OPINION: Time to draw the line as BDS moves in on pension funds

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OPINION: Time to draw the line as BDS moves in on pension funds

by Alex Brummer, City Editor of the Daily Mail 

Alex Brummer
Alex Brummer

Many of the battles against the Palestinian boycott campaign is fought in full public view. These include the attempt to expunge Israeli film productions from the Tricycle Theatre. The Co-operative’s boycott of West Bank produce. The drawn out campaign against (the now closed) Israeli owned Ecostream shop in Brighton and the clumsy efforts to keep Israeli academics off campus.

But a more serious and little understood campaign has been going on in the vast global fund management industry which looks after our savings, insurance and pensions. Behind the scenes the Palestinian supporting Boycott, Divestment and Sanctions (BDS) movement has been seeking to persuade pension fund trustees among others to boycott Israeli firms. 

Similar, campaigns have in the past successfully been run against Britain’s defence contractors and famously the apartheid movement in South Africa. The impact can be devastating. In the case of South Africa Barclays, once the largest bank in Southern Africa, withdrew from the region for almost two decades only returning to the country when Nelson Mandela was elected president.

The BDS campaign first met its Waterloo over Israel in the United States earlier this year. Encouragingly, the current Conservative government, mindful of the views of Jeremy Corbyn’s Labour leadership, is working to stamp out an invidious practice. The Tories aim to stop left leaning Labour controlled councils from making investment decisions on political and social ground rather than in the best interests of present and future retirees. 

Investment managers do at the margin make political choices. Green and ethical funds seek to offer a choice to environmental campaigners and those who object to weapons manufacture. But that is wholly different to singling out one particular country Israel. Among the products of that country’s output are pharmaceuticals, made by Teva, which fill one in six of the prescriptions in the NHS. Others targeted include the American machinery maker Caterpillar which is deployed on building sites and farms across the globe.  

The campaign to defeat BDS in pension fund investment was inaugurated in the United States earlier this year. The US state of Illinois began the process when its House of Representatives and Senate both passed unanimous legislation requiring all five-state pension funds to identify companies that boycott Israel or have bowed to pressure from the BDS movement to divest their direct and indirect holdings in those firms. In other words it became the first state to boycott the boycotters in show of defiance which has been or is being adopted in several other US states and at the national level.

Here in the UK the Conservatives issued a statement in October outlining ‘new rules to stop politically motivated boycott disinvestment campaigns against UK defence companies and against Israel.’ Critics have described the Tory move as ‘ridiculous nannying’ by the government. They argue it is up to local councils to set an investment strategy with money generated by council ratepayers.

The reality is that the councils targeted by the BDS in most cases are acting not in the interests of the retirees, who’s funds they are responsible to, but to narrow political interests. This, arguably, bypasses the fiduciary duty of the trustees of the funds concerned whose task it is to match the assets and returns of the fund to the retirement promises made to those who have contributed. 

As it happens councils, making their own investment decisions, have a terrible record of seeking the best returns and neglecting safety. It turns out that many were investors in the now collapsed corrupt Bank of Commerce and Credit International and the Icelandic banks which went bankrupt during the great financial crisis of 2007-09.

The Jewish community and Israel is fortunate that the minister now responsible for pensions is Baroness Ros Altmann one of Britain’s most fearless campaigners on retirement issues. It was Altmann, once an adviser to the Blair government, who helped shame the Blair-Brown administrations into making good on pensions promises to tens of thousands of ordinary working people, in the steel industry and elsewhere, who lost out on their hard earned entitlements when these firms went into receivership.  

Baroness Altmann is in no doubt about the correctness of the Tory leadership position. ‘The government is absolutely right to direct trustees in this way, especially as local authorities are quasi-government organisations, funded by taxpayers.’ She added it was not appropriate for trustees to be making their own political decisions.

The toughening of attitudes in the US and Britain is no accident. The overly politically correct Norwegian oil fund and the Dutch pension scheme have blacklisted some Israeli companies claiming they have infringed human rights. In contrast in the US the Illinois state pension fund is currently moving in the opposite direction divesting boycotting companies from is $77bn of state pension funds. 

Not surprisingly there has been some blowback from the Local Authority Pension Fund Forum which represents £160bn of assets in the UK and argues the government ignores how seriously trustees take their responsibilities. 

Maybe, but by singling out Israel, among all countries, some councils have not only betrayed retirees they risk fuelling anti-Israel and anti-Semitic sentiment.


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