MSCI Faces Scrutiny Over Alleged Anti-Israel Bias

Washington, D.C. — During MSCI’s 2025 annual shareholder meeting, executives may have materially misled shareholders in their response to a question from the National Center for Public Policy Research’s Free Enterprise Project (FEP) over MSCI’s treatment of companies that operate in the West Bank.

Stefan Padfield

During the meeting, held April 22, FEP Executive Director Stefan Padfield asked:

It has been reported that MSCI recently removed severe ESG risk designations from some Israeli companies with operations in the West Bank. As of November 2024, how many Israeli and U.S. companies were flagged by MSCI for severe ESG risk due to their operations in the West Bank, and do the ESG reports of the companies reveal when this concern is introduced, when it is removed, and approximately how many points were deducted due to this concern?

An MSCI executive responded:

An MSCI ESG rating assesses the company’s exposure and resilience to long-term financially material ESG risks. Our methodology contains no ratings criteria that reference Israel. Do not penalize companies based on their domicile or for selling products or engaging in business activities in any country, including Israel. And it’s applied consistently to all companies within a sector, including Israeli companies. The jurisdiction of a company’s incorporation and the location of its headquarters, operations and customers are not elements of our ratings criteria and therefore do not impact company ESG rating.

(The recording can be found starting at the 17:20 mark here.)

Based on communications with researchers studying MSCI’s ratings and public communications (including MSCI’s response to the National Center’s shareholder proposal), the National Center believes that MSCI’s response may be materially misleading – potentially exposing the company to breach of duty and securities fraud claims.

Just as troubling, the National Center believes that the company failed to provide answers to the questions presented and, seemingly showing nothing but contempt and disrespect for its shareholders, sent up a smokescreen of non-responsive information relating to domicile, location of headquarters, and customers. Shareholders still do not know how many companies were flagged for severe ESG risk as a result of operating in the disputed Israeli territories, what deductions were made to their scores, and whether the removal of the concern resulted in an adjustment to the negative score.

In addition to following up with the company, the National Center plans to bring this apparently deceptive behavior to the attention of the U.S. Securities and Exchange Commission (SEC), which may have been misled in allowing MSCI to exclude the shareholder proposal.

Specifically, researchers have identified the following issues as among those warranting further investigation:

1. Does MSCI’s invocation of terms like “jurisdiction of incorporation” and “location of headquarters” in response to the shareholder question function as a straw man—an intentional misdirection meant to obscure the actual issue? Will MSCI supplementally provide real answers to the questions that were presented?

2. Did MSCI, in apparent response to the National Center’s proposal and growing public scrutiny, remove controversial flags from certain Israeli banks in order to obscure prior biased decision-making? On what date were the “controversies” removed, and were the removals in response to any changes in conditions other than public scrutiny?

3. Did MSCI treat certain Israeli banks worse than similarly situated U.S. corporations in response to political pressure? Specifically, when the controversy in question was removed from the U.S. company operating in the disputed territories, as well as the Israeli banks, was the rating of the U.S. company adjusted in a manner different from the ratings of the Israeli companies?

4. Did MSCI lie when it claimed that its methodology contains no ratings criteria that reference Israel or, once again, is this a straw man response, because the general methodology may contain no Israel-specific ratings criteria, but the disputed territory in Israel is treated differently than disputed territory elsewhere?

5. Based on answers to the previous questions, shareholders deserve to know: Has MSCI improperly claimed that geographic operations are irrelevant to its ratings?

6. Based on answers to the previous questions, shareholders deserve to know: Has MSCI intentionally modified disclosures to obscure biased treatment of Israeli companies?

The National Center will be seeking responses to these questions from MSCI.

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The National Center for Public Policy Research, founded in 1982, is a non-partisan, free-market, independent conservative think-tank. Ninety-four percent of its support comes from individuals, less than four percent from foundations and less than two percent from corporations. It receives over 350,000 individual contributions a year from over 60,000 active recent contributors.

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