MSCI Accused of Anti-Israel Bias in Controversy Ratings for Israeli Banks

The state owned Bank of China, which operates in the Xinjiang Uygur Autonomous Region a region where the U.S. government has assessed that China is committing genocide against the ethnic Uyghur population—has received a relatively favorable rating from a major U.S. investment advisory firm. Meanwhile, Israeli banks have been rated much more harshly, raising concerns about potential bias.

MSCI, a prominent investment advisory firm known for its environmental, social, and governance (ESG) ratings, has come under scrutiny for assigning "severe controversy" scores to four major Israeli banks: Bank Leumi, Bank Hapoalim, Israel Discount Bank, and Bank Mizrahi-Tefahot. These ratings, which categorize the banks as being involved in “severe-to-moderate” social and human rights controversies, are primarily based on their operations in Judea and Samaria.

In stark contrast, the Bank of China, despite operating in a region notorious for human rights abuses, received a “green” score in the same categories, indicating that it is "not involved in any major controversies." The only area where the Chinese bank received a less favorable "yellow" score was for bribery and fraud—issues deemed less severe by MSCI's criteria.

The discrepancy in ratings has led to accusations that MSCI is engaging in "backdoor BDS" (Boycott, Divestment, Sanctions), particularly against Israeli institutions. Critics argue that MSCI’s methodology unfairly penalizes Israeli companies for doing business in Judea and Samaria, based on input from anti-Israel sources like Human Rights Watch, the United Nations Human Rights Council, and Who Profits.

“This is BDS. No doubt about it,” said Richard Goldberg, a senior adviser at the Foundation for Defense of Democracies. Goldberg, who was instrumental in crafting the first anti-BDS state law in Illinois, called for state attorneys general to investigate MSCI’s practices, similar to the scrutiny Morningstar faced for its ESG ratings.

MSCI’s approach mirrors practices that Morningstar and its subsidiary, Sustainalytics, were accused of, leading to a broad investigation by U.S. Jewish and pro-Israel groups. Morningstar later agreed to reforms, including revising its sourcing and ratings for companies operating in disputed territories.

Elana Broitman of the Jewish Federations of North America praised the work done to address Morningstar’s alleged bias, urging other firms like MSCI to follow suit. “Morningstar still has to finish the job, but others in the industry that want to ensure they have not allowed anti-Israel bias to infect their ESG ratings, such as MSCI, can see exactly what they need to do,” she said.

MSCI has denied any political bias in its ratings, stating that its ESG ratings and controversies are based on a rigorous, published methodology. “MSCI ESG ratings and controversies are based on a published methodology that is free from political influence or other biases,” said Konstantinos Makrygiannis, an MSCI spokesman.

However, the controversy continues to grow as more states join the investigation led by Florida Attorney General Ashley Moody. With ongoing scrutiny, the investment advisory firm faces mounting pressure to clarify its methodology and ensure that its ratings are free from bias against Israeli companies.

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