Position on Bank Hapoalim
The Fund takes their responsibilities as shareholders seriously. We believe that environmental, social and governance (ESG) issues can affect the financial performance of the companies in which we invest. We therefore have a responsibility to take these ESG issues seriously and where appropriate, to act upon them. In practice we mainly do this through the appointment of a third party, which is currently Hermes Equity Ownership Services (EOS), who assist in fulfilling our fiduciary responsibility as long term shareholders. On a day to day basis, the in-house investment team takes these matters into account and on an ongoing basis when reviewing the Fund’s external managers to ensure that they do likewise.
Following its appearance on a “blacklist”, a database that the UN was apparently creating of companies operating in Israeli settlements in the West Bank and East Jerusalem, the Fund checked the position with Hermes EOS. Hermes confirmed that the company did not currently sit within its formal engagement programme but that it had recently written to Bank Hapoalim following an NGO’s report ‘Business on occupied territory’.
The Fund have also undertaken due diligence with our external provider of ESG research. The provider notes one social controversy for Bank Hapoalim: that a group of Palestinians had filed a lawsuit against numerous private individuals, political entities and companies, including Bank Hapoalim, over their alleged support of settlements on the occupied territories in the West Bank. This controversy is in the context of a very high overall ESG rating for the company. In other words, the company is not perfect, but across a wide range of environmental, social and governance measurements, it is rated as one of the best banks in the provider’s extensive database.
The Fund’s primary objective is to pay pensions to its members when they fall due and it strives to do this by investing in a responsible manner, which includes engagement with companies through Hermes EOS and directly where the opportunity arises. It does not commission reports from Hermes EOS or anyone else to further the political causes. Nor does the Fund have a policy of exclusion. Its policy is to engage with the companies in which it owns shares with a view to improving corporate behaviour to the benefit of shareholders. By doing this, the Fund aims to satisfy its most important social responsibility, which is to its members and employers by providing pensions, and it believes that this approach will also provide wider societal benefits.
Mention is often made about Falkirk Council Pension Fund. Each LGPS fund has its own investment arrangements and Lothian would not comment on another fund’s arrangements or the decisions of its managers. However, we do know that Falkirk Council Pension Fund has a statement on their website to explain their position on Bank Hapoalim.