Illustrative Anti-Israel event. Photo: Wikimedia Commons.

Morningstar, Inc., a Chicago-based investment firm managing over $250 billion in assets, has adopted measures preventing anti-Zionist bias from affecting ratings assigned to Israeli companies by one of its subsidiaries, the company announced Monday.

Morningstar said the subsidiary, Sustainalytics, will issue guidance clarifying that business activity “linked to the Israeli-Palestinian conflict or related to Israel’s defense, against terrorism, do not give rise to a presumption that there is a human rights concern.”

It will also no longer refer to the West Bank and East Jerusalem as ‘Occupied Palestinian Territory’ or ‘occupied territory,'” educate its employees about antisemitism, and procure information about the Israeli-Palestinian conflict from “independent, recognized experts.”

“We believe constructive criticism can make our research better,” Morningstar CEO Kunal Kapoor said in a statement. “We entered the engagement process with the intention of being transparent, listening, learning, and taking appropriate action. These improvements, coupled with the actions we have taken to date, underscore the spirit of purpose and good faith we have brought to this dialogue.”

Since 2020, Morningstar has faced allegations that Sustainalytics, which assigns environmental, social, and governance (ESG) ratings to encourage socially conscious investment strategies, engages in the boycott, divestment, and sanctions (BDS) movement by placing Israeli companies and those that do business with Israel on a “watchlist.” In 2021, JLens, a group that offers financial advice to Jewish investors, reviewed Sustainalytics’ practices and concluded that the firm used “BDS blacklists” and described Israeli companies with “politicized anti-Israel language” in its reports.

Morningstar has adamantly denied that it ever supported BDS.

Monday’s announcement follows months of cooperation between Morningstar, the ADL and several other leading Jewish rights groups, including the Conference of Presidents of Major Jewish Organizations and the American Jewish Committee. Jewish groups across the US commended Morningstar’s new policies for responding to the Jewish community’s concerns about rising antisemitism.

“We are pleased that Morningstar has made significant progress to date in resolving the many issues identified by the Jewish community and other stakeholders,” ADL CEO Jonathan Greenblatt said. “Still, much remains to be done. We look forward to working with Morningstar and Sustainalytics to hep with implementation and oversight of their blueprint for change.”

“Biased ESG ratings are a sign that the anti-Zionism and antisemitism that have grown up on the campus are increasingly having influence in the boardroom as well,” Kenneth Marcus, founder and chairman of the Brandeis Center, said. “Although today we are making only a first step, it it is an important step along a continuing path in which we look forward to helping Morningstar implement its anti-bias goals.”

Richard Goldberg, a senior director of Foundation for Defense of Democracies, said, “The key test of whether Morningstar is violating state anti-BDS laws is whether the company is inflicting harm on Israel-connected firms in the form of controversy ratings, watchlists, and s0-called engagements.”

“This is a great model for all ESG firms to follow. If not, it’s still BDS. Let’s see what Morningstar does next to end the harm done to companies,” he continued.”

In August, 17 state attorneys general wrote a letter to Morningstar asking it to verify that it was not participating in BDS. A spokesperson for Morningstar told The Algemeiner that the firm “does not support the BDS movement.”

18 states have now joined a Missouri probe into the firm. In June, Illinois concluded in its investigation of Morningstar that the firm had not violated state law.