The Illinois Investment Policy Board has decided not to prohibit state pension funds from investing in Morningstar.

The Chicago mutual-fund giant had come under fire for an investment-screening tool offered by its Sustainalytics unit, which investors use to evaluate investments based on environmental, social and governance criteria. The product was criticized for having an anti-Israel bias.

Morningstar recently commissioned a report that found flaws in some operations of Sustainalytics but did not have a systemic bias against Israel. A state law signed by Gov. Bruce Rauner bars the state from investing in companies that boycott Israel.

The consequences of being black-listed would have been significant for Morningstar as a publicly traded company because Illinois pension funds have roughly $100 billion in assets to invest. The turmoil illustrates the growing importance of ESG to investors, from giant pension funds to individual retirement accounts, and the delicate challenges and unpredictable consequences involved in moving from traditional quantitative risk assessments based on a company’s financial performance to social goals such as climate change.

“We were pleased with the outcome and look forward to continue working with the Illinois Investment Policy Board and external stakeholders as we implement the recommendations of the White & Case independent report,” Morningstar said in a statement.

At least one critic says the company hasn’t gone far enough.

“It’s clear from the facts presented by White & Case that Morningstar has a systemic problem that can’t be solved by firing one vendor or increasing transparency. The company’s core research products are built on biased anti-Israel assumptions matched with biased anti-Israel sources to drive negative ratings targeting Israel-connected firms. Morningstar could fully implement every recommendation put forward by White & Case and it would still be knowingly facilitating a boycott of Israel,” said Richard Goldberg of the Foundation for Defense of Democracies, a think tank perhaps best known for opposing the Iran nuclear weapons agreement.

Morningstar acquired Sustainalytics in mid-2020, and it accounts for a little less than 5% of Morningstar’s revenue. But it’s growing fast, increasing nearly 50% in the first quarter. “Asset managers and asset owners account for the largest share of Sustainalytics’ revenue, and we see strong prospects for continued growth in this segment,” the company told investors recently.