Institutional investors increasingly are inserting themselves into the Israel-Palestine dispute as they grapple with the thorny question of divesting their stock in some companies doing business in the occupied territories.
The new thrust comes as the controversy over Israel's occupation of the land it seized from its Arab neighbors after the 1967 Six-Day War is heating up. On Jan. 31, United Nations human rights investigators called on Israel to halt its program to build Jewish settlements in the occupied territory and withdraw settlers, saying Israel was violating international law.
Recent examples of action by institutional investors include:
cStaff at the $253.2 billion California Public Employees' Retirement System, Sacramento, the nation's largest defined benefit plan, have an ongoing dialogue with French conglomerate Veolia Environnement SA and Israel-based military and electronics company Elbit Systems Ltd. about their operations in the occupied zone. CalPERS owns $31 million of Veolia stock and $2.4 million of Elbit.
Veolia has operated a landfill catering to Jewish settlements in the occupied zone and built a light rail system that connects the settlements to Jerusalem. It also operates buses in the occupied territories that have excluded Palestinians under the orders of the Israeli military.
Elbit has installed monitoring equipment on a wall more than 400 miles long in the occupied territory that Israel says is designed to stop suicide bombers by limiting Palestinian access to the area through checkpoints. Palestinians say the wall prevents them from having free access to their land.
cA portfolio manager from the $154.3 billion California State Teachers' Retirement System, West Sacramento, flew to Peoria, Ill., last summer to talk to officials at Caterpillar Inc. about the Israeli Defense Force's use the of Caterpillar tractors in destroying Palestinian homes in the occupied territories. CalSTRS has $174.2 million in Caterpillar stock.
cThe $US17.6 billion New Zealand Superannuation Fund, Auckland, last Decemberannounced it had excluded three companies from its investment portfolio — real estate development and investment company Africa Israel Investments Ltd. and its subsidiary, Danya Cebus;infrastructure and real estate developer Shikun & Binui; and Elbit Systems.
cThe Norway Minister of Finance forced the $US623 billionGovernment Pension Fund Global, Oslo, to sell its 8.5 million shares of Shikun & Binui in June because it is constructing new settlement housing in the occupied zone. The ministry took the same action with Africa Israel and Elbit earlier.
cThe Friends Fiduciary Corp., Philadelphia, which manages money for the Religious Society of Friends in endowments and other funds, voted in September to divest its stock in Hewlett-Packard Co. and Veolia because of their business activities in the occupied territories. HP, through its subsidiary EDS Israel, maintains a computer system used at checkpoints. Early last year, Friends Fiduciary sold its holdings in Caterpillar; it had around $1.3 million invested in all three stocks.
For institutional investors, some divestment issues weren't as hard to decide, mostly because a consensus was easier to reach. Two examples are divestment of companies in the tobacco business and companies that operate in countries with repressive regimes like Sudan.
But no such consensus exists on companies involved in the dispute between the Israelis and the Palestinians. Some 500,000 Jewish settlers live in the West Bank and East Jerusalem, which were seized by Israel in the Six-Day War. It is the same land that the Palestinians claims as their homeland.
“It is an entanglement of foreign policy (which is) beyond us being able to solve,” said Anne Simpson, CalPERS' director of global governance. Ms. Simpson said given the complexities of foreign policy issues in the Middle East, she has asked officials at the U.N. Principles for Responsible Investment to hold a round table on responsible investing in the Middle East at its next signatory meeting, to be held in Cape Town, South Africa, in October.
Ms. Simpson said PRI officials have been receptive, but the final agenda has not yet been set.
The PRI's guidelines on corporate behavior in war-torn or conflict-driven areas, posted on the organization's website, say companies should act as responsible corporate citizens and do no harm in their dealings there.
Ms. Simpson said CalPERS' staff began discussions with Veolia and Elbit after the Israel Divestment Campaign, an activist group of CalPERS and CalSTRS participants concerned about Israel's occupation of the West Bank and Gaza Strip, asked the CalPERS board in December 2011 to divest the pension fund's holdings in those companies.
Ms. Simpson said both Veolia and Elbit have given detailed responses to allegations of human rights violations and “state that their operations in Palestine are consistent with international law.”
She said CalPERS is continuing the engagement process with the companies and is in the process of giving them an opportunity to respond to the Israel Divestment Campaign's contention that they continue to violate the rights of Palestinians.
Advocates for Israel aren't pleased with groups like the Israel Divestment Campaign. “The efforts by activists to target pensions is one part of a much larger project aimed at delegitimizing Israel,” Omri Ceren, a senior adviser at The Israel Project in Washington, said in an interview. His organization aims to improve Israel's image.
“The groups backing these efforts tell pensions that their aims and tactics are limited and reasonable, but in fact those groups are at the forefront of pushing for full-scale boycotts and sanctions on Israel. ... It's hard to avoid the perception that pensions are getting manipulated into becoming small players in larger activist campaigns, at their own expense,” Mr. Ceren said.
But Sherna Berger, an organizer at the Israel Divestment Campaign, said many of the more than 1,000 CalPERS members who signed her group's petitions are Jewish, as is she, and recognize Israel's right to operate as a sovereign state. The issue, she maintains, is that Israel is violating international law by its occupation of the territories.
CalSTRS took up similar issues as CalPERS, but with Caterpillar. CalSTRS officials say they had an obligation to investigate after members of the Israel divestment group requested that the system sell its stock in Caterpillar.
Anne Sheehan, CalSTRS' director of corporate governance, said CalSTRS officials accepted Caterpillar's stance that the Israeli government gets Caterpillar products from the U.S. government and doesn't do business directly with Israel.
On the other hand, the New Zealand Superannuation Fund decided to sell its stock in the two construction companies because fund officials concluded that their engagement with the companies had reached a stalemate and the companies were not going to stop their activities in the occupied zone, said Anne-Maree O'Connor, manager of responsible investment.
“If you get to the point that improvements won't be made, then you need to make a decision to exclude that company,” she said. n
This article originally appeared in the February 4, 2013 print issue as, "Some take heat for stock investments in occupied areas".