Islington Council’s proposed survey of pension scheme members regarding divestment has been criticised by UK Lawyers for Israel (UKLFI) as misleading and defective. UKLFI has written to the Islington Pensions Committee and Pensions Board, warning that if the deficiencies are not corrected, decisions based on the responses will be liable to challenge.
Managers of pension funds have fiduciary duties to seek to maximise the financial return on investments consistently with prudence. They are permitted to take non-financial considerations into account only if two conditions are both satisfied, namely (1) that doing so does not involve significant risk of financial detriment to the Fund (the financial detriment condition) and (2) that there is good reason to believe that scheme members would support the decision (the member support condition).
Islington Council’s Pensions Committee is proposing to divest (a) from all companies listed in the database compiled by the Office of the UN High Commissioner for Human Rights (OHCHR) of companies carrying on certain activities in the West Bank (Judea and Samaria) and (b) from Palantir, a software company whose customers include the Israel Defence Forces (IDF).
The Pensions Committee has commissioned a survey, evidently in the hope that the responses will support the proposed divestment.
UKLFI argues that the survey is misleading in several key respects:
- Misuse of the UN Database
The consultation wrongly presents the OHCHR database as “a reasonably robust basis” identifying “companies which are likely to be make a material contribution to serious human rights violations”. In fact, the database makes no legal findings and includes companies engaged in activities benefiting Palestinians such as using water to provide sanitary services for Palestinian employees or providing transport enabling them to travel to work.
Moreover, in compiling the list, the OHCHR relied on unverified, anonymous allegations, with companies given no proper opportunity to respond, making it unreliable.
- Misleading Claim as to Financial Impact
The assertion that divestment from companies on the OHCHR database would not materially affect fund performance ignores significant risks, including additions to the database, the obligation to apply similar criteria to companies operating in occupied Western Sahara and Northern Cyprus, and the cumulative financial impact over time. - Questionable Statements on Weapons Investments
The statement that the Fund has already excluded all weapons manufacturers is either inaccurate or in breach of fiduciary duties, since it does not comply with the financial detriment condition. - Biased Presentation of Palantir
The survey gives an unbalanced description of Palantir, stating that its software is used by the IDF and ignoring that it is also used by the Ukraine and UK armed forces. The survey also asserts that Palantir is analogous to a weapons manufacturer in a manner liable to bias the response. - Ambiguity and Overreach
Palantir is analogous to leading IT companies, whose software, hardware or IT facilities are also used in military applications. The survey ignores the significant risk of financial detriment from divesting from these companies.
UKLFI concludes that these issues render the consultation unreliable and unsuitable as a basis for assessing member support or guiding lawful investment decisions.
Jonathan Turner, UKLFI’s Chief Executive, commented: “Those preparing this survey have inserted their own incorrect assumptions as if they were objective facts and overlooked or ignored contrary information. The result is a biased survey on which no reliance should be placed.”