More European funds mull Israel divestment

The "Financial Times" reports that Dutch and Scandinavian pension funds are considering divesting from Israeli banks.

Israel's banks are not surprised by the reports in "Financial Times" that three European pension funds are considering selling their holdings in the country's banks. The banks and the pension funds have been in talks on the matter for a year. "ABP, the world’s third-largest pension fund, and two major European investors are reviewing their holdings in Israeli banks over concerns that the banks finance illegal Israeli settlements in Palestinian-occupied territories," "The Financial Times" reported today.

"As well as ABP, the Dutch pension fund with €300 billion of assets under management, the investors include Nordea Investment Management, a €130 billion Scandinavian fund house, and DNB Asset Management, a €60 billion Norwegian fund group All three want more information from the Israeli banks about their involvement in financing the settlements, which contravene international human rights laws established under the Fourth Geneva Convention in 2004."

A year ago, the banks invited representatives of some of the pension funds and other investment institutions to visit Israel. The representatives visited both Israel and the Palestinian Authority. Banking sources say that the representatives agreed that the situation was complicated and that it was hard to judge the banks' conduct. One of the representatives was from PGGM, which announced two weeks ago that it would sell its holdings in Israeli banks.

"A spokesperson for KLP, one of the biggest Norwegian pension funds, with €45 billion of assets, also confirmed that 'dilemmas linked to financing [of Israeli settlements] will be discussed at KLP'. A spokesperson said that ABP has held talks with three of the banks over the settlement issue for a year. The pension fund might exclude the stocks “as a last resort” if the banks fail to act on ABP’s complaints," says "The Financial Times". "Nordea Investment Management has sent letters to Leumi and Mizrahi “regarding concerns about the violation of international norms”, Sasja Beslik, Nordea’s head of responsible investment," says "The Financial Times". "The Scandinavian fund house plans to meet these banks in March before taking a decision on whether to withdraw their investment at a committee meeting in May". The newspaper added that Beslik expects other large investors to start looking at their investment policies on the Israeli settlement matter shortly.

"Even if these institutions sell their shares, we're not talking about financial damage. We're talking about holdings worth millions of dollars. That said, the damage from these reports is mostly to the image and there is concern that this could snowball with more institutions jumping on the bandwagon," one source told "Globes".

The banks say that at foreign institutional investors, especially in Europe, investment committees decide on investments, and that human rights is one of the considerations about an investment in a particular share. There are consultancies that investigate human rights at various companies for the institutions, which hold that Israeli activity beyond the Green Line is a violation of human rights and jeopardizes lives. As far as the investment institutions are concerned, banks that grant credit to companies operating in the territories and mortgages to settlers, are collaborators in the violation of human rights.

The banks have tried to persuade the investment institutions that the reality is complicated and that they cannot discriminate between customers, and that they must provide banking services on the basis of business, not political, considerations. Some financial institutions were not persuaded by these arguments and efforts and have announced they will consider divesting their holdings in the banks.

The Israeli banks are disappointed by the media reports about the divestment. "Sources at these pension funds told us that they will divest from Israeli quietly, but that has not happened in practice. This is not the way to behave," said one bank.

Published by Globes [online], Israel business news - www.globes-online.com - on January 20, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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