On November 23, 2016, the Socially Responsible Investing Committee (SRIC) announced that HP Inc. (HPQ) was no longer going to be screened out of the Unitarian Universalist Common Endowment Fund (UUCEF). While we did announce that HPQ had become eligible for investment, the SRIC has not yet allowed our managers to purchase shares of HPQ. The UUCEF has not owned shares of HPQ since selling the shares subsequent to the announcement and application of our new Human Rights screen on April 14, 2016.

The main reason for this delay is the debate within our UU community about how to address potential corporate complicity in human rights violations in disputed areas in Israel-Palestine. How the SRIC handles this issue is important to several UU constituencies, so our volunteer committee carried out a more thorough process of due diligence than we might undertake on less contentious issues.  The SRIC wanted to have as complete information as possible regarding HPQ’s potential complicity in human rights violations before implementing our decision to remove the company from our Human Rights screen. Over the past several months, SRIC has taken questions and concerns from UU constituencies and attempted to fully understand and answer them. Additionally, we have thoroughly investigated how Sustainalytics, our research provider, applied its human rights ratings in the case of Hewlett Packard splitting itself into HPQ and Hewlett Packard Enterprises (HPE). There have been some questions and concerns about the change in Sustainalytics’ ratings for HPQ, which will be more fully addressed below.

Hewlett-Packard was originally classified as complicit in human rights violations based on its involvement with the BASEL system. The Israeli armed forces use the BASEL system to deny Palestinians freedom of movement via biometric ID cards. These systems were originally installed by EDS, a predecessor to Hewlett-Packard (now HPE and HPQ). HPE has confirmed that it is maintaining the BASEL system and providing other services that threaten human rights in the disputed areas. HPE therefore remains excluded from our portfolio based on our human rights screen.

HPQ has not yet commented publicly or to Sustainalytics about its involvement with BASEL. Based on discussions with HPE, Sustainalytics has reason to believe that HPQ has no control or influence over the BASEL system. The SRIC asked Sustainalytics quite a number of questions related to their process of understanding HPQ’s level of complicity with human rights violations, and were satisfied that it was reasonable and consistent. Until such a time as Sustainalytics was able to do a thorough review of HPQ’s policies and performance on a range of environment, social, and governance issues, HPQ inherited HP’s entire set of ratings. Ultimately, Sustainalytics rated HPQ on its own basis, not one inherited from HP.

Other concerns about HPQ’s potential role in human rights violations in Israel-Palestine include:  1) the overlap of the Board of Directors between HPE and HPQ; and 2) the computer equipment HPQ supplies to HPE via a two-year marketing agreement. On the first matter, SRIC has been convinced that sharing one Board member neither gives HPQ managerial control over HPE nor demonstrates collaboration regarding human rights violations associated with HPE. On the second point, while HPE and HPQ share a brand, HPQ sells standard commodity-type computer equipment that can be found off the shelf virtually anywhere, produced by many different firms. SRIC has been convinced that HPE’s use of HPQ’s standard equipment does not render HPQ complicit in human rights violations.

Based on our thorough due diligence, SRIC has concluded that Sustainalytics correctly rated HPQ as not complicit in human rights violations in Israel-Palestine.  However, out of an abundance of caution, we would prefer that HPQ indicate directly to our SRI consultant that the company is not responsible for, maintaining or in any way materially contributing to the BASEL system or any other system in Israel-Palestine that might violate human rights. HPQ is expected to answer questions from our SRI consultant during the summer of 2017. Based on HPQ’s response to Sustainalytics’ inquiries on this matter, the SRIC should be in a position to a) implement with confidence our decision to allow investment in HPQ or b) via Sustainalytics’ downgrade of HPQ’s human rights score, place HPQ on our exclusion list. We will use the blog to provide updates on our decision making.