Some European Firms Retreat from Israel-Linked Finance amid War Pressure

 An Israeli national flag flies over a city highway during rush hour, amid the ongoing conflict in Gaza between Israel and Hamas, in Tel Aviv, Israel, November 4, 2024. (Reuters)
An Israeli national flag flies over a city highway during rush hour, amid the ongoing conflict in Gaza between Israel and Hamas, in Tel Aviv, Israel, November 4, 2024. (Reuters)
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Some European Firms Retreat from Israel-Linked Finance amid War Pressure

 An Israeli national flag flies over a city highway during rush hour, amid the ongoing conflict in Gaza between Israel and Hamas, in Tel Aviv, Israel, November 4, 2024. (Reuters)
An Israeli national flag flies over a city highway during rush hour, amid the ongoing conflict in Gaza between Israel and Hamas, in Tel Aviv, Israel, November 4, 2024. (Reuters)

Several of Europe's biggest financial firms have cut back their links to Israeli companies or those with ties to the country, a Reuters analysis of filings shows, as pressure mounts from activists and governments to end the war in Gaza.

While banks and insurers are often vocal about their environmental and governance aims, they are less forthcoming about disclosing their potential exposure to war.

UniCredit put Israel on a "forbidden" list as the conflict escalated in October last year, said a source familiar with the matter, confirming a study by Dutch NGO PAX.

While in line with the Italian bank's defense-sector policy of not directly financing arms exports to any country involved in conflict, it goes beyond Italy's guidelines on arms exports to Israel.

UniCredit declined to comment on its move and the Israeli finance ministry also declined to comment.

Meanwhile, Norwegian asset manager Storebrand and French insurer AXA have sold shares of some Israeli firms, including banks.

Although corporate filings offer only a glimpse into such exposures, they show companies have been readjusting.

"We don't know whether this represents the beginning of a shift in the industry, one that recognizes the power banks have in choosing where to allocate capital, and where not," said Martin Rohner, executive director at the Global Alliance for Banking on Values, which focuses on sustainable financing.

"Investing in the production and trade of weapons is fundamentally opposed to the principles of sustainable development," Rohner added.

Israeli Finance Minister Bezalel Smotrich told a press briefing last week that although there are challenges to Israel's economy, firms are still raising money. "I sit with foreign investors and they believe in our economy," he said.

Reuters has reported that Israel's investor base has narrowed since it entered Gaza last year in response to attacks by Hamas, and it is feeling the effects of rising borrowing costs.

The potential wider effects can be seen in the approach taken by Storebrand, which a filing showed divested a holding worth about $24 million in Palantir, citing the risk of violations of international humanitarian law and human rights.

US group Palantir, which provides technology to Israel's military, did not respond to a request for comment.

Storebrand's annual investment review said that, as of the end of 2023, it had excluded 24 firms, including Israeli companies, across its portfolios in relation to the occupation of Palestinian territories.

The International Court of Justice, the United Nations' highest court, ruled in January of plausible risk of irreparable harm to Palestinian rights to be protected from genocide.

The same court said in July that Israel's occupation of Palestinian territories including the settlements is illegal.

Israel has rejected the rulings, which combined with growing pressure from activists and governments, are nevertheless having an impact on investment decisions.

AXA, one of Europe's largest insurers, British bank Barclays and German insurer Allianz have increasingly been targeted by campaigners.

"Increasing demand for greater transparency and scrutiny can only mean that financial institutions will intensify and broaden their self-assessment of their commercial associations with arms-related businesses or states," said David Kinley, professor and chair of human rights law at the Sydney law school.

The Ireland Strategic Investment Fund (ISIF) has exited six Israeli companies, selling holdings which amounted to about 3 million euros ($3.26 million), including some of Israel's largest banks, a spokesperson told Reuters.

Earlier this year, the 15-billion-euro Irish fund said that the risk profile of such investments were no longer within its investment parameters.

And Norway's $1.8 trillion wealth fund, the world's biggest, may divest shares of companies that aid Israel's operations in the occupied Palestinian territories which violate its ethics standards for businesses.

WAR EXPOSURE

Investments in Israeli banks are also under scrutiny.

The UN included them in 2020 in a list of companies with ties to settlements in the occupied Palestinian territories as part of its mission to review the implications on Palestinian rights.

A study by research firm Profundo, commissioned by corporate watchdog Ekō, shows that AXA sold almost all of its holdings in Israeli banks stocks earlier this year, retaining only a marginal stake in Bank Leumi.

Reuters verified the data with LSEG. A representative for Bank Leumi did not respond to a request for comment.

A spokesperson for AXA declined to comment on whether AXA had cut its holdings, adding that it is not invested in the banks targeted by activists. The UN list is among the criteria AXA takes into account for investment decisions, they added.

'A CLEAR LINE'

Foreign direct investment into Israel fell by 29% in 2023 to its lowest since 2016, UN Trade and Development data shows.

While UNCTAD 2024 figures are not available, credit ratings agencies have flagged the war's unpredictable impact on investment in Israel as a concern.

Although the US remains Israel's biggest military and financial backer, Spain, Ireland and Norway have recognized a Palestinian state, French President Emmanuel Macron has called for an arms export halt and Britain has suspended some licenses.

When it comes to international politics, "it should be down to the governments to take a clear line," said Richard Portes, professor of economics at London Business School, adding: "To put the burden on the private firms, where does this end?"

In an example of how activists are targeting companies directly, Barclays came under pressure from a campaign in Britain, prompting it to withdraw sponsorship from summer music festivals, while the Financial Times reported in August that it considered pulling out of an Israeli government bond sale.

Barclays said in a statement that it remained "fully committed" to its role as a primary dealer and that such activities fluctuated each quarter. The bank fell out of the top five dealers of Israeli bonds in the second and third quarters, after ranking third in 2023.



Winter Will Hamper, But Not Halt, Israel’s War on Hezbollah in Lebanon

A destroyed Lebanese village as seen in a photo from Mount Adir in northern Israel. (Reuters)
A destroyed Lebanese village as seen in a photo from Mount Adir in northern Israel. (Reuters)
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Winter Will Hamper, But Not Halt, Israel’s War on Hezbollah in Lebanon

A destroyed Lebanese village as seen in a photo from Mount Adir in northern Israel. (Reuters)
A destroyed Lebanese village as seen in a photo from Mount Adir in northern Israel. (Reuters)

The ground battles between Israel and Hezbollah in southern Lebanon remain intense, with no end in sight for the coming weeks. The arrival of winter will bring weather changes that could slow down operations. but won't stop the fighting.

Experts say that while winter weather, especially rain and fog, can make it harder for fighters and vehicles to move, it has a limited impact on the overall conflict. Air operations, which rely on advanced technology, are less affected.

The region’s mild winter conditions, unlike harsher winters in other countries, will not be a decisive factor in the battle.

Retired General Abdul Rahman Shheitly believes that modern military equipment is designed to work in any weather.

However, he told Asharq Al-Awsat that fog and rain can give both sides an advantage by obscuring visibility, making it harder to spot each other.

This benefits the attacking side, Israel, which has superior technology, while Hezbollah’s movements could be hindered by muddy terrain.

Shheitly also noted that weather affects displaced civilians, which could put pressure on political negotiations to end the conflict.

Retired General Hassan Jouni, former deputy chief of staff of operations in the Lebanese Armed Forces, argued that weather conditions affect the attacker more than the defender. Since Hezbollah is defending its ground, it is less impacted by the cold and rain.

The weather only slightly affects vehicle movement, and does not stop the fighting.

Jouni noted that the region doesn’t experience severe winter weather, so air operations will be unaffected by rain or cold. Modern drones, missiles, and aircraft are designed to function in such conditions, with GPS ensuring precise targeting.

Both Hezbollah and Israel rely heavily on drones. Hezbollah’s drones are noted for their accuracy and ability to avoid Israel’s Iron Dome defense, while Israel uses drones for surveillance and targeted strikes.

More than a year has passed since the conflict began after Hezbollah opened its "support front” for Hamas on October 8, 2023. The fighting, mostly limited to airstrikes during the winter of 2023, escalated with Israel’s ground operation a month ago, though its full goals remain unclear.

As the ground battles continue, Israel seems focused on creating a buffer zone in the South rather than occupying towns. Israel has destroyed over 37 villages to achieve this goal.

The next steps remain uncertain.

Israeli Chief of Staff Herzi Halevi has stated that the military is preparing for further ground operations in southern Lebanon, while Hezbollah remains determined to hold its ground and prevent Israeli advances.