February 20, 2013
BDS call pushes California pension funds
Responding to petitions signed by hundreds of their members, the California State Teachers Retirement System (CalSTRS) and the California Public Employees’ Retirement System (CalPERS) — the state’s two largest pension plans — have become enmeshed in the battle to persuade American companies to divest from Israel’s West Bank.
Staff from CalSTRS met in 2012 with Caterpillar, the construction equipment manufacturer, at Caterpillar’s offices in Peoria, Ill. Israeli forces have used the company’s equipment to demolish Palestinian homes in the West Bank and Gaza, which has made the company a frequent target of activists in the United States seeking to put pressure on Israel.
CalPERS has also begun a process known as “engagement,” a back-and-forth exchange with companies whose business interests are connected to Israel’s occupation of the West Bank, including Caterpillar; Veolia Environnement SA, a French multinational company that operates a landfill in the West Bank; and Elbit Systems Ltd., a Haifa-based manufacturer of defense electronic systems and integrated battle systems.
The news, first reported earlier this month by the trade publication Pensions & Investments, was hailed by activists in the Boycott, Divestment and Sanction (BDS) movement, which seeks to put pressure on Israel by boycotting and divesting from companies doing business with Israel and sanctioning the Jewish state.
“It is quite significant that two of the country’s largest public pension funds are questioning corporations about their involvement with the Israeli occupation,” Anna Baltzer, national organizer with the U.S. Campaign to End the Israeli Occupation, wrote in an e-mail.
According to Pensions & Investments, CalPERS manages $253 billion in funds, including $31 million in Veolia stock and $2.4 million in Elbit; CalSTRS manages $154 billion and owns $174.2 million in Caterpillar stock.
The Israel Action Network (IAN), an initiative established in 2011 by the Jewish Council on Public Affairs and the Jewish Federations of North America, monitors all types of efforts to delegitimize Israel. According to David Dabscheck, IAN’s deputy managing director, BDS activists are increasingly focusing their efforts on institutional investors that attempt to make “socially responsible” investments. These investors attempt to take into account the impact their dollars have on the environment, societies and governments around the world.
“[BDS activists] are trying to exploit the criteria of socially responsible investing to further their strategy to isolate Israel from the family of nations,” Dabscheck said. He declined to speak about any specific actions by IAN regarding CalPERS and CalSTRS.
Catherine Schneider, senior vice president for community engagement at The Jewish Federation of Greater Los Angeles, also declined to comment on what actions, if any, The Federation would take to counter efforts by the Israel Divestment Campaign, the statewide group of activists behind the petitions submitted to CalPERS and CalSTRS.
“We are committed to addressing BDS efforts on a local level, on a state level and on a national level,” Schneider said, adding that for The Federation, as for all American Jewish groups seeking to defend Israel against its detractors, deciding whether to respond to specific BDS efforts requires strategic thinking.
Schneider said The Federation has been watching the group since at least 2010, at which time the activists started collecting signatures for a ballot measure that, had it been approved, would have compelled the two public pension funds to divest their holdings in the targeted companies. The Federation took no public action at that time, and the activists collected only about 14,000 signatures, well short of the 434,000 required to place a measure on a statewide ballot.
In other instances, however, The Federation has mounted active opposition to BDS campaigns. In September 2012, when BDS activists opposed the City of Los Angeles awarding a contract to a Veolia subsidiary to provide DASH bus services downtown, The Federation drafted a letter, along with seven other local Jewish organizations, urging the city not to “entangle” itself in a dispute over the Israeli-Palestinian conflict.
The term “engagement” may suggest a rather open-ended process, but in some cases, engagement by institutional investors with companies is the first step on a path that eventually leads to divestment.
In 2012, after a years-long engagement process, Friends Fiduciary Corp, which manages money for Quaker groups across the United States, divested itself of Caterpillar stock. Later that year, the Quakers voted to divest from Veolia and Hewlett-Packard Co. — the Palo Alto-based computer company, which maintains the biometric ID system used at Israeli checkpoints.
Engagement was also the starting point for the Presbyterian Church (U.S.A.) and United Methodist Church, whose members last year narrowly rejected resolutions to divest from Caterpillar, Motorola Solutions and Hewlett-Packard. Both churches had begun engaging with those companies years earlier.
In response to the engagement inquiry by CalSTRS, Caterpillar said it does not conduct business directly with Israel, but with the U.S. government, which then transfers its equipment to Israel. The response from Caterpillar was outlined in a report prepared by the internal committee that ensures CalSTRS is complying with mandatory divestments from tobacco companies as well as companies with ties to Iran and Sudan.
“As a U.S. Government supplier in the Foreign Military Sales system, Caterpillar must deliver products when requested by any U.S. Government agency,” according to the CalSTRS report that was presented in December by Director of Corporate Governance Anne Sheehan.
Sherna Berger Gluck, who as a professor emeritus at California State University, Long Beach, is a participant in the CalPERS fund, serves as a statewide coordinator with the Israel Divestment Campaign. She said she found Caterpillar’s answer unconvincing but sees the engagement process as part of a path toward divestment.
“It’s not that we’ve given up on divestment,” she said, “but it’s obviously a very long process to get there.”
In recent years, more pension funds have sought to demonstrate their commitment to responsible investing, and a growing number have signed onto the Principles for Responsible Investment (PRI), a United Nations-backed initiative aimed at creating a “more sustainable global financial system.”
Both California retirement systems are PRI signatories. CalPERS, as part of its response to the BDS activists’ petition, has asked PRI to address the subject of responsible investing in the Middle East at an upcoming meeting later this year.