By  Benjamin Mercer | October 2, 2020

At least two Local Government Pension Scheme funds are undertaking engagements with companies allegedly operating in contested Israeli settlements, Pensions Expert can reveal.

The West Yorkshire Pension Fund, the West Midlands Pension Fund, and the Local Authority Pension Fund Forum, which brings together 80 LGPS funds, have each targeted companies featured on a blacklist published by the UN Human Rights Council and flagged by campaigners for the Palestine Solidarity Campaign.

The move was made possible by the government’s defeat in the UK Supreme Court case MHCLG vs Palestine Solidarity Campaign earlier this year, a verdict that lifted the government’s ban on political investments by the LGPS, as reported by Pensions Expert at the time.

The PSC action demonstrates how pension trustees can be mobilised and manipulated

Michael McCann, Israel-Britain Alliance

In a letter, seen by Pensions Expert, from WYPF chair Cllr Andrew Thornton to Ben Jamal, director of the PSC, the WYPF confirmed that it was seeking information from Alstom, a French multinational rolling stock manufacturer, “regarding its inclusion on the UNHRC list and its human rights impact assessment for those activities”.

The letter also confirmed that the LAPFF, of which WYPF is a member, “met recently with representatives of the Palestine Solidarity Campaign”.

Meanwhile, minutes prepared for a pensions committee meeting at the WMPF that took place on Wednesday stated: “Following the Supreme Court ruling on the case of the Palestine Solidarity Campaign vs the secretary of state for housing, the fund received correspondence from both a national campaign group (received in common with a number of other local authority pension schemes) and local representatives.

“The Wolverhampton Palestinian Solidarity Campaign raised queries regarding a number of companies that currently operate within occupied Palestinian territories that were felt not to be adhering to the UN’s guiding principles on human rights,” the minutes continued.

“The fund’s engagement partner, LAPFF, has started correspondence with companies cited by both the PSC and the UN as having human rights concerns through their operations in the Israeli settlements/occupied Palestinian territories. The committee will be kept updated on progress in this engagement.”

Controversial moves a win for activists

The moves were claimed by the PSC as a victory, won in large part by their lobbying efforts.

Mr Jamal said: “We welcome the steps taken by the LAPFF and the WYPF to begin engagement with companies active in Israel’s illegal settlements.”

He added that “administering authorities must listen to scheme members and their representative trade unions and go further, ensuring that no amount of money is invested in any company that is complicit in supporting Israel’s grave violations of international law”.

However, the moves are controversial. As reported previously by Pensions Expert, the government intends to bring in legislation to supersede the Supreme Court’s decision and reinstate a ban on “local boycotts”.

Additionally, the fact that the engagements focus solely on companies operating in Israel has been branded suspect, with critics suspecting an ulterior motive to the focus on the world’s only Jewish state.

Omar Barghouti, co-founder of the Boycott, Divestment and Sanctions movement, which the PSC supports, told Pensions Expert in a cover feature this year that it is targeting an end to “Israel’s entire system of occupation, settler-colonialism and apartheid”.

Michael McCann, director of the Israel-Britain Alliance, who predicted moves such as these when Pensions Expert spoke to him in June, said: “The Supreme Court ruling means that LGPS funds have the ability to pursue divestments in any country they wish, under the veil that they are acting on their members’ wishes. However, the PSC action wasn’t taken to prevent investment in China, North Korea or Iran, it was taken to stop investment in the world’s only Jewish state, Israel.”

Mr McCann said the PSC action “demonstrates how pension trustees can be mobilised and manipulated” by political campaigns, adding that government intervention is needed to stop this.

Engagement protects human rights

Asked to respond to these concerns, Rachel Brothwood, director of pensions at WMPF, told Pensions Expert: “The West Midlands Pension Fund adopts a risk-based approach to responsible investment based on the principle of engagement for positive change where this can influence and protect the value of the fund’s investments.

“Collaborative engagement has been proven to be more effective, and we support the work the LAPFF is undertaking with companies operating in this area, engaging and gathering information to inform future engagement.”

Ms Brothwood continued: “This aligns with the fund’s responsible investment framework and work across a broad range of human rights issues as one of the fund’s four engagement themes for 2020–23.” 

An LAPFF spokesperson directed Pensions Expert to its position statement regarding companies operating in Israeli settlements. 

“The forum has engaged with companies operating in the Israeli settlements/occupied Palestinian territory prior to the UN report and Supreme Court ruling, and prioritises engagement with companies in which LAPFF member funds collectively hold a high number of shares,” the statement read.

“LAPFF will continue to engage with companies to promote acceptable human rights conduct and impact, not only in this region but globally. In respect of engagements with companies operating in the Israeli settlements/occupied Palestinian territory, the forum is using the UN report as a point of reference for engagement.”

It adds that the LAPFF engagement strategy is to ask companies accused of operating in the disputed territories “to produce robust, independent, and credible human rights impact assessments… in line with the UN Guiding Principles on Business and Human Rights”.

The LAPFF retains the option to employ “escalation strategies” such as providing members with voting recommendations for company annual meetings, and “using targeted press coverage to facilitate accountability”.

LGPS has £2bn invested in alleged ‘illegal Israeli settlement’ companies 

Thirty-three Local Government Pension Scheme funds retain investments worth more than £2bn in arms manufacturers and in companies accused of supporting illegal Israeli settlements, as some of these schemes opt for engagement instead of divestment.

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“The forum will continue this approach with companies so that investors have access to adequate levels of information on which to engage investee companies and hold them to account, both in respect of human rights performance and financial performance,” the statement continued.

The Ministry of Housing, Communities and Local Government and the WYPF have been approached for comment.

Israel Britain Alliance Ltd. Registered Address: 71-75 Shelton Street, London, WC2H 1BB. Company Number: 11054917