Hackney Council’s Pensions Committee has rejected a demand for divestment made by a deputation of the Hackney Palestine Solidarity Campaign (Hackney PSC) at a meeting on 9 July 2024.

The outcome has also resulted in anti-Israel demonstrators dismantling their encampment outside the Town Hall, established in early May. They said that they had been “forced to change tactics”.

Hackney PSC had originally sought the exclusion of companies on a database produced by the UN Human Rights Council (“UNHRC”) of companies operating in Area C of the West Bank under Israeli administration. However, at the meeting they argued for the exclusion of arms manufacturers generally, backed by an emotive narrative of the situation in Gaza.

Jonathan Turner, chief executive of UK Lawyers for Israel (UKLFI), spoke on behalf of a counter-deputation by Hackney Friends of Israel, which was introduced by Councillor Michael Desmond. They were accompanied by former Councillor Linda Kelly and Martin Sugarman, Chair of the Hackney Anglo-Israel Friendship Association.

Turner reminded the Committee of the fiduciary duties of pension fund trustees and managers to maximise the return on investments consistently with prudence. He referred to the 2014 Law Commission Report which has been regarded as authoritative and endorsed by the UK Supreme Court.

This states: “In general, non-financial factors may only be taken into account if two tests are met: (1) trustees should have good reason to think that scheme members would share the concern; and (2) the decision should not involve a risk of significant financial detriment to the fund.”

The Law Commission added in its Report that “in cases where the issue is clearly controversial, the courts may well expect trustees to focus on financial factors rather than becoming embroiled in disagreements between the members.”

Turner noted: “Israel/Palestine is clearly controversial, probably the most controversial issue on the planet – even though there are other conflicts where there have regrettably been far more casualties. It is also very divisive, particularly in Hackney which has many Jews and many Muslims.”  He drew the Committee’s attention to extensive research at US universities that found that BDS activity targeting Israel promotes antisemitism and hostility.

Turner noted that Hackney PSC had shifted its position to seeking divestment from arms companies generally. There is a consensus that some types of armaments should be banned and against investment in companies that make them.  However, weapons generally are needed by countries to defend their populations from genocidal terrorists who threaten to repeat their atrocities again and again. There is therefore no consensus for divestment from all arms manufacturers, as Hackney PSC now sought.

With regard to the financial impact of divestment, Turner pointed out that the Hackney Pension Fund invests in passive funds, and that its fund managers have no control over which companies are included in these funds. Hackney Pension Fund could only divest from particular companies by disposing of its entire holdings in the funds and adopting a different and significantly more expensive investment approach.

Turner added that “boycotts and divestment are unlikely to impact their target unless there is extensive international compliance” and that “a local Council does not have the tools and systems to make accurate judgments on complex foreign conflicts. This is particularly so in relation to the Middle East where there is so much false information.”

The Committee Chair, Councillor Kam Adams, responded to the Deputations. He noted that “Hackney is home to diverse residents from different nationalities, cultural heritages, and faiths. This includes large Muslim and Jewish communities.”

He quoted the Law Commission’s 2014 guidance and noted that the Pension Fund’s equity investments in companies on the UNHRC database and in Elbit Systems amount to less than 0.2% of the total fund of nearly £2 billion.

However, these investments are held via passive funds. The only way of divesting would be to dispose of the whole investment and find an alternative solution. This would involve significant costs, estimated at over £2.1 million in the first year and over £10 million over five years.

The Committee concluded that “commitment to the form of divestment requested by the Hackney Palestinian Solidarity Campaign would risk financial detriment to the Fund and would therefore breach Law Commission guidance”. However, the Committee are “seeking to develop a survey to gauge the views of scheme members and employers on this very sensitive issue.”

Councillor Adams observed that the Fund’s previous divestment from investments in Russia was different as it was aligned with national government sanctions.

He added that the Committee is focused on delivering “responsible investment priorities, including the transition to a low carbon economy”. Hackney Pension Fund is also an active member of the national Local Authority Pension Forum (LAPFF) which continues to request companies operating in the West Bank to undertake “enhanced human rights due diligence” in the form of “human rights impact assessments led by an independent third party.”