Florida could soon prohibit state funds from investing in companies that work in any way to undermine Israel, a move that would simultaneously hurt “woke” investment strategies and anti-Semitic boycotts.
The legislature this month approved a bipartisan bill that would bar the state from doing business with companies “taking adverse action, including changes to published commercial financial ratings … to inflict economic harm on Israel.” The bill, which hit Florida governor Ron DeSantis’s (R.) desk on Tuesday, aims to crack down on companies that work to hurt Israeli businesses under the guise of progressive Environmental, Social, and Corporate Governance (ESG) guidelines.
Chief among those companies is the financial ratings giant Morningstar, which has been plagued by accusations that it systematically downgrades companies that work with Israel—a move that generally discourages investors from funding companies. Morningstar subsidiary Sustainalytics, for instance, blacklists several companies that work with Israel to stop terrorism. Critics say this activity feeds the anti-Semitic Boycott, Divestment, and Sanctions (BDS) movement as it seeks to economically isolate Israel.
The bill comes as DeSantis clashes with various corporate titans over “woke” business practices. Earlier this month, DeSantis signed legislation that bans state officials from investing public money in ESG funds and bans the sale of ESG bonds in the state. The governor last year pulled $2 billion of state assets from the financial firm BlackRock in protest over the firm’s ESG policies
The legislation could provide a roadmap for other states that want to cut ties with Morningstar over its alleged anti-Israel bias, analysts told the Washington Free Beacon.
“It’s the final countdown for Morningstar to end its blacklisting of Israel-based companies,” according to Richard Goldberg, a senior adviser at the Foundation for Defense of Democracies. “There’s no doubt Morningstar is violating many state anti-BDS laws around the country, but some states aren’t sure if their laws apply to financial ratings intended to drive divestment.”
Goldberg and others say the Florida measure was specifically crafted to account for the type of BDS activity that has infected the ESG sector.
“Florida’s Morningstar amendment,” Goldberg told the Free Beacon, “is removing any doubt for its regulators who will soon need to put the company on the state’s list of prohibited investments.”
Over 35 states have enacted anti-BDS laws, which primarily apply to businesses that directly boycott Israel. But these states could soon follow Florida’s lead and expand their statutes to include downgrading or blacklisting companies via ESG ratings.
“States have been holding back their anti-BDS laws because they believed Morningstar was working in good faith to improve their ratings,” Goldberg said. “But today we know they are defending a BDS blacklist against 26 companies, including every Israeli bank—truly engaging in economic warfare against Israel. Time’s up for states giving Morningstar the benefit of the doubt.”
Pro-Israel advocacy groups are already lining up behind the Florida statute.
Sandra Parker, the chairwoman of the Christians United for Israel action fund, said the broad bipartisan support for the Florida measure signals that lawmakers are saying “‘no’ to those seeking to use ESG as a vehicle to surreptitiously infect American investments with BDS.”
Christians United for Israel, one of several groups that have been pressuring Morningstar to eradicate anti-Israel bias, has also raised the issue in meetings with members of Congress, “who are deeply concerned about Morningstar’s pro-BDS actions,” Parker said.
“In the end it’s quite clear that Morningstar, and anyone else pushing BDS on American investors, is going to change course rather than harm shareholders and suffer additional reputational damage,” Parker said.
Morningstar has repeatedly rebuffed accusations of anti-Israel bias, insisting that it in no way supports the BDS movement. It has also taken steps to eradicate bias from its ESG ratings and adjust current guidelines to more favorably rate Israel.
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