July 2012 Archives

Worth repeating ... and repeating again

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Contrary to international opinion and the claims of Israeli human rights organizations, it is the loaded use of the term "occupation" that makes peace less likely, not the Israeli presence in Judea and Samaria.
-- DG's Mideast Media Sampler ... 7/10/12

Read the whole thing.

Clarifying the CAT downgrade: MSCI

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This is a story that's gotten so mucked up by the media that I'm not sure it will ever be entirely sorted out.  Of course, they had some extra help from the ever devious and always mendacious Boycott, Divestment and Sanctions (BDS) movement and (possibly) some contradictory corporate statements, but it remains to be seen how much.

Many thanks to the indispensable blog Divest This! for digging painstakingly through the dirt and pointing to this July 4 clarifying Q&A by MSCI explaining in precise detail the mechanics behind its downgrade of Caterpillar, Inc. in February and the company's subsequent removal from three of MSCI's Environmental, Social and Governance (ESG) indices.  Here's the bottom line:

How does the use of Caterpillar equipment by Israeli Defense Forces in the Occupied Palestinian Territories affect the company's rating?

Caterpillar is involved in a long running controversy regarding the use of its bulldozers by the Israeli Defense Forces in the Occupied Palestinian Territories.

This controversy is accounted for in the Community & Society Pillar rating. The Community & Society Pillar accounts for 10% of a company's ESG rating in the Construction & Farm Machinery & Heavy Trucks industry. As part of its ongoing evaluation of companies, MSCI ESG Research analysts assess controversies associated with ESG issues which may potentially pose investment or reputational risks for investors. The analysts document and appraise the significance of such controversies with regard to investor risk, but do not make judgments on the positions of interested parties.

MSCI ESG Research has assessed this human rights controversy since 2004. This controversy has been incorporated in the rating since then and, as such, did not trigger the ratings downgrade in February 2012.

Let's review that last sentence once more.  The use of Caterpillar equipment by Israeli Defense Forces in the territories is a controversy that "has been incorporated in the rating since [2004] and, as such, did not trigger the ratings downgrade in February 2012."

So what did?  Earlier on in the Q&A, you'll find that it was

... due to declining ESG performance associated with management of its Employees & Supply Chain challenges. This rating change was initiated following a controversial lockout and plant closing at the company's London, Ontario, locomotive plant.

A quick look at even the most benign sources reporting the MSCI downgrade during the past two weeks reveals a shocking departure from this very clear statement.  Let's take this article from The Forward on June 25, which bears the headline:

Israel Was 'Key' Issue in Caterpillar Dump: Boycott Israel Groups Claim Win in Ratings Downgrade
with a photo bearing the caption: "Caterpillar's links to the Israeli military has led to its being bounced from a socially responsible stock index."

Or this one, from the AP: 

In a statement, MSCI said one of the "key factors" in Caterpillar's downgrade was "an ongoing controversy associated with use of the company's equipment in the occupied Palestinian territories." It also citied employee safety concerns, environmental issues and a January 2012 plant closing in Canada.
How did a controversy that by MSCI's own reckoning (a) couldn't possibly have accounted for more than 10% of CAT's rating (most likely less) and (b) "did not trigger" the rating downgrade have been characterized as "one of the key factors" in that downgrade? Countless articles from respectable news sources have cited that "key factors" statement, but none of them put it in context and so far I've been unable to find anything like a full transcript.  So where exactly did it come from?  All roads lead back to that same June 25 Forward article, which stated:

MSCI itself was initially vague about how important the Israel-related issue was in its decision to downgrade Caterpillar. But in a statement issued June 25, MSCI made it clear that Israel was a major factor in its decision.

"The key factors determining the rating include a January 2012 labor dispute and subsequent plant closing in Canada, an on-going controversy associated with use of the company's equipment in the occupied Palestinian territories, management of environmental issues, and employee safety," the statement said.

And yet, Wednesday's Q&A published on MSCI's website makes no mention of that "statement" and in fact seems to largely contradict it.  So who was the actual source of the statement that The Forward published and where's the whole thing?  It's a question that might be worth a follow-up.  Bad news stories like this one are really hard to claw back, especially when there's a whole industry devoted to keeping them going.

And then there's the sequel: the TIAA-CREF "divestment" hoax.  Divest This! again has the scoop (also here, here, here and here), and I may come back to that later.

Meanwhile, some good news.

Bibi: wishing America a Happy Independence Day 2012

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via IMRA

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