Council / Consultants believe ‘no immediate action’ is required by SIC over investments linked to Israel
A report from investment consultants cost £9,500 plus VAT, council meeting papers said
A DECISION from councillors to investigate the SIC’s financial holdings in companies linked to the Israeli government has resulted in a report which cost over £9,500 to procure.
The 16-page report, from investment consultants Isio, said the SIC’s funds’ current exposure to Israel is 0.1 per cent of total assets.
Exposure to companies involved in the provision of “enabling products/supply chain” is said to be one per cent.
The consultants said it did not believe any immediate action is needed, but possible actions that the SIC could explore further include:
- Reviewing and updating the fund’s current approach to responsible investing and whether ESG [environmental, social and corporate governance] factors could be further integrated within the portfolio.
- Collaboration with other councils/LGPS [Local Government Pension Scheme]
- 1) to see what others are doing in relation to responsible investing/Israel specifically and;
- 2) to see whether it would be possible to scale overall engagement on certain matters that are deemed important.
The report – which does “constitute recommendation” but instead offers an overview of information – was commissioned by the council after a motion, signed by elected members Alex Armitage and Dennis Leask, was passed in October.
The motion said the SIC noted the “recent finding by the United Nations Independent International Commission of inquiry on the Occupied Palestinian Territory and Israel, that Israel has committed genocide against Palestinians in the Gaza Strip”.
It instructed the SIC’s director of finance to investigate the council’s financial holdings in companies linked to the Israeli government, and to report back to a subsequent meeting with a proposal as to how the council may divest from these assets.
The council hires fund managers to invest its reserves – which at the end of September were valued at £411 million – to gain returns. The council is able to draw funds from these investments for spending.
A report from Isio is now set to go front of elected members at a meeting of the full council on Wednesday.
An introduction from the council said the cost of the report was £9,500 plus VAT.
The consultants said it was difficult to define a link to the Israeli government, and instead it looked at five definitions including regional, direct and market exposure, and supply chain links.
Isio said it believes engagement with fund managers on ethical matters is “more effective to initiate change” than divesting from assets.
The report added that divesting from Russian assets after the country’s invasion of Ukraine was “not only ethnically and politically justified, but financial and legally prudent” because of the UK’s sanctions imposed on Russia.
Isio said in contrast, there are no sanctions from the UK against Israel and therefore the decision for asset managers is centred on “reputational pressure and beneficiary sentiment” rather than market impairment or regulatory compulsion.
Because the SIC’s funding is invested in “pooled mandates”, fully divesting from a specific sector or region would be complex – and could cost around £1.4 million alone.
Isio also said the SIC could consider moving to segregated mandates with fund managers BlackRock and Baillie Gifford, which could exclude any holdings which meet the definitions given in the report.
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