Are more changes coming for Australia’s $230 billion sovereign wealth fund?

Two weeks ago, I wrote a piece about the Future Fund’s new investment mandate and the long political fight over how it invests money on behalf of Australians.

Last week, I wrote another piece examining the fund’s questionable investments in weapons manufacturers and other war-related companies.

Today, let’s look at its investments in businesses operating in Israel’s settlements.

They’re worth looking at given Australia’s significant decision last week to vote in favour of a UN resolution demanding that Israel rapidly end its “unlawful presence” in the Occupied Palestinian Territories.

What will that decision mean for Australia’s Future Fund?

An important UN database

For this conversation, we need to know about an important database of business enterprises — and why the database exists.

The United Nations Human Rights Council is made up of 47 member states, including Australia.

In early 2013, following a fact-finding mission to investigate the ways in which Israeli settlements were impacting the human rights of Palestinians in the Occupied Palestinian Territories (OPT), the council issued a report.

That report noted that despite all pertinent UN resolutions declaring that the existence of the settlements was illegal and calling for their cessation, the planning and growth of the settlements continued.

The council then adopted resolution 31/36 in 2016.

That resolution asked the Office of the UN High Commissioner for Human Rights (OHCHR) to produce a database of all business enterprises that were involved in certain “specified activities” related to Israel’s settlements in the OPT, including East Jerusalem, and in the occupied Syrian Golan, that raised concerns about human rights violations.

As was stated in the fact-finding mission’s 2013 report, business enterprises carried out activities in Israel’s settlements and contributed to their maintenance, development and consolidation with “full knowledge of the current situation and the related liability risks”.

The report also noted that Israel labelled all of its export products as originating from “Israel”, including those wholly or partially produced in settlements, which posed an issue of “traceability” of products for other states that wanted to align themselves with their international and regional obligations.

So, regarding the 2016 request to build a database of business enterprises, the council named 10 “specified activities” that businesses were engaged in in Israel’s settlements that might lead to their inclusion in the database:

• The supply of equipment and materials facilitating the construction and the expansion of settlements and the wall, and associated infrastructures
• The supply of surveillance and identification equipment for settlements, the wall and checkpoints directly linked with settlements
• The supply of equipment for the demolition of housing and property, the destruction of agricultural farms, greenhouses, olives groves and crops
• The supply of security services, equipment and materials to enterprises operating in settlements
• The provision of services and utilities supporting the maintenance and existence of settlements, including transport
• Banking and financial operations helping to develop, expand or maintain settlements and their activities, including loans for housing and the development of businesses
• The use of natural resources, in particular water and land, for business purposes
• Pollution, and the dumping of waste in, or its transfer to, Palestinian villages
• Captivity of the Palestinian financial and economic markets, as well as practices that disadvantage Palestinian enterprises, including through restrictions on movement, administrative and legal constraints
• Use of benefits and reinvestments of enterprises owned totally or partially by settlers for developing, expanding and maintaining the settlements

In 2020, the OHCHR then published an official database with 112 business enterprises on the list, and in June 2023, after a review, it published an updated version with 97 business enterprises on the list.

That’s the current version of the database.

You can see it in the table below, which I’ve put together with some extra information (in the table, the letters in the “listed activities” column correspond to the 10 letters in the bulleted list of “specified activities” above):

Does Australia’s Future Fund invest in any of the business enterprises in the UN database?

According to the Future Fund’s most recent Periodic Investment Report (30 June 2024), as of June 30 this year, it owns shares in seven of them, as I showed in the table:

• Airbnb ($18,762,070)
• Expedia Group ($24,569,984)
• Israel Discount Bank ($3,501,064)
• Mizrahi Tefahot Bank ($1,342,924)
• Alstom SA ($8,466,147)
• Booking Holdings Inc ($38,117,240)
• Motorola Solutions Inc ($7,311,758)

Those shareholdings are worth a combined $102,071,187.

The International Court of Justice’s advisory opinion

Now, in July this year, the International Court of Justice (ICJ) issued an advisory opinion stating that Israel’s continued presence in the OPT was unlawful.

The court emphasised that Israel was under an obligation to bring to an end its unlawful presence in the OPT as rapidly as possible, cease all new settlement activities, evacuate settlers, and make reparations for damages caused.

It said all states and international organisations, including the United Nations, were obligated not to recognise the legality of Israel’s continued presence in the OPT and not to aid in maintaining the situation.

For background, the ICJ had been requested to issue an advisory opinion on those matters by the UN’s General Assembly following a vote in December 2022. That 2022 vote in the General Assembly saw the adoption of resolution 77/247, which detailed the questions the assembly wanted the ICJ to answer regarding the legal consequences of Israel’s occupation, settlement and annexation of Palestinian territory.

Israel’s government does not consent to the ICJ’s jurisdiction, and it did not support resolution 77/247.

In a statement in 2023, signed by Israeli ambassador Modi Ephraim, it was highly critical of the General Assembly vote.

“The questions put to the Court by resolution 77/247 represent a clear distortion of the history and present reality of the Israeli-Palestinian conflict,” the statement said.

“Contrary to any conception of due process, the Court is asked simply to presume Israeli violations of international law — to accept, as given, plainly biased and flawed assertions directed against Israel alone.

“The prejudicial nature of the questions is evident not only in the contorted manner in which they are framed, but also in what they disregard.

“In pointing a finger at one side only, the questions overlook thousands of dead and wounded Israelis who have fallen victim to murderous Palestinian acts of hatred and terrorism — acts that continue to endanger Israel’s civilians and national security on a daily basis,” it said.

But what should we make of the ICJ’s advisory opinion from July, and how does it relate to Australia’s Future Fund?

In August, more than 170 Australian and Australian-based lawyers and legal scholars published an open letter in response to it.

You can read it here.

In their letter, they called on the federal government to “act without delay” to ensure Australia’s compliance with its international obligations, as articulated by the court’s advisory opinion.

“These historic findings by the ICJ do not create new obligations for states,” they said in their letter.

“These obligations have existed for decades, and — regrettably — most states, including Australia, have been in violation of them. Rather, the Advisory Opinion is a formal, authoritative reminder of these obligations.”

Of course, the lawyers who signed that open letter don’t represent all Australian lawyers and legal scholars.

Gregory Rose, a professor of law at the University of Wollongong, is highly critical of the ICJ’s decision to issue an advisory opinion on this issue.

But it’s important to keep tabs on any policy shifts that may come from the ICJ’s advisory opinion.

What’s coming for the Future Fund?

In fact, last week, Australia made international news when it voted in favour of a UN resolution demanding that Israel rapidly end its unlawful occupation of the Palestinian Territories.

The text of that resolution specifically referenced the ICJ’s advisory opinion from July.

By voting in favour of the resolution, Australia reverted to the official position it had long held up until 2001. It means Australia now holds the same position on this matter as Germany, New Zealand, Norway, Denmark, Sweden, Finland, Switzerland, France, Belgium, the United Kingdom, Canada, Brazil, India, Singapore and 142 other members.

Eight members voted against the resolution: Israel, the United States, Argentina, Federated States of Micronesia, Nauru, Palau, Papua New Guinea, and Hungary.

And in what may be a sign of things to come for the Future Fund, in late November some very interesting bills were tabled in the federal Senate that drew inspiration from the ICJ’s advisory opinion.

The first bill (Treasury Laws Amendment (Divesting from Illegal Israeli Settlements) Bill 2024), related directly to the Future Fund.

It seeks to amend the Future Fund Act 2006 (Cth) to prohibit financial investments from Australia’s sovereign wealth fund in companies operating in illegal Israeli settlements.

It specifically uses the UN database of business enterprises we’ve discussed as the reference point for prohibited companies. Its prohibitions would also apply to Australian registered charities.

The second bill (Genocide Risk Reporting Bill 2024) would also impact the Future Fund.

It seeks to create a mandatory genocide risk supply chain disclosure regime for Commonwealth entities and Australian business entities involved in the manufacturing and supply of weapons.

It could impact the Future Fund’s investment decisions given the fund currently owns shares in global arms manufacturers worth hundreds of billions of dollars.

The bill would also establish an anti-genocide commissioner who would be responsible for supporting compliance with the act. The bill is akin to the Modern Slavery Act, but with stronger enforcement provisions including criminal and civil penalties around non-disclosure.

Lawyers say both of those bills seek to implement Australia’s obligations under international law to not render aid or assistance for serious violations of international law, as clarified in the ICJ’s advisory opinion on the Occupied Palestinian Territories in July.

Both bills were sponsored by Australia’s Voice senator Fatima Payman and Greens senator Lidia Thorpe. Nothing may come of them immediately.

But the ideas are out there now.