Boycott, divestment and sanctions have long been key demands for the Palestine solidarity movement. Kate Deer explains why they are so important, and outlines some key steps that people can take.
The unfolding genocide in Gaza has rightly sparked public anger across the globe, with many people feeling outraged and helpless by the inability of our political leaders to even call for a ceasefire.
With the United States and Britain effectively vetoing any political sanctions against Israel and continuing to supply weapons, there appears to be no political accountability. But there are things we can do to hold Israel accountable.
One way of doing this is by supporting the campaign for Boycotts, Divestments and Sanctions against Israel (BDS). The BDS Campaign is not new, it is based on an initiative by Palestinian society launched in 2005, and has already scored considerable victories. But it is now time to step up the pressure – Israel has to become a pariah state in the global economy.
Most of us don’t consider ourselves to be investors, or feel that we understand enough about financial markets to really make an impact. But that notion is mistaken. If you pay into a pension, that money is being invested. If you are a student, your university invests its funds through endowments, and even if you are simply a holder of a bank account, your bank will be investing some of its assets. We should have a say in how this money is being allocated.
A key motivation for the BDS campaign is that Israel as a settler colonialist state has virtually no incentive to end the illegal occupation and oppression of Palestine. Recent surveys have shown that only 10 percent of Israelis back a ceasefire, while almost 60 percent think the Israeli Defence Force is not using enough force in Gaza. It is therefore vital that Israel faces international pressure.
Lessons from South Africa
Apartheid South Africa is often raised as an example of a successful boycott and divestment campaign. Just like Israel today, apartheid South Africa was characterised by a settler colonialist regime which oppressed the indigenous population. But growing economic pressure played a crucial role in bringing the apartheid regime to an end.
One day, the Israeli apartheid regime will come to an end and financial markets could play an important role in that. It is crucial that we now step up the pressure on those pension funds, banks, insurers and endowments to divest from Israel just like financial institutions were pressurised in the 1980s to divest from apartheid South Africa. Throughout the 1980s, anti-apartheid activists across the US and Britain stepped up the pressure for universities to divest from apartheid South Africa.
Between 1984 and 1988, the number of universities and endowments divesting from the apartheid state tripled. While sanctions against South Africa appeared relatively ineffective, decisions to stop doing business with the apartheid regime contributed to a sharp drop in foreign direct investment, according to World Bank data. This capital flight and the subsequent devaluation of the South African currency was a major contributor to the end of the apartheid regime.
There are of course significant differences between the Israeli and South African economy. The Israeli economy today is far larger than the South African economy of the 1980s. In 2022, the Israeli state attracted $1.7 trillion in foreign direct investment, compared to South Africa facing millions of net outflows during the 1980s.
But foreign direct investment in Israel peaked in 2007 at $3.2 trillion, plummeted in the wake of the 2008 Gaza massacre, and has never fully recovered, according to World Bank data. This may in part be due to the efforts of the BDS campaign, as in the case of French utilities giant Veolia, which divested from Israel in 2015 after having been targeted by the campaign. More generally speaking, investors may have feared the political risk that comes with investing in Israel.
In the case of South Africa, there were concerns that the economic effects of divestment would hit black South Africans the hardest. But Palestinians, especially those in Gaza, have been on a deliberate starvation diet for more than 15 years, so this argument does not hold up here – it is hard to imagine how their economic situation could possibly become any worse. Moreover, the Israeli economy is not dependent on Palestinian labour, which is one of the reasons why it has proceeded with its ethnic cleansing campaign with such brutality.
Another difference with South Africa is that the Israeli Shekel is in a much stronger position. As of October, the Israeli Central Bank sat on just under $200bn of foreign currency reserves which it can use to prop up the value of the Shekel. But it is worth noting that the genocide has already had an impact on the Israeli currency. In the wake of the 7 October attack, a series of short bets against the Israeli Shekel reduced the value of the Israeli currency. At the same time, major rating agencies such as Fitch and Moody’s downgraded their outlook for Israel. The Shekel has since rebounded, but only because the Israeli Central Bank used more than $7bn of its foreign currency reserves to prop up the currency.
Moreover, the Israeli government borrowed $6bn from international debt markets. Interestingly, it chose to do so through private debt placements rather than via open syndication, reflecting growing nervousness among investors to be associated with funding the Israeli war.
Borrowing costs for the Israeli state have risen since the genocide unfolded. The debt issued in November this year came with coupons (interest rates) of 6.25 and 6.5 percent – by contrast, bond coupons for debt issued before the war were around 4.5 percent, according to the Financial Times. It also reveals that the costs of insuring against Israeli government defaults have doubled. Having said that, Israeli debt to GDP is still low, so it is a long way from defaulting. But a concerted effort to exclude Israeli debt from institutional portfolios could play an important role in driving up Israeli borrowing costs and make it harder to raise money for the war.
Markets don’t have a moral compass. Investors tend to allocate funds according to profits and losses. A financial asset as abstract as Israeli sovereign debt appears conveniently detached from the bombs and missiles launched on families in Gaza. It’s down to us to make that connection.
While markets don’t have a moral compass, institutions such as pension funds have a fiduciary obligation to act in their members’ best interest. They also face growing regulatory pressures to report on their ESG, environmental, social and governance standards. Not lending money to states that commit a genocide should be a natural part of that.
Politicians are starting to fear the BDS campaign, which is an indication of its potential power. The British government is pressing ahead with a bill which effectively outlaws divestments from Israel for public sector pension funds. This is especially aimed at the powerful local government pension funds, which hold £364 billion in assets – several funds have already taken steps to divest from Israel. Some Canadian and Dutch pension funds have also taken similar measures. It is easy to see why politicians who support Israel are concerned about the risks.
Markets are often driven by perceptions of risk which are subjective. For example, in the case of the Greek sovereign debt crisis, perceptions of the riskiness of Greek debt spiralled out of control fuelled by media reports and speculative short bets. While the boycott campaign in itself might only be a small piece of the puzzle, it could easily trigger a domino effect.
The BDS campaign has already outlined some divestment targets. This includes above all Elbit Systems (Israel’s largest arms company), JCB, HD Hyundai, Volvo, Chevron, Barclays Bank and TKH Security. The BDS Campaign has further information how the companies in question are complicit in Israeli apartheid.
But the net could arguably be spread wider. It is unlikely that any pension funds will have direct investments in Elbit systems, but they might hold Israeli government debt. In any case, they are likely to be invested in major US weapon firms like Lockheed Martin, Boeing, Northrop Grumman or the British weapons giant BAE Systems. All of these firms have delivered weapons to Israel which have been used during the genocide.
These weapon firms are included in major indices such as the Dow Jones or the FTSE100 in Britain and defined contribution pension funds in particular tend to invest in funds that simply replicate these indices. Some pension providers might argue that they simply invest in index tracker funds and don’t control what is part of their portfolio, but that is no longer a good enough reason – tracking an index whilst excluding weapon producers has become fairly straightforward.
A practical example is Nest, the largest defined contribution pension provider in the UK, which manages more than £30 billion in pension assets for more than 11 million workers in the UK, and which still invests in BAE Systems and Lockheed Martin. When Russia invaded Ukraine, Nest moved swiftly to announce their divestment from all Russian assets. It would be good to see them upholding the same standards on Palestine.
We should also ask pension providers to no longer invest in Israeli government debt. This case will be harder to make, as it is targeting the Israeli state per se, rather than just firms complicit in maintaining apartheid. But with South Africa taking Israel to the International Court of Justice for genocide against Palestinians, the case becomes much stronger. Moreover, Israeli debt would most likely only account for a relatively small proportion of their investment portfolios so it should be relatively easy to ditch. But if many big investors chose to do so, it could really have an impact.
What you can do
If you pay into a pension, you can take the following steps:
- Find out who your pension provider is. If you don’t have the paperwork, as your colleagues or HR department.
- Talk to your colleagues about your pension and encourage them to also write to their pension provider.
- If your workplace is unionised, you could seek support for the divestment campaign from your trade union.
- Write to your pension provider, addressing the letter to their chief investment officer and possibly their head of responsible investment and ask them to divest from arms manufacturers and other firms complicit in the Israeli occupation and genocide.
- If you are a student, you can target the endowments for your universities. You can find a list of the biggest endowments here.
- Make your campaign public by sharing it on social media, make sure to tag them in it.
- If you bank with Barclays, consider switching provider, as they are a big investor in Israel.
- The insurance giant AXA is on the BDS boycott list as a major backer of Israeli banks.
In sum, you might not think of yourself as an investor because you might not have fortunes to gamble on stock markets. But the institutions we pay our pensions into, our everyday bank accounts, the insurers we sign up to and our universities’ endowments sit on huge amounts of wealth. Their assets could play a powerful role in bringing about the end of Israeli apartheid.