Socially responsible investing, also known as “sustainable” or “impact” investing, is on the rise. For those of us in the field for many years, 2015 was a remarkable year. Some have called it “the end of the beginning” as socially responsible investing finally became mainstream.
At the end of 2015, the United Nations’ Principles for Responsible Investment had 1,380 signatories representing $59 trillion in assets under management.
The movement began in the 1970s and 1980s as a form of political protest. Divestment was the original tactic and targets included companies profiting from the Vietnam War, and apartheid in South Africa. But as the movement evolved, divestment became the strategy of last resort. Investors gained more power by working collaboratively with companies to advocate for positive change.
Investor demand has grown in recent years as studies demonstrate that socially responsible investment strategies typically perform the same as or better than traditional strategies because companies are often stronger in the long term if they operate in a responsible manner. As a result, companies and mainstream investors increasingly consider social and environmental factors.
With all the euphoria comes the need for caution. The increased power and influence of the responsible investing field has attracted many activists, unfortunately some with less than noble goals. For the past decade the anti-Israel BDS (boycott, divestment and sanctions) movement has sniffed around at conferences, learned the language and tactics, pretended to care about responsible investing, and established relationships with leaders in the field.
At a recent presentation, BDS activists gleefully explained that responsible investing is easy to manipulate — simply use the term “human rights” and demand submission. The BDS campaign is forcing many companies and investors to choose — divest from Israel, or be subject to a slanderous public relations onslaught, and potentially lose your reputation as a responsible entity. In fact, public companies are scored on social and environmental factors by influential research firms, and any controversy results in a lower score. The scores are used to make investment decisions.
Companies across Europe have acquiesced, including the French company Orange and the Irish company CRH. Both cut business ties with Israel this month. Many U.S. companies face similar BDS pressure, including Hewlett-Packard, Motorola Solutions, Caterpillar, Cisco, Intel, GE, General Mills and others.
BDS activists know that Israel is an easy target because the country is so small. Their blatant lack of concern for human rights is apparent when they pressure investors to ignore human rights abuses in large countries such as China and Russia. The United Methodist Church, after years of BDS coercion, acquiesced this week and announced it is partially divesting its $20-billion pension from 14 countries, including Israel, while ignoring larger countries with significantly worse human rights violations.
The Methodists claim that rankings by Freedom House, a watchdog organization that rates countries on their political rights and civil liberties, are the basis for their divestment list. But of the 14 countries listed by the Methodists, Israel is the only country ranked “free” by Freedom House. In fact, Israel is the only country in the entire Middle East ranked “free.”
The Methodists ignored most of the 51 countries ranked “not free” by Freedom House when compiling their divestment list. This inconsistency reveals that the true motivation behind the Methodists’ divestment is support for the anti-Israel BDS movement, despite the efforts they have made to hide this fact.
The BDS campaign is prejudiced and targets Israel alone in a two-sided dispute. Over the past 10 years the BDS campaign has done nothing but exacerbate tensions, rather than creating new avenues for cooperation and reconciliation between Israelis and Palestinians.
Israel stands alone among nations in the harsh treatment it receives in the socially responsible investing field. Up to this point, no one in the field has pushed back against the growing anti-Israel onslaught.
The Methodists used to be inspiring leaders in the socially responsible investing field. Now, rather than promoting peace by investing in collaborative joint ventures, infrastructure, job creation and economic stability, they have selected an ugly path. It’s tragic to see them wield their power in such a reckless and discriminatory manner. By straying from their values, the Methodists have betrayed their moral compass, their pension holders, and the entire socially responsible investing field.
Now that responsible investing has become a mainstream and influential arena, it’s time to open a discussion about abuses of power and to promote standards that protect the field from corruption and moral decay. It’s ironic that the socially responsible investing field demands transparency from companies, yet shrouds its own biases and discriminatory tactics. Professionals in the field have different values and won’t agree on every issue, but we have worked too hard to gain credibility to let it slip away.