The Wales Pension Partnership (WPP) has been warned  that divestment linked to Israel could be unlawful.

In a letter dated 30 March 2026, addressed to the Chair of the Joint Governance Committee and the Chief Executive of WPP, UK Lawyers for Israel (UKLFI) set out a detailed legal critique of efforts by some Welsh local authorities to push for divestment from companies connected to Israel. The intervention comes as WPP reviews its investment framework.  WPP is a collaboration of eight Local Government Pension Scheme (LGPS) funds covering the whole of Wales.

Fiduciary duties

UKLFI’s letter notes that pension fund investment managers are bound by strict fiduciary duties requiring them to prioritise financial returns. Non-financial considerations — such as ethical or political concerns — can only be taken into account if two conditions are met: member support and no risk of significant financial detriment.

These conditions were originally identified in a Law Commission Report. Their application to the management of LGPS funds has since been endorsed in the UK Supreme Court and mandated by UK government guidance and regulations. Their application in this context has also been elucidated in legal opinions by Nigel Giffin KC published by the LGPS Advisory Board and further discussed in a recent article by Dan Harris.

UKLFI emphasises that both of the conditions must be satisfied for any divestment or exclusion to be permissible. It would therefore be unlawful to implement a motion by Carmarthenshire County Council that WPP “should not partake in investments which fund war, human rights violations, or the potential breaking of international law regardless of how profitable they are.”

UKLFI adds that the statutory requirement to apply the two conditions excludes any argument that these conditions might be overridden by international law, as suggested in a paper circulated by the Palestine Solidarity Campaign (PSC).

Member support

UKLFI notes the general consensus that the first condition requires a very high level of positive support or acceptance and is not satisfied where the issue is controversial.

The letter observes that divestment from arms suppliers is likely to be controversial because companies producing arms typically supply them to a variety of countries, including (for example) the Ukraine. Indeed, a recent survey by the Avon Pension Fund found that 47% opposed divestment from defence and aerospace companies against 42% in favour.

The letter also draws attention to the warning given by Harris against assuming that councillors, trade unions and activists express views representative of members of pension schemes as a whole.

Risk of financial detriment

UKLFI’s letter refers to Giffin’s advice that the second condition requires consideration of both the likelihood of detriment and the scale of detriment if it occurs, and that professional advice will normally be required.

UKLFI also notes an important point made by Harris that it is likely to be impossible to change an LGPS investment policy rapidly or at all in the event of a change in market conditions. It is therefore a fallacy to suppose that there is no significant risk of financial detriment by divesting from and excluding a category of companies on the basis that the fund’s existing holding is small, since the category could become significantly more attractive in future.

UKLFI’s letter goes on to warn that excluding sectors such as defence or Israeli companies could significantly diminish financial returns. It points to the strong performance in recent years of defence shares and of the Tel Aviv stock exchange, as well as multi-billion dollar acquisitions of Israeli tech companies.

UKLFI also draws attention to an analysis by the NGO, JLens, which showed that the return of a broadly based US equity index over the period 2014 to 2024 would have been reduced by half of its value at the start of the period if top targets of the Palestinian BDS campaign had been excluded.

Public Sector Equality Duty

UKLFI’s letter argues that WPP is also required to comply with the Public Sector Equality Duty (PSED) under the UK’s Equality Act 2010. This requires bodies exercising public functions to have due regard to the need to eliminate discrimination and harassment and to foster good relations between persons with different protected characteristics.

UKLFI observes that demands for divestment relating to Israel are based on and provide a platform for false allegations of crimes and other wrongful conduct by Israel, stirring up hostility towards Jews, Israelis and Zionists and resulting in their harassment.

UKLFI further considers that acceding to these demands endorses the defamatory allegations and encourages their repetition, exacerbating the damage to community relations and the harassment. Singling out Israel and ignoring conflicts and violations of human rights involving other countries leads members of the public to believe that the Jewish state is uniquely evil and to treat those associated with it accordingly.

The letter cites reports showing links between BDS activity and the targeting of Jewish people for harm and further reports describing the massive rise in antisemitism in the UK since October 2023.

The letter goes on to demonstrate the falsity and perniciousness of some of the most common allegations defaming Israel.

Challenge to UN-linked “database”

UKLFI also disputes the legal weight of the UNHRC database of companies operating in the West Bank, often cited by divestment advocates.

According to UKLFI’s letter, inclusion in the database does not constitute a finding of wrongdoing and should not be treated as evidence of human rights violations.

Call for response

UKLFI has asked the WPP to confirm that its legal arguments will be considered during the ongoing review and requested an update on the process by 13 April 2026.

Jonathan Turner, chief executive of UKLFI commented:

“Those responsible for managing Local Government Pension Scheme funds have clear fiduciary duties. Departing from them exposes both the Councils and the individuals responsible for the decisions to significant financial and legal risks.

It is also important that public bodies act in a way that promotes community cohesion and avoids discriminatory outcomes. Targeting investments connected to Israel, while ignoring comparable situations elsewhere, raises serious equality concerns.

We expect the Wales Pension Partnership to take full account of these legal considerations in its review.”