PRI won’t advise investors on Israel

23-Jan-2014

By Wouter Klijn

Related Articles: | |

The United Nations-backed Principles for Responsible Investing (PRI) initiative will not advise its members to divest from holdings in Israeli banks, following increasing pressure from institutional investors on these banks over their financing of settlements in Palestinian-occupied territories.

The UN views the Israeli settlements as a breach of international human rights laws, a position which has caused a number of European pension funds – including the $465 billion Dutch pension fund ABP, the $200 billion Scandinavian fund house Nordea Investment Management and $90 billion Norwegian fund group DNB Asset Management – to engage with the banks over their financing.

But the banks are required by Israeli law to finance the settlements and this situation resulted earlier this month in the first large institutional investor, the Dutch pension fund PGGM, to divest its holdings in five large Israeli banks: Bank Hapoalim, Bank Leumi, First International Bank of Israel, Israel Discount Bank and Mizrahi Tefahot.

The measure caused controversy and Israel summoned the Dutch ambassador to object to the pension fund’s decision.

Despite the UN position on the matter, the PRI will not give its members guidance as it does not advise on individual cases.

“The PRI signatories around the globe approach responsible investment in many and varied ways,” PRI managing director Fiona Reynolds told theinstoreport.

“After a significant period of engagement with a particular company or sector, some of our signatories make the final decision to divest.

“We don't advise signatories on individual engagement decisions. This is up to our signatories and their individual engagement policies and responsible investment strategies.

“There is no one-size-fits-all approach to responsible investment and around the globe strategies can vary from region to region.”

Australian institutional investors have shown they are willing to divest from holdings if engagement with companies does not lead to improvements.

Last year, a number of pension funds divested their tobacco-related holdings as part of their environmental, social and governance (ESG) frameworks.

But so far, no Australian investors have indicated they would review their holdings in Israeli banks.

Local Government Super chief executive Peter Lambert said the fund had no holdings in Israeli banks and, therefore, it was not an issue for them.

But Lambert said the fund’s sustainable and responsible investment (SRI) policy would encourage a review of its holdings if the fund had invested in the banks.

“Our SRI policy looks to exclude us from equity holdings in specific industries, that is, tobacco, armaments, uranium mining, et cetera, and specific companies that rate poorly from an ESG perspective,” he told theinstoreport.

“The issue you have here does not meet the industry criteria, but could conceivably fit the specific company criteria if we felt that the actions of the banks in question show that they are not managing their ‘social’ risk appropriately.”

« Back to Articles