Top financial officers from 17 states sent a letter to the CEO of the investment firm Morningstar on Thursday accusing its environmental, social, and governance (ESG) scores of anti-Israel bias and “apparent alignment with the Boycott, Divestment [and] Sanctions (BDS) movement,” the latest escalation in a growing scandal for the investment giant.

The state officials, all Republicans, allege that the ESG ratings offered by Morningstar subsidiary Sustainalytics “are deeply infused with anti-Israel bias” and “automatically [punish] any company involved in the Israeli economy in its ratings system.” They further claim that Morningstar’s denials of this are “intentionally misleading.” 

“Many of our states have investments in Israel, and we view Sustainalytics’ practices [as] a direct attack on those investments,” the letter, obtained by Jewish Insider, reads. “As Americans who strongly support Israel – a close democratic ally of the United States – we are also deeply disturbed by a corporate culture at Morningstar that would allow researchers to rely on sources aligned with the anti-Semitic BDS movement.”

A Morningstar spokesperson said the company does not support the Boycott, Divestment and Sanctions (BDS) movement against Israel. An outside review commissioned by Morningstar recommended changes to the company’s practices. It has agreed to implement these and other proposed reforms.

The letter alleges that state contractors “rely upon Morningstar and other firms for unbiased financial research.”

“As state financial officers, we have a fiduciary duty to ensure that the financial research our respective states rely upon is based on sound financial principles rather than BDS movement tactics meant to isolate Israel in the world economy and breed prejudice against the Jewish people,” the letter continues.

A spokesperson for one signatory, Arizona State Treasurer Kimberly Yee, told JI earlier this week that the state has no investments in Morningstar. Last week, Yee became the first state to communicate her intention to blacklist Morningstar under anti-BDS legislation. Anti-BDS legislation varies by state and, in some cases, the letter’s signatories are not responsible for maintaining their states’ anti-BDS registries.

The letter urges Morningstar to “immediately to terminate all research and ratings products that treat Israel-connected companies differently than companies operating in other free democracies,” including “termination of automatic incident reporting related to companies operating in disputed territories controlled by Israel, elimination of terminology and definitions hostile to Israel, and halting the use of known anti-Israel sources.”

The State Financial Officers Foundation, a group of Republican state officials, which organized the letter, has been critical of ESG investing more broadly, as have some of the individual signatories.

The letter’s signatories include officials from Nebraska, Missouri, Arkansas, Utah, Louisiana, Arizona, Florida, Idaho, Kentucky, Mississippi, North Carolina, North Dakota, Ohio, South Carolina, South Dakota, West Virginia and Wyoming.