Scott Shay on How BDS Crept Into the Investment World, and How It Was Kicked Out

The Tikvah Podcast

Tikvah

Judaism, Politics, Religion & Spirituality, News

4.6 • 620 Ratings

🗓️ 3 November 2022

⏱️ 39 minutes

🔗️ Recording | iTunes | RSS

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Summary

In recent years, a new movement has shaken the world of finance. Many investors are no longer interested in the financial return on their investments alone, but they want to feel that they are investing in companies that align with their ethical values. In response, a new metric was created: the ESG score, which attempts to measure the environmental, social, and governance factors and attitudes present in any given company.

A few years ago, it was discovered that Morningstar, one of the most prominent of the agencies that create and rank ESG scores, was disproportionately giving companies that are located in or do business with Israel lower scores. After discovering this systemic practice, Scott Shay, the chairman of Signature Bank, worked together with leaders in the Jewish institutional world to confront Morningstar and persuade it to stop. On this week's podcast, in conversation with Mosaic editor Jonathan Silver, he tells the whole story.

Musical selections in this podcast are drawn from the Quintet for Clarinet and Strings, op. 31a, composed by Paul Ben-Haim and performed by the ARC Ensemble.

Transcript

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0:00.0	We live in a highly moralized time. The brand of clothing you wear or the razors you shave your face with
0:15.5	have connotations now for your tribal identity in American society. Corporate entities once tried to avoid
0:23.3	hot button social and political issues because, reasonably, they wanted to do business with
0:29.6	and sell products to everyone. Coca-Cola wants Democrats and Republicans both to buy its soft drinks. We can't assume that any longer,
0:39.3	because today many companies do not avoid but are instead eager to articulate some set of values.
0:46.6	In 2015, the New York Times columnist Ross Douthit called the effort of corporations
0:52.1	to signal support for progressive causes woke capitalism.
0:57.0	And in this social climate, the line between consumer and activist has been blurred.
1:02.0	Now, a parallel development in recent years has gathered momentum in the world of finance and investing.
1:09.0	See, investors are no longer merely interested in the
1:12.6	financial return on their investment. I mean, of course, they're interested in that too,
1:17.2	and perhaps remain mostly interested in that. But alongside the money that they can make,
1:23.1	investors want to feel as if they are investing in companies that align with their values.
1:28.5	Now, here's the problem.
1:29.7	Investors can't possibly know enough about the ethical stances of the many thousands of companies that they could invest in.
1:36.6	And so, a new industry has been born.
1:39.8	The new industry advises investors on this question by assigning to companies an ESG score.
1:47.5	ESG, that stands for the environmental, social, and governance factors that go into these rankings.
1:54.5	ESG ranking agencies thus have a large impact on which companies are added to indexes and portfolios and which ones
2:02.5	receive investment? Here we come to our theme. For what if one of the most widely used of these ESG
2:08.5	rankings agencies exhibited a systematic bias against companies that are located in or do business with
2:16.7	Israel? What if the effort to boycott, divest, and sanction Israel so prevalent on many college campuses,
	...

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