Israel cited in Caterpillar’s delisting from influential investment index

Two Caterpillar bulldozers used for the construction work at the Jewish settlement of Elazar, outside Jerusalem, September 2010.  (Gershon Elinson/Flash90)

Two Caterpillar bulldozers used for the construction work at the Jewish settlement of Elazar, outside Jerusalem, September 2010. (Gershon Elinson/Flash90)

WASHINGTON (JTA) – The sale of Caterpillar tractors to Israel was a factor, but not the determining one, in the delisting of the company from an influential index that prioritizes good governance and human rights.The move, however, is poised to further complicate the difficult ongoing conversation about Israel taking place between American Jewish groups and the Presbyterian Church (USA). 

A senior official at MSCI-ESG, a subdivision of MSCI, an investment advice firm, said Caterpillar already had a low rating before its delisting earlier this year, in part because of its association with the Israeli army’s use of the tractors in the West Bank and past use in the Gaza Strip. The role of Israel’s use of the tractors in the decision also suggests that a sustained campaign by pro-Palestinian groups has had some effect, although officials at MSCI-ESG and one of its clients, the TIAA-CREF pension fund, deny succumbing to direct pressure.

TIAA-CREF’s divestiture amounted to $72 million in funds, dwarfing previous divestitures by liberal religious groups such as Friends Fiduciary, a Quaker group that divested $900,000.

The news of the delisting comes ahead of the biennial general assembly of the Presbyterian Church (USA), where divestment from Caterpillar and other companies selling products used by the Israeli army will be considered.

Ethan Felson, the vice president of the Jewish Council for Public Affairs, and the Jewish community’s lead official in countering the boycott, divestment and sanctions movement aimed at Israel — known as BDS — said that how the movement was spinning the news of the MSCI-ESG decision would cause "damage" just ahead of the Presbyterian colloquy.

BDS groups already were claiming a victory, although Felson noted that the sales to Israel were neither the immediate nor the preeminent factor in the divestment. He said that linking Caterpillar to Israeli practices was "nonsensical," noting that it had no say in how the U.S. military resells the tractors and that it could not legally turn down the U.S. military as a client.

The MSCI-ESG official told JTA on Friday that what drove Caterpillar off the index was the company’s decision in February to shutter a Canadian plant following a high-profile dispute with employees. However, the official acknowledged that several factors played into the company’s already relatively low rating, including the association of Caterpillar with Israeli army practices in the administered territories. 

The death in 2003 of Rachel Corrie, an American pro-Palestinian activist, while she was protesting the demolition of a Palestinian home in the Gaza Strip helped spur the BDS movement. Corrie’s parents and witnesses say she was caught beneath an armored tractor. The Israeli army denies fault and maintains that she was killed by debris.

MSCI-ESG — ESG stands for Environment, Social or Governance — has as its clients a number of progressive groups that base their investments in part on social justice issues, including care for the environment, the treatment and safety of employees, and involvement in human rights abuses.

Its decision, made in February and effective as of March 1, came to light this week because of claims by groups associated with the BDS movement that a decision by TIAA-CREF — a pension fund for teachers and other academics — to divest from Caterpillar was a result of their pressure.

"It’s long past time that TIAA-CREF began living up to its motto of ‘Financial Services for the Greater Good’ when it comes to the people of Israel and Palestine,” said Rabbi Alissa Wise, the national coordinator for We Divest, a coalition of several groups, including Jewish Voice for Peace, where Wise is director of campaigns.

Pro-Palestinian groups for a decade have campaigned against the sale of the tractors to Israel. The pro-Palestinian groups, backed by a number of human rights NGOs, say that Israel uses the tractors to destroy Palestinian homes as a means of inhibiting growth and as collective punishment. Israel says the tractors are used to destroy illegal structures, and in Gaza were used until 2005, when Israel pulled out, to destroy tunnels used by terrorists for smuggling purposes.

Caterpillar has said it sells the tractors to the U.S. military for resale to allies, and does not determine to which countries the tractors are resold and how they are refitted for military use.

In a statement released to Jewish groups, Caterpillar again denied direct sales to Israel of the D-9 Track-Type tractors.

"This is how it works," corporate spokesman Jim Dugan said. "Caterpillar sells equipment to the U.S. government, which then transfers the equipment to the Israeli government, which then transfers it to the Israeli military. Israel is one of about 150 countries that take part in the program, which supports U.S. allies. For the D9s, the protective armor plating, the bullet resistant glass and other modifications take place after the machine has been transferred to the Israeli government by the U.S. government. These changes happen after the sale, not in our factories. We hope and wish for a peaceful resolution to the unrest in the Middle East, but that solution is a political matter to be worked out by the appropriate parties. Caterpillar does not and should not have a role in that political process."

The Jewish Federations of North America’s Israel Action Network derided the haste with which pro-BDS groups claimed credit for the divestment.

"Pro-BDS groups have constructed the ‘Caterpillar Myth’ that insinuates a conflict between the machine and the Palestinian people," Geri Palast, the network’s managing director, said in a statement. "It is designed to invoke dystopian images, link BDS to specific Israeli policies and appeal to fear."

Officials of TIAA-CREF, however, denied such pressure was a factor and pointed JTA to established policy that devolves such decisions regarding its Social Choice account to its “social screen vendor” — in this case, MSCI-ESG. A quick review of a number of recent TIAA-CREF fund reports shows that the fund still has millions of dollars invested in Caterpillar outside of the Social Choice account that MSCI-ESG screens.

And while the MSCI-ESG official, who spoke on background, affirmed that Israel’s use of the tractors was one of several factors in the decision, he also said that an established methodology determines which companies are listed and which are not, and that decisions are not based on representations from interest groups. The official’s emphasis suggested that shuttering the Canadian factory had greater weight than Israel’s use of the tractors.

Rebecca Vilkomerson, the Jewish Voice for Peace spokswoman, said she was “confident” that representations by the We Divest coalition and other groups to MSCI-ESG and TIAA-CREF played a role.

In any case, she said, activism by groups such as hers has resulted in a “consensus in the human rights community because of its role in human rights abuses in Palestine, Caterpillar is not an ethical actor.”




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