Morningstar ditches UN Human Rights Council data to address anti-Israel bias concerns

The ESG data and ratings firm will cease using the terms 'Occupied Palestinian Territory' or 'occupied territory'.

Morningstar’s ESG data business Sustainalytics will no longer draw upon United Nations Human Rights Council data in its research products as part of efforts to tackle “anti-Israel bias concerns”. 

Yesterday, the US-based data giant unveiled a swathe of measures to address concerns raised by several groups, including the Jewish Federations of North America, the American Jewish Committee and JLens. 

This included changes to how Sustainalytics approaches media and other data sources used to inform research into companies potentially involved in controversies. As part of the measures, Morningstar revealed that Sustainalytics “will immediately terminate the use of several sources, including the United Nations Human Rights Council”. 

“These steps mark the culmination of Morningstar’s months-long engagement process with these organisations and resulting commitments to further fortify Sustainalytics’ ESG research and ratings against any concerns of anti-Israel bias,” it said in a statement.  

Responding to the decision, a spokesperson for the UN’s Council told Responsible Investor: “The Human Rights Council is a state-driven body whose actions and decisions are the product of a democratic process. The Human Rights Council takes a vigilant stance against anti-Semitism.”  

“As the only intergovernmental body charged with addressing human rights situations around the globe, the Human Rights Council provides a unique stage to hear a wide range of views, often those not heard elsewhere,” they added.  

Earlier this year, Morningstar published the results of an investigation by law firm White & Case into claims of anti-Israel activities at its ESG data and ratings subsidiary.  

The law firm found “no evidence” that Sustainalytics products recommended or encouraged divestment from Israel, or that would suggest a “pervasive or systemic bias against Israel across Sustainalytics products, including the Sustainalytics ESG Risk Rating”.  

However, its Human Rights Radar was found to have a “latent, disproportionate focus on the Israeli/Palestinian conflict which results in biased outcomes”. The product, which provided information on companies operating in regions where Sustainalytics believed serious human rights violations were taking place, was discontinued by Morningstar in response to recommendations by White & Case.  

Following the report, the Illinois Investment Policy Board, which had previously raised concerns to Morningstar about its stance on Israel, voted against placing Morningstar on the US funds “prohibited investment list”.

Then in August, attorneys general and chief law enforcement officers from 17 US states sent a letter to Morningstar expressing “serious concerns related to reports that Morningstar – through its wholly owned subsidiary, Sustainalytics – may be furthering the boycott, divestment, and sanctions (BDS) movement against Israel”.  

Asked for an update on the letter, a spokesperson for Morningstar told RI: “We have responded to the letter in accordance with the procedural mechanisms.”  

Under the newly announced measures, Sustainalytics will now also provide additional documented guidance to ensure that its analysts “understand that business activity, including but not limited to sectors such as telecommunications, banking, real estate, and construction, within the regions linked to the Israeli-Palestinian conflict or related to Israel’s defense against terrorism, do not give rise to a presumption that there is a human rights concern”.  

The ESG data and ratings firm will also cease using the terms “Occupied Palestinian Territory” or “occupied territory” and instead use geographic names “eg, West Bank, East Jerusalem”.