The senators claim that the “implicit advocacy” of Morningstar subsidiary Sustainalytics borders on a boycott of Israel as defined by federal law.
(September 30, 2022 / JNS) A pair of Republican senators are calling on the U.S. commerce secretary to address what critics cite as BDS practices by Chicago-based investment firm Morningstar and its subsidiary, Sustainalytics.
Sens. Ted Cruz (R-Texas) and Marsha Blackburn (R-Tenn.) sent a letter this week to U.S. Secretary of Commerce Gina Raimondo, asking her to investigate how ESG (environmental, social and governance) standards, used by socially conscious investors to screen a company’s behavior, are being developed to promote boycotts of Israel.
“Advocates of economic warfare against Israel have increasingly sought to use ESG criteria as pretexts for boycott advocacy,” the senators wrote. “Companies that rely on ESG ratings in their business decisions have minimal transparency into the details, let alone motivations behind how the ratings were set. The practice introduces exposure to American anti-boycott laws along the entire chain, and most acutely for the firms opaquely designing and setting the ESG criteria.”
The letter specifically cites the practices of Morningstar, which is under investigation in 19 states for potential violations of consumer-protection laws and anti-boycott laws for its evaluations of companies’ performance on ESG issues.
Critics allege that Sustainalytics utilizes openly anti-Israel sources and gives them extra weight in formulating its ESG risk ratings, singling out Israel and the territories it controls over other conflict zones or disputed territories.
“We are concerned that… the Commerce Department is not sufficiently engaging Morningstar and similar companies. The ratings and implicit advocacy from Sustainanalytics come remarkably close to blackletter violations of prohibitions described at the federal level by the Export Administration Regulations and in laws of states such as Texas,” Cruz and Blackburn wrote to Raimondo. “The Commerce Department, both generally and as the agency housing the Office of Antiboycott Compliance, is charged with ensuring American companies are aware of these risks and working with them to mitigate and end any exposure. It is also charged with insuring the integrity of those federal prohibitions, as necessary.”
Morningstar has repeatedly denied that it takes part in BDS practices. The company commissioned an outside investigation by a law firm, which found no evidence of blatant anti-Israel practices, but which made dozens of recommendations to root out potential bias.
A number of states and pro-Israel groups say the recommendations don’t go far enough and fail to address the inherently biased manner in which Sustainalytics develops its ratings.