The UN blacklist may not have teeth, but it could still hurt Israel’s economy
The database cannot impose sanctions or block trade, but its growing reach into Israel’s biggest companies could raise the compliance and reputational costs of doing business with the country.
On the surface, there is no need for alarm. The latest update to the database of companies involved in activities linked to Israeli settlements in the West Bank and East Jerusalem, published last week by the UN Office of the High Commissioner for Human Rights, may appear relatively harmless. After all, the database was established a decade ago, and the Israeli economy continues to thrive. In total, 61 companies were added and five were removed, bringing the list to 214 companies from 11 countries.
Moreover, the database has no enforcement power. It imposes no fines, prohibits no trade with listed companies, freezes no assets, and does not prevent investment funds from purchasing their shares. Even the common moniker it has acquired, "the UN blacklist," is not its official name. In reality, it is a list identifying companies that the UN says there are reasonable grounds to believe are involved in one of 10 categories of settlement-related activity, ranging from construction and infrastructure, banking and finance, and transportation to the use of natural resources, waste management, and services supporting the existence of settlements.
It is important to clarify that a company’s inclusion in the database does not constitute a conviction for human rights violations or a judgment against the company. Furthermore, in the latest update, the UN has, for the first time, classified the nature of each of the 214 companies’ involvement according to the framework established by the UN Guiding Principles on Business and Human Rights. Notably, none of the companies were classified as having themselves caused the adverse impact under review. Instead, approximately 200 were classified as having made a "Contribution," meaning that, according to the UN analysis, their activities contribute to a negative impact. The remaining 14 fall under the category of "Direct Linkage," meaning they are connected to an adverse impact through a product, service, or business relationship without having themselves caused or contributed to it.
To put this in perspective, the Human Rights Council operates dedicated investigative mechanisms for Iran, Venezuela, Russia, Myanmar, and other countries as well. Yet there is no mechanism parallel to the settlements database: an institutionalized, regularly updated list of business entities scrutinized and recorded because of economic activities linked to a specific conflict or territory. The Israeli government vehemently opposes the mechanism, arguing that it is discriminatory and lacks a legal basis, with no equivalent covering other conflict zones around the world. The UN, for its part, presents the database as a tool for transparency and corporate accountability.
This tension, combined with the lack of direct enforcement power in what Israel views as an anti-Israel mechanism, is precisely why the economic risk it poses can be easily overlooked. From an economic standpoint, the debate over the database’s intentions and capabilities is almost secondary. What matters is what the database actually does and what consequences it could trigger in the future.
The figures illustrate this clearly. Of the 214 companies on the list, 192, or approximately 90%, are Israeli. When foreign companies with direct corporate or organizational ties to Israel are included, that figure rises to nearly 94%. The concentration is even more pronounced in the latest update: 55 of the 61 new additions are registered in Israel, while another four have Israeli ties or own an Israeli company.
The specific names matter even more than the percentages. We are no longer talking merely about a few small real estate developers operating beyond the Green Line. The list includes major banks such as Hapoalim, Leumi, Discount, Mizrahi-Tefahot, and First International; telecommunications firms including Bezeq, Cellcom, Partner, and HOT; retailers such as Shufersal and Rami Levy; and construction and infrastructure giants including Shikun & Binui, Shapir, and Electra. The latest update has further expanded the circle to include names such as Tnuva, Netafim, Adama, Taavura, Maman, Alony Hetz, and Energix. Companies on the list are also included in the TA-125 Index and rank among the economy’s largest and best-known firms.
Simply put, the list is gradually moving from the fringes of the Israeli economy into its supply chains, finance, food, energy, transportation, and infrastructure sectors, and, of course, into the state’s tax base. That is where the real problem begins.
Suppose a Swedish pension fund is looking for an investment in the food sector in the Middle East. Or a Dutch bank is considering financing an energy project. Or a French company is looking for an irrigation system supplier. In the past, the examination would have begun with financial statements, the balance sheet, shareholders, the markets in which the company operates, and its business risks. Today, due diligence also includes ESG, human rights, sanctions, and reputational risks.
A compliance officer may start with a basic AI-powered search engine, and a detail concerning almost any large Israeli company can appear immediately. Type the company’s name into a database, search engine, or artificial intelligence tool, and another fact appears: the company is included in a United Nations database related to human rights violations. Few people will then begin digging deeper, and there is no requirement that those officials become experts in public international law or the geography of Israel.
At this point, there is no longer any need for a formal boycott. That investment manager is neither a judge at an international tribunal nor a geography expert required to distinguish between West and East Jerusalem, or to understand the difference, if one exists in his or her view, between Ma’ale Adumim, Barkan, and Ra’anana. The bank’s compliance officer is not required to determine whether the UN or Israel is right. From their perspective, a new risk has emerged that must be assessed: another questionnaire for the company, another legal opinion, another discussion by the ESG committee, and another need to explain to clients and savers why their money is invested in a company appearing on such a list. All of this comes at a cost. In some cases, the cheapest option is simply to move on to the next company.
This phenomenon has a name: "de-risking." It is not a ban on doing business with Israel, but rather an increase in the friction costs associated with doing so. The Israeli company is not disqualified; it simply becomes a slightly more complicated transaction. And if there are two potential investments with similar returns, two similar suppliers, or two similar projects, where one carries a "red flag" in the compliance system and the other does not, one hardly needs legislation to foresee the likely outcome.
The list cannot be viewed in a vacuum, especially given the current turbulent environment for Israel in the international arena. In recent months, initiatives seeking to create a commercial distinction between Israel and the settlements have proliferated across Europe. The Netherlands and the UK have already imposed trade restrictions on goods originating from the settlements.
In this context, it is also important to mention the CSDDD, the EU’s Corporate Sustainability Due Diligence Directive, which is set for full implementation in 2029. It requires large corporations operating in Europe to ensure that their entire supply chains are free from human rights violations and environmental harm. The law came into effect in 2024. Under the legislation, European companies are required to conduct rigorous due diligence to identify, detect, and prevent human rights violations and environmental damage throughout the entire value chain, including direct and indirect suppliers both within and outside Europe. Non-compliance entails fines and sanctions that could reach 3% to 5% of a company’s annual global turnover. The law also allows aggrieved parties to file civil liability lawsuits against these corporations in European courts.
While these measures do not necessarily amount to a boycott of Israel, and some governments explicitly emphasize a distinction between Israel within the Green Line and the settlements, the legal distinction a government might draw in a decree is not necessarily the distinction a private investment manager will want to make in every transaction.
Households are also in the crosshairs
This is also the list’s great paradox. It possesses almost no legal teeth of its own, yet it may require none to exert economic influence. The mere appearance of a name in an official UN database can become a factor in the screening systems used by investors, banks, insurance companies, suppliers, and customers of the Israeli economy and, by extension, affect households, firms, and the Israeli government itself. This is no trivial matter.
Israel is a small, open, global economy dependent on foreign capital, exports, international markets, and overseas financial systems. In such a world, the most dangerous economic sanction is not necessarily one announced by a government at a press conference. The danger lies in the "quiet" damage that seeps in gradually.
No one is explicitly forbidding a Swedish pension fund from investing in an Israeli company, a Dutch customer from buying from it, or a European bank from financing it. The database might simply steer them toward the conclusion that there is an alternative, one that is simpler and carries less risk.
It turns out that to bite into the Israeli economy, this list does not truly need teeth. It may be enough for it to make the world think twice before doing business with Israel.
