The Netherlands' largest pension fund management company has decided to withdraw all its investments from Israel’s five largest banks because they have branches in the West Bank and/or are involved in financing construction in the settlements.

PGGM’s investments in Israeli banks amount to only a few tens of millions of euros. But its decision is liable to damage the banks’ image, and could lead other business concerns in Europe to follow suit.

A source involved in the issue said that over the past few months, the Dutch pension giant contacted Bank Hapoalim, Bank Leumi, Bank Mizrahi-Tefahot, the First International Bank of Israel and Israel Discount Bank and informed them that their ties with the settlements, and/or companies involved in building in the settlements, created a problem from the standpoint of international law.

PGGM told the banks its opinion was based on an advisory opinion issued by the International Court of Justice in The Hague in 2004, which said that settlements in occupied Palestinian territory are illegal and violate Article 49 of the Fourth Geneva Convention. That article states that “The Occupying Power shall not deport or transfer parts of its own civilian population into the territory it occupies.”

The Israeli banks responded that Israeli law doesn’t allow them to cease providing service to entities connected to the settlements. Nor, given the daily reality in which the banks operate, would this even be feasible, they added.

A few days ago, therefore, PGGM informed the banks that since it had not managed to alter their conduct with regard to the settlements via dialogue, and since no change in the situation seemed likely in the foreseeable future, it had decided to divest from them. This decision took effect on January 1.

PGGM is the Netherlands' largest pension management company and one of the leading such companies in the world, with some 150 billion euros of pension money under management. Last year, as it reviewed its investment policy for 2014, it considered divesting from several banks and companies worldwide in accordance with its policy of “social responsibility.” At the end of this review, it concluded that it would be impossible to create a firewall between its investments in Israeli banks and the banks’ activities in the territories.

Over the past few weeks, Dutch firms have engaged in a wave of boycotts, divestments and sanctions against Israeli firms. Last month, the Dutch water company Vitens announced that it was suspending cooperation with Israel’s national water company, Mekorot, given the latter’s operations in West Bank settlements. A few weeks earlier, another Dutch company canceled a contract to build a sewage treatment plant that it had signed with Jerusalem’s water company, Hagihon, because the plant was to be located over the Green Line.

The Foreign Ministry is very worried by the trend in the Netherlands. Officials in Jerusalem believe the background to this recent wave of boycotts is a new policy adopted by the Dutch government under which it encourages commercial enterprises to avoid any business dealings with the settlements. But in PGGM’s case, the pension company decided to boycott even Israeli banks with only indirect ties to the settlements.

Open gallery view Construction site in the West Bank settlement of Modiin Illit. Settlement construction − and not any talks or prisoner release − is the only thing that creates solid facts. Credit: AP