MSCI claims that its ESG ratings do nothing more than “align [a] portfolio with [an] investor’s ethical or political values,”1 but in reality, ESG ratings are weaponized against companies to sway their policies towards the partisan agenda of ESG. When ESG turns companies into partisan actors rather than merely ‘doing well by doing good,’ all investors suffer from the material misinformation. Additionally, MSCI’s ESG rating criteria include a number of highly divisive positions that the majority of shareholders (including many pro-ESG shareholders) are not aligned with. One such example is that MSCI’s ESG ratings have a distinct anti-Israel bias and double standard towards Israel, which most Americans – and therefore most shareholders – would not approve of.2 Nonetheless, MSCI lowers companies’ ESG scores – which influences their policies as they are penalized by asset managers for low scores – simply for their business operations in Israel. MSCI does this by applying a “severe controversy” penalty to those companies’ ratings,3 and it cites heavily biased and morally corrupt sources as a rationale. As Richard Goldberg from The Foundation for Defense of Democracies reports, MSCI relies on “several anti-Israel sources to justify these negative ESG ratings, including Human Rights Watch, the United Nations Human Rights Council, Amnesty International, Who Profits, Pax Christi, Jewish Voice for Peace, AlJazeera, War on Want, and the Palestine Chronicle… The UN Human Rights Council’s blacklist of Israeliconnected companies is a pillar of the [Boycott, Divestment, Sanctions] BDS campaign.4 Who Profits is an organization that initiates BDS campaigns,5 while Amnesty and Human Rights Watch have falsely libeled Israel as an apartheid state.6 Al-Jazeera employed a Hamas terrorist.7 Pax Christi and Jewish Voice for Peace both advocate for BDS and routinely denounce Israel.8 ” 9 And a writer from The Palestine Chronicle held Israeli civilian hostages in his home.10

In short, MSCI relies on these sources – sometimes staffed with literal terrorists11 – to smuggle BDS-type activism into its ESG ratings, which are then leveraged against companies to pressure them to conform to the ratings’ criteria. Aside from running counter to the values of most shareholders, this also raises a grave regulatory risk. As Goldberg reports, “[m]ore than 30 states have adopted laws or executive orders related to boycotts of Israel. Some states prohibit contracting with companies that boycott Israel, while others mandate divestment of state funds, including pension fund investments, from such companies.”12 Thus, states with anti-BDS laws could potentially place MSCI on prohibited investment lists or terminate state contracts with the firm. This is a clear risk to shareholder value and an abuse of the Company’s mandate to serve the interests of all shareholders.