LGPS urged to divest from ‘Israeli settlement economy’

In a letter to all LGPS pension committee chairs, Lynk, whose title is special rapporteur on the situation of human rights in the Palestinian Territory occupied since 1967, said the LGPS “can play a transformational role in demonstrating the ethical validity of a more robust approach to investing in conflict-affected areas, as well as […] in respecting international humanitarian and human rights law”.

He then asked that LGPS funds conduct enhanced human rights due diligence for all companies listed on the OHCHR database and beyond that “may be involved in the illegal Israeli settlement economy”, and then to divest from any of those holdings if those companies cannot give assurances that they have removed themselves from that economy. 

In addition, he asked that the LGPS ensured companies in high-risk, conflict-affected areas around the world are a priority for the scheme’s environmental, social and governance strategy. 

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

Michael McCann, Israel Britain Alliance

The LGPS board will discuss the letter at its meeting on December 13. In the meantime, the board will seek clarification with Lynk on “a number of points in the letter”, according to its website.

A controversial issue

The LGPS is one of the largest defined benefit schemes in the world, and the largest in England and Wales. It works with 16,300 employers, has 6.2m members and assets of £276bn. 

Last month Pensions Expert revealed that at least two LGPS funds are undertaking engagements with companies linked to contested Israeli settlements. 

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.

Hailed as a win for activists, the question of LGPS investment in Israel is mired in controversy, and the government has previously said it will introduce legislation reintroducing the ban on “local boycotts”.

The fact that these engagements focus solely on companies operating in the world’s only Jewish-majority state has been branded as suspect by pro-Israel campaigners, who accuse some pro-Palestine campaigners of enabling or covering for anti-Semitism.

In particular, the PSC’s closeness with the Boycott, Divestment and Sanctions movement has been heavily criticised. BDS co-founder Omar Barghouti told Pensions Expert in a cover feature in 2020 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, said at the time: “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.”

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.

In response, PSC director Ben Jamal said: “The ask of local government pension schemes is that they do not invest money in companies identified, including by the UN, as being complicit in violations of international law.

“The argument that those campaigning for the rights of Palestinians have prejudiced motivations because their rights are being violated by the policies of the Israeli government is as nonsensical as claiming that those campaigning for the rights of the Rohingya people are motivated by hatred of the people of Myanmar.”

Human rights at stake?

Rachel Brothwood, director of pensions at WMPF, told Pensions Expert in October 2020: “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.”

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.”

The LAPFF adopted a formal position statement on companies operating in disputed Israeli settlements, which stated: “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.

“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.”