A council pension fund has sold its shares in an Israeli bank at the centre of a global divestment campaign.

Falkirk Pension Fund (FPF) had £6m invested in Bank Hapoalim – Israel’s largest bank – but recently sold its holding on the advice of a fund manager.

Bank Hapoalim has been targeted due to its financing of illegal settlements in the West Bank.

FPF claimed the move was not a response to the global divestment campaign but its decision has been welcomed by pro-Palestinian campaigners in Scotland.

We revealed last year that Scots pension funds invested millions in companies reportedly on a United Nations (UN) blacklist for doing business in illegal Israeli settlements in the West Bank and East Jerusalem.

The UN’s blacklist has 206 firms who are listed for acting in violation of “internal law and UN decisions”.

Israeli media has named 25 of the companies including HPE, RE/MAX and Bank Hapoalim who all carry out business in the Occupied Territories.

Critics of these companies argue that pension funds should exclude ‘unethical’ investments from their portfolios and abide by ethical principles. But the funds point out that they are legally bound to secure the best returns for investors.

According to Time to Divest, Bank Hapoalim provides financing for the construction of housing projects in Israeli settlements and is a guarantor and loan maker to companies who build in the Occupied Territories.

FPF manages pension funds for Falkirk, Stirling and Clackmannanshire Councils. It has £2.3bn of globally invested assets and until recently that included £6m in Bank Hapoalim.

Confirming the shares had been sold, the fund said external investment managers make investment decisions on its behalf.

A spokesman for the FPF said: “The investment manager holding the Bank Hapoalim recently re-evaluated the stock in terms of its risk and return characteristics and decided to sell the stock. There was no instruction to sell given to the manager by the fund. In general terms, the fund does not have a policy of divestment from companies.

He added: “Where corporate governance matters are of a concern the fund prefers to engage with and, if necessary, apply pressure to companies by being part of collaborative organisations such as the Local Authority Pension Funds Forum. The fund does not invest to further ethical or political aims but in order to meet its fiduciary responsibilities to scheme members and sponsoring employers.”

The move was welcomed by Sofiah MacLeod, of the Scottish Palestine Solidarity Campaign, who said it was an “important step forward to ensure that our pension funds are not investing in companies complicit in Israel’s violations of Palestinian rights.”

The decision by Falkirk Pension Fund sends an important message to Palestinians that they are not forgotten Sofiah MacLeod, Scottish Palestine Solidarity Campaign

She added: “Palestinians are suffering an escalation of Israeli actions. Medics, journalists and children are among those killed by Israeli snipers in Gaza. Homes and whole communities are being demolished or are under threat of demolition. Israeli jets continue to bomb Gaza, recently destroying Said al-Mishal Cultural Center in Gaza City.

“The decision by Falkirk Pension Fund sends an important message to Palestinians that they are not forgotten.”

MacLeod also called on both Lothian and Tayside Pension Fund to sell their shares in Bank Hapoalim, adding: “We expect them to follow Falkirk Pension Fund in divesting their holdings with immediate effect.”

In reply Lothian Pension Fund confirmed it still invests in Bank Hapoalim. “Our list of investments to 31 March 2018 is available on our website,” a spokeswoman for the fund said.

Dundee City Council – which runs Tayside Pension Fund – would not confirm whether it invests in Bank Hapoalim. There is no list of investments available on its website, unlike other funds which publish the names of companies they invest in.

Strathclyde Pension Fund invests in HP and RE/MAX indirectly. A spokesman said: “We currently have small investments in HP, DXC and RE/MAX. The fund commissioned a report from its responsible investment advisors, which did not identify explicit violations of the law, or our own policy. The fund’s responsible investment policy is based on engagement, rather than divestment or exclusion.”

In October, Denmark’s third largest pension fund excluded Bank Hapoalim and three other firms from its portfolio, citing links to Israeli settlements.

In 2016, the United Methodist Church in the US divested from two Israeli banks and excluded five major Israeli banks from future investments. The banks included Bank Hapoalim.

In 2014 Dutch pension fund PGGM announced it had withdrawn tens of millions of Euros worth of investments from five Israeli banks, citing unethical practices in the West Bank.

Revealed: Scots pension funds invest in firms blacklisted by UN

PGGM said it had been in discussions with Bank Hapoalim for several years, to convince them to reconsider their financial backing for Israel’s West Bank settlements which “are considered illegal under international humanitarian law”.

PGGM manages the pensions of 2.5 million people and claims assets worth more than £161 billion.

Bank Hapoalim did not respond to our request for a comment while Confederation of Friends of Israel Scotland declined to send a statement.