The banks - BNP Paribas, BPCE, Crédit Agricole and Société Générale - and insurance company Axa hold shares in Israeli banks that enable the construction of settlements, Dangerous Liaisons: French banks and Israeli Settlements, published by eight campaign groups and unions, says.
The banks provide mortgages to individuals, finance for construction and loans to companies that build them and supply them with utilities.
The UN Security Council has condemned the settlements in the occupied West Bank and East Jerusalem as illegal and many countries consider them as an obstacle to peace between Israel and the Palestinians.
"The coercive environment generated by Israeli settlement has a direct impact on the life and the human rights of the Palestinians who live in zone C [of the West Bank] and the 298,000 who live in East Jerusalem," the report comments, pointing to the administrative restrictions, checkpoints and separation wall that limit circulation and access to facilities, including housing and work.
Although the French banks' investments are rarely over one percentage of capital, the report says they "indirectly contribute to the maintenance and development" of the settlements.
BNP Paribas, Société Générale, Crédit Agricole subsidiary LCL and BPCE subsidiary Natixis lent 288 million euros in 2004-2020 to the state-run Israel Electric Corporation (IEC) to build gas-fired power stations, which provides power to the settlements, the report says.
Maryse Artiguelong, vice-president of the International Federation for Human Rights, said she was "sad" to see the banks and insurer "would get involved in this illegal activity just to make a bit more money", accusing them of "seeking profit at any cost".
"We want French groups to withdraw their money from Israeli businesses with a connection to the settlements" as recommended by the ministry of foreign affairs in 2014, said Didier Fagart, member of the France Palestine Solidarity Association that coauthored the report.
"French banks cannot say they didn't know what is going on," he added. "They must make the right decisions."
Small percentage of investments
Pointing out that the amounts concerned "represent an infinitesimal part of our assets under management", Axa said that its responsible investment committee studied the issue last year and found no problem with the investments.
The banks have not commented on the report so far.
Dutch and Luxembourgeois pension funds have pulled out of the five banks mentioned in the study in recent years and Danske Bank and the Deutsche Bank Ethical Fund have put one of them on a blacklist.