On Thursday, an elite events club in Toronto’s financial district hosted a private luncheon featuring Bank of Nova Scotia CEO Scott Thomson on the topic of “Increasing Productivity and Connectivity in North America.” Thomson had just barely sat down when the event was disrupted.
“Scotiabank funds Genocide! Scotiabank is invested in Elbit Systems, which is responsible for over 30,000 dead Palestinians … Scott Thomson blood on your hands!” yelled one of the activists before being escorted from the Canadian Club Toronto.
In Canada, universities have been the primary target of calls by pro-Palestinian activists to divest from Israeli companies since Hamas’ Oct. 7 attacks on Israel. But Scotiabank, Canada’s fourth largest bank by market capitalization and a significant funder of the Canadian arts, has come under sustained scrutiny from groups of pro-Palestinian writers, artists and filmmakers.
The activists are calling on Scotiabank to divest from Elbit Systems Ltd., an Israel-based international defense technology company that is one of the largest suppliers of land-based equipment and drones to the Israeli military.
Recently, pro-Palestinian activists have disrupted several events sponsored by Scotiabank, including the prestigious Scotiabank Giller Prize ceremony in November, 2023, and the Scotiabank Photography Award ceremony on May 30.
Since the Israel-Hamas war began, Scotiabank has cut its stake in Elbit by about half. It has not publicly commented on its reasons for doing so and it did not respond to multiple requests for comment by press time.
Campaigners say they won’t be satisfied until the bank has fully divested.
“So long as Scotiabank is invested in Palestinian death, their brand and logo will be tainted as it appears on any sort of arts festival,” said Michael DeForge, a writer and cartoonist with the group Writers Against the War on Gaza. Other groups agitating for the bank to divest include Artists Against Artwashing and Film Workers for Palestine.
Mike Vinokur, a portfolio manager with Toronto-based MV Wealth Partners and iA Private Wealth, says the campaigners misunderstand the nature of Scotiabank’s investment. Elbit is a publicly traded company and, as such, Scotiabank’s investment is unrelated to Elbit’s ability to produce and sell weapons.
“Once a company is publicly traded, shares purchased in the secondary market do not directly benefit the company in any way,” Vinokur said in an emailed statement. “The purchase of shares in the secondary market simply transfers ownership and wealth from one group of shareholders to another.”
Decreasing its stake
Elbit Systems supplies up to 85 per cent of the land-based equipment procured by the Israeli military and about 85 per cent of its drones, according to the Database of Israeli Military and Security Export, a database compiled by New Profile, a movement that aims to demilitarize Israeli society.
In 2022, Eko, a global corporate accountability organization, launched a petition calling on Scotiabank to divest from Elbit. Today, the petition has over 16,000 signatures. The petition says Elbit technology has been used to kill civilians in Gaza and that Elbit “produces components for the illegal apartheid wall in the occupied West Bank.”
Elbit did not respond to requests for comment before press time.
On Nov. 16, 2023, the day before a protest in the lobby of Scotiabank’s headquarters in Toronto, Eko representatives met with Scotiabank representatives to discuss their demands.
“We told them it’s really not a good look to be invested in this notorious weapons company. And we sort of said, maybe, it would just make sense for them to slowly divest so that they save face,” said Maen Hammad, a writer and organizer at Eko.
Scotiabank has been decreasing its stake in Elbit since the third quarter of 2023, after leaving its position largely unchanged for several years.
As of Sept. 30, 2023, 1832 Asset Management, a wealth management subsidiary of Scotiabank, owned a 5.03 per cent stake in Elbit, according to regulatory filings. By the end of 2023, Scotiabank had cut its stake to 4.24 per cent. By March 31, 2024, it had further cut it to 2.54 per cent, valued at about CAD$320 million. With Scotiabank’s entire asset management operation managing CAD$340 billion as of Jan. 31, 2024, its Elbit stake represented about 0.1 per cent of total assets.
‘War for talent’
Even before Oct. 7, several financial institutions, including Norway’s sovereign wealth fund, Swedish pension funds and HSBC, had divested from Elbit, citing alleged human rights abuses committed by the Israeli military using Elbit’s technology.
Jan Mahrt-Smith, an associate professor at the University of Toronto Rotman School of Management, says it isn’t just consumer pressure that can influence a bank’s decision to divest.
“Many strategies that banks follow publicly … are not merely aimed at the clients of the bank (the investors or depositors),” said Mahrt-Smith, who teaches corporate finance and sustainable finance, in an emailed statement.
“Rather, the strategies are to a large part in place to ensure that [young people] … want to work for the bank. There is a ‘war for talent’ among the banks and they need to adopt a posture that will not alienate their workers.
“Hence, there is just as much ‘inwards looking’ by the PR folks when they pick strategies as there is worry about how the bank looks ‘from the outside’.”
Having made the decision to divest, doing so a little bit each quarter is probably the smart thing to do from a public relations perspective, says Matthew Olsen, an associate at Jenni Byrne & Associates, a public affairs agency.
“If I were to advise a client on a case like this, I’d probably say to avoid the media attention. At the end of the day, public pressure will fall, even if it might take a while, and the issue will drop out of the media cycle,” Olsen said.
“I think [divesting] quietly is probably a good way to achieve that.”
‘Significant backlash’
Scotiabank is a major funder of the arts in Canada, including the Giller Prize, Hot Docs Film festival, Montreal Museum of Fine Arts and The National Gallery of Canada. Some pro-Palestinian activists question the bank’s motivation for its arts philanthropy.
“Companies often put up a benevolent front and use their investments in something like the arts to cover up for the fact that, in this case, they’re investing in genocide and Palestinian death,” said DeForge of Writers Against the War on Gaza.
“These companies sometimes think they can safely ride out the heat of a controversial investment. But in this case they clearly can’t,” he said.
Vinokur, the portfolio manager, sees it differently.
“I believe it truly is a shame that some artists do not wish to accept prize money from Scotiabank,” he said. “It is very generous of corporations like Scotiabank to give away their shareholder money to causes like the arts.”
He also points out that ESG activists — who put pressure on companies to factor environmental, social or governance considerations into their investing decisions — can be selective in their focus.
“I would be interested to find out if the artists are taking the stance that any and all defense contractors held in a portfolio by Scotiabank are against ESG protocols and will continue to not accept funds from [Scotiabank] until all defense contractors are sold, or is it merely the Israeli-based Elbit?”
Mahrt-Smith says the current protests at banks and universities may have “led banks to reconsider their portfolios, [but] it is not clear at all whether this will be sustained.”
“Overall there is also significant backlash against ESG activities by investors, especially in the US,” he said. “Funds under management in ESG funds are no longer growing at exponential rates and in some areas have plateaued or even declined.”
There may even be advantages for Elbit, and other controversial companies, when institutional investors divest for ESG reasons.
Companies “might prefer a world where their investors are not easily swayed by moods and changing ethical considerations,” says Mahrt-Smith. In the case of Elbit Systems, its shares “could easily end up in the (even less transparent) hands of a private equity fund or even a sovereign wealth fund.”
