13 Fall 2021 should “Avoid questions that begin with a statement indicating a pre-existing position: this can bias the beneficiary’s response.” 10 Suppose, then, that a trade union, with no financial interest in a pension fund – just in terms of its political position – believes the pension scheme should divest from a stock on BDS grounds. Rather than lobby the pension fund’s trustee or scheme administrator with whom it has no relationship, the union issues a“guide” for its many millions of members, some of whom are also beneficiaries in the LGPS. The guide is entitled “Palestine: is your pension fund invested in the occupation?”11 The union makes the case to its members that they should communicate to their pension boards or scheme administrators their preference for divestment from certain stocks on human rights grounds. It feeds them a one-sided narrative. It even provides them with a pro forma letter to sign and send to the pension board or scheme administrator. The union takes care to disclaim responsibility and inform members that it is not their investment advisor – but the reality is very different. The union is in a position of influence. The member, by virtue of the union looking out for his or her employment rights, will have a high degree of trust and confidence in what the union communicates. When a fiduciary is on notice that a beneficiary’s preference simply adopts the wording of the model letter attached to a guide, and that the entire guide is premised on a leading question, the PRI’s cautionary advice surely applies. In such circumstances, the beneficiaries are arguably little more than proxies. The trustee is really in receipt of no more than a singular view of the union, a non-beneficiary. Even if a consensus across beneficiaries is detectable, the fiduciary must consider whether the pursuit of BDS (however the fiduciary may characterize it) is in the best interests of the fund. As the PRI has said,“Trustees and relevant parties should not take beneficiary preferences as instruction, but rather as key input.…”12 This process involves a duty to reach the decision with due skill, care, and diligence.13 In practical terms, the trustee must give proper weight to relevant considerations, including in this case the legal position, and discount irrelevant considerations. An honest appraisal of most investment management firms will reveal that their businesses pre-date ESG considerations. They are organized to measure and manage financial risk. The integration of non-financial ESG considerations into the investment management process has made fiduciaries heavily reliant on information from third-party ESG score providers and ESG exclusion list compilers. The marketplace is crowded with such providers, some of which are (or are lobbied or even influenced by) BDS activists. For example, the database of business enterprises published by the UN Office of the High Commissioner for Human Rights (OHCHR) on February 12, 2020 is increasingly cited in divestment and exclusion decisions. The format of a list is highly calculated: it is easily and cheaply operationalized by investment managers. Where a disposal is not expected to have an impact on overall portfolio risk or performance, the fiduciary has little incentive to look behind the blacklist to test its veracity. Those who may be inclined to do so soon discover that the lobbyists behind it included the pro-BDS NGOs Human Rights Watch, Amnesty International, Who Profits, and Al-Haq.14 The database sidesteps the highly involved legal and factual analysis required here, including making a seamless leap from the acts of a state to the acts of nonstate enterprises. The decision of the UK Supreme Court in DPP v. Richardson15 illustrates how an evidential link between a company and the State of Israel cannot be readily drawn. The database simply reframes and distils the entire analysis into the nebulous catchphrase“human rights concerns”which – to the unsuspecting – readily invites the leap to “human rights breaches.”The mere mention of “human rights” is calculated to marry-up with the boilerplate language of ESG policies, despite the suggestive assertions being unsupported by legal analysis or sound empirical research. 10. “Understanding and Aligning with Beneficiaries’ Sustainability Preferences,” PRINCIPLES FOR RESPONSIBLE INVESTMENT, Apr. 21, 2021, p.14, available at https://www. unpri.org/strategy-policy-and-strategic-asset-allocation/ understanding-and-aligning-with-beneficiariessustainability-preferences/7497.article 11. “Palestine: Is your pension invested in the occupation?” UNISON, Jan. 17, 2021, available at https://www.unison. org.uk/news/article/2021/01/palestine-pension-investedoccupation/ 12. Supra note 10, p.17. 13. The UK Financial Services Authority imposes the same standard on firms it regulates. 14. “UN BDS Blacklist,”NGO MONITOR, available at https:// www.ngo-monitor.org/key-issues/un-bds-blacklist/ which-ngos-are-involved-in-the-creation-of-the-blacklist/ 15. [2014] UKSC 8 (see particularly para. 17).
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