NZ Super excludes Israeli banks over financing activities in Occupied Territories

New Zealand’s sovereign wealth fund NZ Super has announced that it has pulled its money from five Israeli banks over their financing of Israeli settlements in the Occupied Palestinian Territories.

The exclusions apply to: First International Bank of Israel, Israel Discount Bank, Bank Hapoalim, Bank Leumi and Bank Mizrahi-Tefahot.

The same five banks were divested by Dutch pension fund PFZW in 2014 – a decision that sparked a diplomatic incident at the time, including protests and the Israeli Government summoning a Dutch ambassador to “clarify” the decision.

NZ Super, which announced its decision yesterday, pointed to “credible evidence” that the banks are providing project finance for the construction of Israeli settlements in occupied Palestinian territiories. 

“We believe that without the banks’ involvement, the settlement activity would not be proceeding at the scale seen in recent times,” it said in a statement on its website. 

NZ Super regards such financing as “inconsistent” with the UN Global Compact’s principles, which the fund uses as the “key benchmark” to measure corporate behaviour. 

In a separate document expanding on its rationale for the exclusions, the sovereign fund also points to reports describing the banks involvement in the settlements as “active and direct partners” rather than “passive lenders”. 

NZ Super said it gave the banks an opportunity to respond to its concerns before the exclusion was undertaken, but that engagement was not likely to be effective given their “involvement in the face of international criticism over a long period” and their view that the activity is legal.

The total value of the excluded holdings is just NZ$6.5m (€3.9m) and will not have a material financial impact on performance, the fund said. 

‘We believe that without the banks’ involvement, the settlement activity would not be proceeding at the scale seen in recent times’ – NZ Super

But the move does appear to mark a departure from NZ Super’s historic approach to exclusions linked to Occupied Territories. In 2012, when the fund’s investment committee recommended excluding construction companies involved in the settlements, it differentiated between companies with a direct and indirect involvement – banks, at that time, were deemed to be providing “a service and less direct than the construction firms themselves”.

NZ Super said that its responsible investment framework is guided by policy positions of the New Zealand Government, which in 2016 co-sponsored a UN Security Council resolution demanding the cessation of Israeli settlement activities in the Occupied Palestinian Territories.

Last summer, the New Zealand Government stated publicly that: “New Zealand is a long-standing supporter of Israel’s right to live in peace and security. However, successive New Zealand governments have also been clear that Israeli settlements are in violation of international law and have negative implications for the peace process.”

Yesterday, RI reported that the leaders of New Zealand’s Green Party had publicly pulled their money out of the voluntary pension scheme Kiwi Saver – part-owned by NZ Super – because it refused to divest Raytheon Technologies, which has been accused of providing munitions to the Saudi military.  

Earlier today, NZ Super’s outgoing Chair, Catherine Savage, also appeared before the Government’s Finance and Expenditure Select Committee and revealed that at the “height of the COVID-19 uncertainty in March 2020”, the fund lost NZ$13.4bn (€8bn) of its value. But she assured the Committee that the fund has “since rebounded strongly”, returning 53% from that point to now. The fund’s value currently stands at NZ$54bn (€32bn). 

Savage also revealed that the fund no longer holds “material long term shareholdings of fossil fuel reserves” and is not contemplating any “future investments in fossil fuel reserves”. She also said that the fund had achieved its 2016 goal to reduce its exposure to carbon emissions by 40%.