Arizona State Treasurer Kimberly Yee (R) shared that she notified Morningstar, Inc. that they have 30 days to prove they are not actively boycotting Israel and breaking Arizona law.
“As Treasurer, it is my duty to ensure that Arizona does not do business with companies that are attempting to undermine Israel’s economy and violate Arizona’s anti-BDS law,” Yee said in a statement. “I will not allow companies to promote policies that are antisemitic and discriminatory efforts against Israel, which is America’s longtime friend and ally, and a significant trade partner with Arizona.”
In a letter Yee sent to Morningstar, Inc. on Monday, she alleged that the company’s environmental, social, and corporate governance (ESG) focused subsidiary, Sustainalytics, used anti-Israel sources to negatively impact the scores of companies doing business in Israel and Israel-controlled territories.
Yee pointed to a 117-page report from law firm White & Case (W&C), which investigated anti-Israel bias within Morningstar. According to W&C, the independent probe found no evidence that Sustainalytics products “recommend or encourage divestment” from Israel, nor did they find any “pervasive or systemic bias” in the products. The sole exception, a single product called the Human Rights Radar, was found by W&C to have a “disproportionate focus on Israel.”
In response, Morningstar’s top officials said they have discontinued the Human Rights Radar and will take other steps to ensure there is no bias within the company, including improving the transparency of Sustainalytics’s research, “monitoring our internal processes,” and adopting an anti-bias style guide.
However, despite the report not showing overarching bias against Israel, Yee said there could still be issues for the company to resolve. According to her letter, an “ESG, in itself, is a subjective exercise and suffers from inherent bias.” Moreover, the fact that Sustainalytics performs any ESG review on companies doing business with Israel violates Arizona law, as the company is performing actions intended to limit commercial relations with companies connected to Israel.
Arizona law, ARS § 35-393, defines ‘boycott’ as refusing to deal, terminating business activities, or performing actions intended to limit commercial relations with entities doing business in Israel or its territories. These actions count as boycotting if they are done “based on the fact that the entity does business in Israel” or in a manner that discriminates based on nationality or religion rather than valid business reasons.
Therefore, Morningstar would need to “potentially cease issuing or revise the process for preparing reports and research under the guise of ESG” relating to Israel to avoid violating Arizona law, according to Yee.
Yee told the company it would need to provide written certification explaining how its usage of ESG does not violate Arizona law and ensuring that it will not engage in any future boycotting against Israel. She sent the letter on August 18, and if Morningstar does not provide the requested materials, the company will be placed on the Arizona Treasury’s prohibited investment list.
As JewishInsider (JI) reported, Arizona does not currently have any public funds invested in Morningstar, Inc. Any government entity would need to divest from the company if it is added to the prohibited investment list. JI shared that Morningstar is “evaluating” Yee’s letter.
Additionally, 18 states recently joined Missouri Attorney General Eric Schmitt (R) in investigating Morningstar, Inc. and Sustainalytics over potential consumer fraud issues.
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Neil Jones is a reporter for The Arizona Sun Times and The Star News Network. Follow Neil on Twitter. Email tips to [email protected].
Photo “Kimberly Yee” by Kimberly Yee for Arizona.
