Eighteen AGs investigating Morningstar ESG policies, alleged anti-Israel bias
By JOE MUELLER
THE CENTER SQUARE
(The Center Square) – Morningstar Inc. and its subsidiary, Sustainalytics, are being investigated by 18 attorneys general for allegations of consumer fraud or unfair marketing practices.
Missouri Republican Attorney General Eric Schmitt announced he is leading the investigation into the company’s environmental, social and governance (ESG) investment ratings. Mr. Schmitt, who is running against Democrat Trudy Busch Valentine for the seat of retired Republican U.S. Senator Roy Blunt, announced on Wednesday that he had sent civil investigative requests in late July to Morningstar and Sustainalytics. It included more than 40 document interrogations. Sustainalytics’ “Human Rights Radar” was flagged as a concern, along with documents relating to the investigation by law firm White & Case and the Illinois Investment Policy Board.
“These ESG investment firms are playing politics with the pensions and livelihoods of real people,” Schmitt said in a statement announcing the investigation. “Missouri has been a leader in the fight against woke ESG investing and our fight will continue.”
Mr. Schmitt asked Morningstar to provide all documents and communications with clients attempting to dissuade them from doing business in and/or with Israel. Documents and communications were also requested between any official and any person or entity regarding business conducted in, with or relating to the State of Israel, any area of Israeli-Palestinian conflict, and/or boycott, divestment and sanctions (BDS).
“Virginia’s consumer protection laws protect Virginians from businesses that don’t like to play by the rules,” Virginia Attorney General Jason Miyares said in a statement. “Virginia joined the investigation of Morningstar and Sustainalytics in response to credible allegations that they violated our consumer protection laws by allowing anti-Israel bias to infect the ESG ratings they provided to investors. “
In an open letter published in June, Morningstar Executive Chairman Joe Mansueto and Managing Director Kunal Kapoor reaffirmed their stance against an anti-Israel BDS campaign.
“However, in retrospect, our initial review was overly dismissive of the serious bias concerns raised by the JLens organization, the Illinois Investment Policy Board (IIPB), and other entities,” the letter said. “We consider bias to be unacceptable in any form and have concluded that the concerns warrant a thorough and independent review.”
Morningstar hired White & Case, an independent law firm, to conduct an investigation. Over 40 employees and external parties were interviewed and 140,000 Sustainalytics documents, customer reports and other documents were reviewed. The resulting 117-page report identified “limited areas of bias that are outliers over the span of our work but, nonetheless, fall short of Morningstars standards.”
Three states are not permitted to disclose participation due to privacy laws or other state policies. In addition to Missouri, the other 14 are Arkansas, Georgia, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Montana, Nebraska, Ohio, Oklahoma, South Carolina , Texas, Utah and Virginia.