Ethical Investment Policy | BDS Movement

I. Introduction

International standards on the legal responsibilities and liabilities of a company operating internationally have evolved in recent years, and courts are taking a “more expansive view of legal liability.” Exposure is evident in situations of armed conflict, where there is a heightened risk of gross human rights violations and international crimes. 

Legal liabilities of companies are not limited to the domestic laws where these companies are domiciled or where they operate. Laws in Third States may also apply. Companies can be held accountable for illegal operations, and their “board members, executives, or employees” can also be held responsible for corporate and individual wrongdoing. The same standards may apply to institutional investment bodies that invest in such companies.

The Ethical Investment Policy (EIP) of a council, firm, investment fund, university, or other institution (henceforth, entity) must harmonize with the entity’s values and principles. It aims to ensure that its investments are managed in a productive but socially, ethically, and legally responsible manner. 

By adopting this EIP, the entity affirms that it does not profit from or provide capital to corporations that do not conform to international standards of socially, ethically, and legally responsible business operations or from activities materially inconsistent with its values, including its ethical investment principles. 

The entity does not and will not knowingly profit from, provide capital to, or invest in companies implicated in:

1. The production of weapons, weapon parts, or military equipment;
2. Fossil fuel extraction, processing, or trade;
3. Grave violations of human rights as defined in international law (including war crimes, crimes against humanity, and genocide).

The main principles of the entity’s EIP are as follows:

• The EIP is based on the premise that the entity’s choice of where to invest should align with its strategic aims, legal obligations, and environmental, social, and ethical values.
• The entity’s investment/asset managers will actively monitor its investments to ensure their continued adherence to its EIP criteria below. In particular, they must provide professional advice against investment in areas considered ethically or legally unacceptable according to the criteria.

II. Investment Principles

To accord with the entity’s values when investing its funds, regard must be made to Environmental, Social, and Governance (ESG) issues, including human rights, per the United Nations Principles for Responsible Investment (PRI). The entity will not knowingly invest in businesses whose activities and practices risk serious harm to individuals, groups, or the environment.

The entity’s investment principles are based on the UN’s PRI, the UN Global Compact, and the UN Guiding Principles on Business and Human Rights (UNGPs).

The UNGPs are grounded in the recognition of three pillars: the state’s obligation to protect against human rights abuses, the business responsibility to respect human rights, and access to remedies for victims of human rights abuse. “These Guiding Principles apply to all States and all business enterprises, both transnational and others, regardless of their size, sector, location, ownership and structure.”

According to the UN’s Working Group on Business and Human Rights, “Under the UNGPs, all business enterprises have a responsibility to respect human rights, and the process of continuously conducting human rights due diligence (HRDD) is a core requirement for businesses in fulfilling that responsibility.” Businesses should conduct enhanced human rights due diligence in conflict situations and prevent and mitigate adverse human rights impacts identified in all HRDD processes. This includes impacts related to a business’s activities “or as a result of their business relationships with other parties.”

Based on the above, the UN has developed responsible investment principles to guide corporations and investment firms.

(1) The United Nations Principles for Responsible Investment

Institutional investors must act in the best long-term interests of their beneficiaries. In this fiduciary role, they recognize that environmental, social, and corporate governance (ESG) issues can affect the performance of investment portfolios (to varying degrees across companies, sectors, regions, asset classes, and through time).

They also recognize that applying these Principles may better align investors with the broader objectives of society. Therefore, to reconcile their fiduciary responsibilities with their legal and ethical obligations, they commit to the following:

• Principle 1: Incorporate ESG issues into investment analysis and decision-making processes.
• Principle 2: Prevent involvement in human rights violations, war crimes, and crimes against humanity by incorporating investment risk assessment processes for situations of armed conflict.
• Principle 3: Be active owners and incorporate ESG issues into ownership policies and practices.
• Principle 4: Seek appropriate disclosure on ESG issues by the entities in which they invest.
• Principle 5: Promote acceptance and implementation of the Principles within the investment industry.
• Principle 6: Work together to enhance their effectiveness in implementing the Principles.
• Principle 7: Report on their activities and progress towards implementing the Principles.

(2) The United Nations Guiding Principles on Business and Human Rights (UNGPs)

According to the UNGPs, businesses should:

1. Support and respect human rights; and 

2. They must ensure that they do not cause or contribute to human rights abuses and address the adverse impacts they are involved in or linked to. Sometimes, ending the business’s operations or relationship may be necessary. This may also come at the discretion of States. The UNGPs further note that “in situations of armed conflict, enterprises should respect the standards of international humanitarian law.” 

III. Monitoring

To give effect to its commitment to this Ethical Investment Policy, the entity will:

• Publish the EIP on its website following its approval.

• Assign the responsibility to monitor the policy’s operation and effectiveness to a specific manager/department. The manager/department must provide the entity with a quarterly update and advise on investments that conflict with the EIP.

• Publish on its website a list of the commercial assets owned by the entity, with full transparency on these assets’ operations and significant business relationships.

1. “Corporations and their managers, directors, and other leaders could also be held directly liable for the commission of acts of genocide, as well as war crimes and crimes against humanity. Article VI of the Genocide Convention specifies that ‘persons’ may be held liable for genocidal acts – which include individual businessmen or corporate managers as natural persons and may include corporations as legal persons. While the International Criminal Court (ICC) does not have jurisdiction over legal entities, company personnel as natural persons of States Parties to the Rome Statute may fall under its jurisdiction. Under Article 25(3)(c) of the Rome Statute, the ICC can prosecute those who facilitate the commission of crimes, including through the provision of means. […] In situations of armed conflict, additional international humanitarian and international criminal law standards apply to corporations and individual business leaders, who must consider whether their operations contribute to gross human rights violations or international crimes.” 

Obligations of Third States and Corporations to Prevent and Punish Genocide in Gaza, 5 June 2024, p.2

2. Commentary to UNGP 13.

 3. “Third States engaged in commercial activities with companies potentially implicated in acts of genocide in Gaza, for example through public procurement, as shareholders or public pension fund and other investments should terminate such contracts and exclude such companies. 

Pension funds should also withdraw their investments from Israeli banks, Israel Bonds, and other financial institutions, considering the connection with illegal settlements and other violations of international law.” From the expert opinion, Obligations of Third States and Corporations to Prevent and Punish Genocide in Gaza, 5 June 2024, p. 35.

4. The ICJ Advisory Opinion of July 2024, for example, calls on States to “take steps to prevent trade or investment relations that assist in the maintenance of the illegal situation created by Israel in the Occupied Palestinian Territory.” para. 278

5. UNGPs commentary to Principle 12.

6. In situations of armed conflict, the risk of human rights violations is heightened, and so must the due diligence requirements of companies involved in such situations. According to legal experts, “For companies and the institutions that invest in them, understanding and upholding conflict-sensitive practices that embed IHL will give them a greater chance of managing investment risks, encouraging best practices, and respecting the lives and dignity of those affected by armed conflict.”