Pro-Israel Fund Manager Invested $500M in Israeli Arms Firm. Now Activist Investors Want Answers.

The Canadian bank that holds the largest foreign share of an Israeli weapons manufacturer is coming under scrutiny from human rights groups over its stake in the company.

Last fall, Scotiabank, one of Canada’s largest banks, was reported by Bloomberg to have become a major shareholder in Elbit Systems, Israel’s premier defense contractor. On Tuesday, at a shareholder meeting, a representative of the ethical investing activist group Ek? delivered a petition on behalf of 12,000 signatories calling on Scotiabank to divest from the firm.

“Since the petition started in October, we have asked Scotiabank to divest from Elbit Systems. This is a company whose weapons have caused countless civilian deaths,” said Angus Wong, the senior campaign manager from Ek?, the group formerly known as SumOfUs. “The question is not why they own shares — it is why they are the biggest foreign shareholder in Elbit. We demand to know why Scotiabank is investing hundreds of millions of dollars of funds from middle-class families in this company.”

A representative of Scotiabank at the meeting did not address questions about Elbit’s human rights record or the large scale of Scotiabank’s investment, Wong, who delivered the petition, told The Intercept. At the Scotiabank shareholder meeting, a representative of the bank characterized all fund decisions as being driven by “the interests of shareholders.”

Scotiabank’s gigantic stake in Elbit Systems, estimated to be about $500 million, dwarfs that of its two larger domestic competitors, TD Bank and Royal Bank of Canada. The two other banks hold around $3 million in shares, combined, in the company.

“1832’s investment in Elbit Systems is unusually large for a bank its size,” said Adriana DiSilvestro, a research consultant focused on corporate accountability. “It’s unusual that an asset manager of this size would own that percentage of outstanding shares of a company unless they have some sort of strategic interest.”

The investment in Elbit comes through Scotiabank’s asset management arm, 1832 Asset Management, and a particular subdivision known as Dynamic Funds, which is run by a fund manager and executive named David Fingold. (Scotiabank declined to comment, and Fingold did not respond to a request for comment.)

Fingold is a prolific investor in controversial Israeli firms: As of recent reporting funds under his management had also taken a roughly 2 percent stake in Mizrahi-Tefahot Bank, an Israeli company on a United Nations list of firms profiting from Israeli settlements, and 8 percent of Strauss Group, a conglomerate that co-owns Sabra and has been previously criticized for its vocal public support of the Israeli military. The funds that Fingold manages accounted for the entirety of 1832 Asset Management’s stake in these companies.

Fingold’s Israel Investments

While it’s not possible to attribute Fingold’s eyebrow-raising investments in companies like Elbit to a particular ideological stance, his social media postings consist heavily of links to pro-Israel influencers and websites. Many of his posts reshares content from the Israeli Ministry of Foreign Affairs and pro-Israel figures like Hananya Naftali, including posts characterizing Palestinians as supporters of terrorism and Nazism.

In late 2021, Fingold also shared an article on Twitter referring to Ben and Jerry’s board of directors chief Anuradha Mittal as “antisemite of the year” — a reaction to the company’s announcement that it would not be selling its products in Israeli settlements. (Following The Intercept’s request for comment, Fingold made his Twitter account private.)

Ben and Jerry’s boycott announcement coincided with 1832 Asset Management’s divestment from large financial positions in the brand’s parent company, Unilever. The company became a target of widespread divestment efforts from state investment funds across the U.S. in 2021 over Ben and Jerry’s stance on the conflict.

Publicly available information shows that 1832 Asset Management held nearly 700,000 shares of Unilever on March 31, 2021, a large position that the firm sold off all the way down to zero by September of the following year. The most recent update to the firm’s position shows a smaller position of roughly 67,000 shares. The breakdown of positions does not indicate whether it was Dynamic Funds trading that accounted for the sell-off.

In a 2019 interview with an Israeli financial news outlet, Fingold explained that his investments in Israel were outsized compared to the MSCI World Index, which serves as a guideline for how mutual funds should distribute their investments across various global economies. Some funds hew to the index’s weighting, but Fingold said Dynamic did not.

“We came into Israel as early as 2002, and we have had holdings here for a long time,” Fingold said in the interview. “Most firms can’t invest beyond Israel’s weight in the [MSCI] indices, but we don’t care about Israel’s weight, and Israel accounts for a larger share of our investment portfolio than its proportion in the indices.”

Socially Irresponsible Investing

While socially responsible investing has become an attractive marketing tool for financial institutions, it has not translated into much in the way of altering the balance sheets of major firms.

Scotiabank prominently touts its “four pillars for responsible banking” and boasts of its listing on socially responsible investment indices. The company also touts its “allyship” to various marginalized communities in public-facing marketing materials and has identified “advancing human rights” as a core environmental, social, and governance objective in investment decisions.

This saccharine language has not impeded it from holding a major stake in a weapons manufacturer accused of facilitating terrible human rights abuses.

Elbit Systems has been under scrutiny from activists for years over its involvement in arming Israeli military units operating in the occupied Palestinian territories. The company is a major developer of drone technology for the Israeli military, as well as weapons systems, munitions, and surveillance tools.

Drones developed by Elbit have been involved in carrying out attacks that have killed civilians. A notorious 2018 strike in the Gaza Strip that killed four children playing on a beach was reported to have been carried out with the help of an Elbit-designed surveillance drone.

Activists have charged that surveillance technology developed by Elbit has also been sold to regimes like Ethiopia, which have deployed them to target dissidents and journalists both domestically and abroad.

Several major European banks and pension funds have divested from Elbit over the past decade due to the use of its technology in the occupied West Bank. The company has also come under fire for its alleged involvement in the production of cluster munitions blamed for causing indiscriminate harm to civilians in war zones.

Last spring, Australia’s sovereign wealth fund banned investment in Elbit due to a subsidiary’s alleged manufacturing of cluster bombs. The move followed similar steps taken by Norwegian and Swedish government-run funds, as well as the London-based bank HSBC, to divest from Elbit over broader human rights concerns.

As the security situation in the occupied Palestinian territories continues to deteriorate, Elbit has remained a subject of ethical investment concerns.

The petition submitted by activists at this week’s shareholder meeting for Scotiabank is only the latest salvo in a growing campaign against Western financial institutions’ involvement with Elbit.

Human rights activists say simply declaring that fund decisions are based solely on returns does not go far enough to address ethical concerns by many investors.

“This is a weapons company, and the situation in Israel makes putting money in Elbit Systems a potentially profitable investment,” said Ward Warmerdam, an economic researcher with the Netherlands-based ethical investing research firm Profundo. “But it should concern consumers that funds they have invested are being directed towards a company that is profiting from the occupation of the Palestinian territories.”