Financial Ratings Firm Morningstar Pulls Israeli Security Firm From Investment Blacklist

Morningstar upgrades tech company that works with Israel following Free Beacon report

Activists demonstrate outside Israeli-owned Elbit arms company (Christopher Furlong/Getty Images)
December 19, 2023

Financial services firm Morningstar has pulled an Israeli security firm off its investment watchlist, the company told the Washington Free Beacon, marking a significant win for pro-Israel advocates who had been pressuring the financial giant to stop unfairly targeting the Jewish state.

Morningstar had been encouraging its clients to divest from Elbit Systems, a technology company that helps Israel combat terrorism, generating accusations that the ratings firm is complicit in the anti-Semitic Boycott, Divestment, and Sanctions (BDS) movement, which wages economic warfare on Israel.

Elbit Systems was removed from Morningstar’s blacklist in July, according to a spokesman for the financial ratings firm, who confirmed the technology company is no longer being downgraded for its work with the Israeli military. Ratings produced by Morningstar act as a primary guide for investors and can greatly impact how a company is valued.

"There is no longer a controversy in our research associated with the provision of services to the Israeli security forces for surveillance purposes at military checkpoints and the wall within the area of the conflict," the Morningstar spokesman said. "The company remains exposed to some minor reputational risks following allegations of delivering weapons that are used by the Israeli military and have caused civilian casualties."

Morningstar subsidiary Sustainalytics has long faced criticism from pro-Israel groups for blacklisting several companies, including Elbit, that work with Israel to stop terrorism. The ratings giant has been working for months to combat claims of anti-Israel bias in its ratings system, with Elbit’s removal from the watchlist signaling Morningstar is taking these concerns seriously.

"This is a significant step forward in removing pro-Hamas ESG ratings inside Morningstar with no Israel-based companies left on its do-not-invest list," said Richard Goldberg, a senior adviser with the Foundation for Defense of Democracies who first documented anti-Israel bias at the company. "Morningstar however still maintains pro-Hamas BDS controversies on several companies, which get factored into their overall ESG risk ratings, so it's too soon to give Morningstar a clean bill of health."

Morningstar says that Elbit Systems was upgraded earlier this year after "enhancements to our sources methodology" was implemented during the summer.

The Free Beacon first reported in June 2022 on how Morningstar was targeting Israeli security firms for their work with the country’s counterterrorism forces, relying on research produced by several pro-BDS advocacy groups.

Morningstar began reforming its ratings process earlier this year after some states, including Florida, threatened to cut financial ties with the firm for its alleged anti-Israel bias and support for the BDS movement.