Morningstar does not support BDS - opinion

Morningstar Inc. has pledged greater transparency in its research and rating methodology, as wellas many other new measures to combat antisemitism.

 THE WRITER poses for a portrait in Chicago. ‘Morningstar does not support the anti-Israel BDS campaign; it never has and it never will,’ he says.  (photo credit: Eileen T. Meslar/Reuters)
THE WRITER poses for a portrait in Chicago. ‘Morningstar does not support the anti-Israel BDS campaign; it never has and it never will,’ he says.
(photo credit: Eileen T. Meslar/Reuters)

As the chief executive officer of Morningstar, I have the privilege of leading a company built on transparency, independence, and long-term thinking – important values, but not the only ones. Our firm opposes intolerance or discrimination in any form, including antisemitism. Likewise, Morningstar does not support the anti-Israel BDS campaign; it never has and it never will.

In 2020, Chicago-based Morningstar acquired ESG (environmental, social, and governance) ratings and research firm Sustainalytics, based in Amsterdam. Shortly afterward, a Jewish activist investor group, JLens, raised questions about whether Sustainalytics’ research reflected bias against companies operating in Israel. At that time, we said we did not support BDS. But we were too quick to end the discussion about the possibility of bias in some of our research.

We recognized the seriousness of the issue, though, and retained an outside law firm, White & Case, to conduct a months-long, exhaustive review of our practices. Two independent Morningstar directors oversaw the firm’s work, which proceeded without interference or guidance from our executives. The probe included interviews with dozens of key employees and the review of more than 140,000 documents.

Results of the investigation 

In June, the investigation concluded and we made the entire 117-page report public. It states that “the investigation found neither pervasive nor systemic bias against Israel in Sustainalytics products and services,” and that “Morningstar’s Sustainalytics products do not recommend or encourage divestment” from Israel. Nevertheless, the report also found limited areas of bias that fell short of Morningstar’s standards for objectivity.

 WE MUST stand together against BDS and all forms of antisemitism. (credit: Wikimedia Commons) WE MUST stand together against BDS and all forms of antisemitism. (credit: Wikimedia Commons)

For example, one Sustainalytics product, Human Rights Radar, was found to have biased outcomes by over-representing firms linked to the Israeli-Palestinian conflict. Our response: We discontinued the product. Indeed, we are adopting every one of the report’s recommendations. We have pledged to practice greater transparency in our research and rating methodology, monitor our processes to ensure greater consistency, adopt a style guide to guard against anti-Israel terminology like the phrase “Occupied Palestinian Territories,” and stop doing bespoke research for clients.

Our work in implementing the reforms is ongoing. We recently began working with the Jewish Federations of North America and other major Jewish organizations to reexamine our methodologies and processes to ensure that any possibility of anti-Israel bias is removed. We value our dialogue with these organizations and look forward to continuing to work with them.

Morningstar does not support the anti-Israel BDS movement, and we are proud of our ESG products. Notably, under Sustainalytics’ Country Risk Rating, Israel is rated “Low Risk.” And if you look at our flagship ESG Risk Rating – which measures a company’s exposure to and management of financially material ESG risk – you will see that in aggregate Israeli companies fall in the middle.

Nevertheless, we know bias can occur in less-than-obvious ways. That is why we are committed to remaining transparent in our methods and continuing to engage with the Jewish Federation of North America and other major Jewish organizations – and indeed with anyone who can show us how better to fulfill our mission of getting investors the information they need.

The writer is the CEO of Morningstar, Inc.