Colorado is the latest U.S. state to add a European bank to a blacklist of companies in which its pension fund is banned from investing because of an alleged anti-Israel bias, but Danske Bank A/S denies that it has singled out Israel, and says it has only avoided Israeli companies in instances where their activities go against its corporate responsibility policies.
On Sept. 22, Colorado's Public Employees' Retirement Association put Danske Bank, Denmark's largest lender, on its "divestment from companies with prohibitions against Israel restricted company list." The move is in line with legislation passed in the state in 2016 requiring divestment of public funds from companies that have Israel-specific economic prohibitions, and Danske is the first company so targeted.
Colorado follows in the footsteps of New York state, which released a list of banned companies in December 2016 that it said are supporting the boycott, divest and sanctions movement against Israel, and Illinois, which passed a bill in May 2015 barring the state pension fund from investing in companies that boycott Israel.
Danske Bank is one of the 14 companies on New York's blacklist, which also includes Triodos Bank NV, a Dutch lender with an ethical investment policy; ASN Bank NV (part of Netherlands-based Volksbank NV, also on the list); the Co-operative Group (formerly the parent of U.K.-based Co-operative Bank Plc); and Norwegian life insurer Kommunal Landspensjonskasse Gjensidig Forsikringsselskap and its asset management arm, KLP Kapitalforvaltning.
European financial services firms on Illinois' banned list include ASN Bank and Volksbank, the Co-operative Group, Dexia SA and Triodos, but not Danske Bank; the state also publishes an extensive list of companies banned because they do business with Iran and Sudan, as does Colorado.
In the case of Danske Bank, the controversy stems from its decision to put two Israeli arms manufacturers, Aryt Industries and Elbit Systems, on a list of more than two dozen companies that it will not invest in because they are involved, respectively, in the manufacture of cluster bombs and the distribution of surveillance systems that "violate international conventions and human rights," bank spokesman Kenni Leth said.
This means that they do not meet the bank's responsible investment criteria and would have been on Danske Bank's "banned" list regardless of their country of origin.
"Danske Bank does not boycott Israel or Israeli companies as such, and we do not take part in the [boycott, divest and sanctions] campaign targeting Israel," Leth said in an email to S&P Global Market Intelligence.
The bank's responsible investment policy on arms and defense specifically bars investment in companies that produce cluster bombs, a type of weapon that disperses smaller bomblets over wide areas.
Leth told Danish publication Berlingske that the perception that Danske Bank was anti-Israel was "a misunderstanding," and that it had held talks with Florida, New Jersey and Arizona that resulted in it being kept off their banned lists.
Danske Bank uses an independent firm to carry out ethical evaluations of companies; a list of banned firms is updated twice yearly, Leth said. The list includes companies in the U.S., U.K., Canada, France, the Netherlands, Romania, South Korea, Australia, Russia and Morocco, as well as the two Israeli firms, he added.
"The inclusion of the two Israeli companies on the list does not reflect a decision by Danske Bank to boycott Israel or otherwise restrict its business with Israeli companies. Rather, we included those two companies on our list because we determined that those two companies, like 25 other companies currently on our list, were engaged in commercial activities that were not consistent with our responsible investment policy," Leth said.
A Colorado Public Employees' Retirement Association spokesperson confirmed in an email that there is a "moratorium" on any further investments in Danske Bank but declined to comment further. The fund is banned from "acquiring direct holdings in the securities of non-United States-based companies that maintain economic prohibitions against Israel," according to a policy document.
In April, Dutch-based Triodos also challenged claims that it was anti-Israel. It said: "As we have stated on several occasions and in repeated communication to the State of New York, we choose to invest in companies that match our standard for positive social, environmental and cultural change.
"We do not have any policies or frameworks in place for companies or countries that could result in a boycott of any one country. This implies that we do not boycott Israel."
Triodos Bank has a number of investments in Israel, including a US$1.8 million stake in Solar Edge, a renewable energy company, according to the bank's website.
Danske Bank counts a number of the U.S.'s largest state pension schemes among its shareholders, including the $213.7 billion California State Teachers' Retirement System, which owned $30.8 million of its shares (as of mid-2016).