The Lothian Pension Fund (LPF) has been urged to divest from Bank Hapoalim after its recent inclusion on the UN list of companies sustaining Israel’s illegal settlements.

The Scottish Palestine Solidarity Campaign (SPSC) wrote to the fund after the UN report was published in February 2020, emphasising the inclusion of the bank on the list as just one recent example in a string of accusations against the bank.

Bank Hapoalim has been highlighted as a concern in the past, having been ‘blacklisted’ by the UN for carrying out business in the Occupied Territories in 2017, and also pleading guilty to both conspiring with US taxpayers to hide more than £7.6bn, and to its involvement in the FIFA corruption scandal, last month (April 2020).

Whilst other pension funds, such as Falkirk Pension Fund and Tayside Pension Fund had been invested in the bank, they both divested in 2018 and 2019 respectively.

A spokesperson for SPSC added: "LPF is the sole remaining local authority pension fund in Scotland with Bank Hapoalim in its investments, following Falkirk and Tayside dropping the bank in what now looks like a timely move.

“LPF's insistence on retaining Bank Hapoalim holdings will now face a perfect storm of the company's inclusion on the UN list of companies sustaining Israel's illegal settlements, the bank's admission it was part of the huge conspiracy to defraud the US Treasury, and changes in public attitude due to several years of campaigning to have LPF divest from
Bank Hapoalim and adhere to their commitment as signatories to the UN Principles for Responsible Investment."

In response to the letter, a spokesperson for the Lothian Pension Fund stated: “We’re naturally disappointed with these developments and, as shareholders, and in line with our responsible investment and stewardship obligations, we’re starting the process to engage with the management team at Bank Hapoalim to ensure that any and all deficiencies in systems and controls, oversight and culture are identified and put right and that such events will not be repeated."

However, the SPSC clarified that at a meeting before lockdown between the two parties, the LPF had “failed to even enter into their preferred process of 'constructive engagement' with Bank Hapoalim, despite the evidence brought before them over a number of years”.

The spokesperson for SPSC added: “This demonstrates either a failure of their own processes for screening investments and to take seriously environmental, social and governance issues; or contempt for concerns of pension fund members that their pension invests in companies that have been found to be complicit in violations of international law and of Palestinian rights."

The Lothian Pension Fund signed up to the UN Principles for Responsible Investing in 2008, and have also identified ‘be responsible’ as a core strategic goal in its recent operating plan for 2020/21, stating that it will “seek to have a positive impact on the economy and society”.

The campaign highlighted that given this commitment, it expected a greater acknowledgement of the UN’s concern that “companies may exacerbate conflict” through their operations in some areas, stating that the scheme was not adhering "meaningfully" to the PRI guidance.

However, at the meeting, it is understood that LPF Officers stressed the value of engaging with companies in regard to ESG matters, with the scheme informing the campaign that MSCI undertakes ESG assessment of all LPF investments.

According to SPSC, Bank Hapoalim was given “a very high rating” of AA by MSCI, with the issue of a US court case bought by Palestinian families the only matter of "recorded concern".

The campaign stated: “We enquired about the weightings of the E,S and G elements in these ratings and it was conceded that the evaluation might attach little weight to human rights as opposed to governance issues when dealing with banks.

“We also wondered what positive conduct by Bank Hapoalim could trump, dilute or neutralise their involvement in the facilitation of war crimes, as determined by the IVth Geneva Convention.”

It is understood that LPF officers confirmed at the meeting that they would check what aspects of human rights are considered when assessing the bank.

They also clarified that where MSCI indicated a low rating, it would engage with the organisation to drive improvement, but would ultimately sell of the shares if no progress is achieved.

The campaign argued however, that engagement is "unlikely to be successful" in a situation "such as this", stating that Bank Hapoalim likely views its financing of settlement expansion and infrastructure developments in the West Bank as "core banking business" and therefore it would be "futile to expect it to desist".

Share Story: