Scotiabank asks group to end campaign seeking Elbit divestiture

TORONTO -

Bank of Nova Scotia has asked an advocacy group to end a campaign demanding the Canadian lender divest from Israel-based weapons manufacturer Elbit Systems, accusing the campaign of spreading misinformation and saying protesters endangered staff and customers safety, according to an e-mail seen by Reuters.

Scotiabank's 1832 Asset Management mutual fund is the third-biggest shareholder in Elbit with about a 5.04% stake in the US$9.4 billion company, according to LSEG data.

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Scotia's exposure to the weapons maker has triggered a number of protests at the bank's branches in recent weeks. It also disrupted Canada's prestigious Giller Prize Gala on Nov. 14, a literary award sponsored by Scotiabank. Toronto Police said they arrested three protesters.

Corporate accountability organization Eko launched the campaign last year and has now collected about 15,000 signatures. It claims in its petition that Scotiabank is the biggest foreign shareholder in Elbit, whose weapons were heavily used during Israel's 11-day operation in Gaza in May 2021. The campaign has gained more attention during the recent Israel-Hamas conflict.

A senior Scotiabank executive said in an email dated last Friday that Eko's petition contained misinformation which caused "confusion and disturbances" that included "anti-Israel protests" at the bank's main branch in Toronto resulting in the closure of its offices, inability to serve clients and culminated in "hate speech being chanted in our branch, prior to police intervention."

The email said Scotiabank was "not the biggest shareholder of Elbit, nor is it the biggest foreign shareholder of Elbit. Shares in Elbit are held by mutual funds managed by our asset management arm, which in turn are held by unitholders of those funds."

The executive said in the email that employees and clients have become concerned about safety due to vandalism and protests at its branches.

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Scotia did not offer immediate further comment on the email. Eko said it would not comment on the protests at Scotia branches and has not taken part in the protests.

"After carefully considering Scotiabank's request for Ekō to take down our petition due to misinformation, a request I have never received in my 10 years as a digital campaigner, we have decided to keep the petition up," Eko's Angus Wong said.

Addressing the allegations of misinformation, Wong insisted that Scotiabank had "500 million dollar ownership of a notorious weapons company." The group on Tuesday did revise its petition to add Scotiabank's explanation of the mutual fund ownership stake and said the bank asked it to take down the petition.

The bank, under Scotia Global Asset Management, holds about 3,200 equity securities in total and Elbit is just one of those securities and is held in 14 of its over 200 mandates. Its Elbit exposure represents less than 0.3% of total asset under management across 1832 Asset Management.

The Vanguard Group and BlackRock Institutional Trust company respectively own 1.8% and 1.2% stake. Norway's sovereign wealth fund in 2009 dropped Elbit saying it did not "wish to fund companies that so directly contribute to violations of international humanitarian law."

Elbit, one of Israel's largest defence contractors, on Tuesday said it boosted production to help supply Israel's military during the country's war with Hamas, after reporting higher quarterly profit.

"Following the brutal attack on Israel, the outbreak of war on the 7th of October and the increase in demand for our solutions by the Israel Ministry of Defence, Elbit Systems has ramped up its production in support of the Israel MOD and Israel's security forces," said CEO Bezhalel Machlis.

Its stock is up about 33% this year.

(Reporting by Nivedita Balu in Toronto Editing by Denny Thomas and David Gregorio)