshops covered: the basics of understanding antisemitism; ways in which antisemitism can be projected onto Zionism and the Jewish state; and international law and its use and abuse in attacking Israel.

• July 2023: It was announced that Morningstar had removed controversy ratings from an additional 19 companies conducting business in Israel and the West Bank, in response to its updated guidelines for analysts which remove anti-Israel bias. In recent months, the number of companies flagged as controversial by Sustainalytics for operating in Israel and the West Bank was reduced from 109 to 26. The most recent action means that now only 7 companies retain a controversy rating: B Communications, Bezeq, Construcciones y Auxiliar de Ferrocarriles SA, Elbit Systems, Elco Ltd., Electra Ltd. and Shapir Engineering and Industry Ltd.

JLens’ Analysis on Morningstar’s BDS Support:

In 2020, at the start of its engagement with Morningstar, JLens concluded that the companies products and services supported BDS.

• Morningstar advised institutional investors how to divest from Israeli and/or BDS targeted companies, and maintains divestment lists of companies with ties to Israel

• Morningstar advocated for companies to divest Israeli operations or cease sales to Israeli entities including the Israeli military and government

• Morningstar’s ESG research punished companies with ties to Israel by elevating their controversy and risk scores, making those companies less attractive for investment

• Morningstar discriminated against companies with ties to Israel by relying on antisemitic, anti-Israel, and extremist sources in their ESG research reports

• Companies were penalized disproportionately in Morningstar’s scoring for operating in Israel

Morningstar will be reassessed periodically to ensure the company is implementing the commitments it has promised. Please visit JLens’ news page for press related to Morningstar and other JLens’ initiatives.