Nuclear Weapons No Thanks - Except in Portfolios
Many financial institutions are currently increasing their investments in the arms industry. Some are dropping their nuclear weapons exclusions along the way, as many of the world’s largest defence contractors also manufacture nuclear weapons. It is no longer just “conventional” investment funds that invest in nuclear weapons, but also sustainability-labelled funds with terms such as “ESG” or “Sustainable” in their names. To check whether a fund invests in arms, visit our independent consumer platform, Faire Fonds.
Fund providers often refer to the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) in their investment policies. Yet their funds at times hold companies that produce for nuclear weapons programs outside the NPT.
Major differences between asset managers
None of the 15 asset managers examined applies a general exclusion of nuclear weapons. State Street holds the largest number of nuclear weapons companies and is the only one to invest in the Indian nuclear weapons manufacturers Premier Explosives and Walchandnagar Industries. At the other end of the spectrum, LBBW (Landesbank Baden-Württemberg) and MEAG (Munich Re, ERGO) are the only asset managers with no investments in Indian nuclear weapons suppliers.
Claim vs. reality: discrepancies between policies and investments
The study compares the nuclear weapons investment policies and actual holdings of the five largest asset managers each from the US, Europe and Germany. One challenge is that data providers differ in their assessments of how involved certain nuclear weapons suppliers are, particularly Indian companies.
Policies often do not cover all nuclear weapons suppliers, but only manufacturers of “essential components” or “components specifically designed for nuclear weapons”. Some asset managers count only certain products as part of the nuclear weapons business: nuclear warheads, for example, but not the missiles that carry them or the aircraft and submarines that launch them. Definitions and assessments vary widely.
Under their own policies, Union Investment funds and Amundi’s actively managed funds are required to exclude companies that produce nuclear weapons for non-NPT states. Even so, they hold Larsen & Toubro, which produces the launch systems for India’s Dhanush nuclear missiles and is the single largest contributor to India’s Arihant nuclear submarines.
Actively managed funds of Allianz, UBS and JPMorgan also commit to excluding companies in non-NPT states. Yet they also invest in Hindustan Aeronautics, which manufactures the nuclear-capable Jaguar and Su-30MKI aircraft and essential parts (engines, warhead casings) of India’s Prithvi nuclear missiles.
The policies of Union Investment funds and BlackRock’s actively managed ESG funds require the exclusion of companies that derive more than 5% of their revenue from nuclear weapons. Still, these funds in some cases hold shares in companies such as Honeywell (US) that clearly exceed this threshold.
No asset manager takes the NPT’s disarmament obligation into account
The NPT contains non-proliferation obligations (Articles I and II) and a disarmament goal (Article VI). Ten of the 15 asset managers profess their commitment to the NPT, but limit their exclusions to the non-proliferation. None uses the disarmament obligation as a basis for excluding companies. The fact that the five nuclear weapon states recognised under the NPT (UK, US, France, China, Russia) and some of their nuclear weapons companies ignore the disarmament goal does not lead to exclusions at any asset manager.
Furthermore, nearly all asset managers that support the NPT (Union Investment being the exception) invest in companies headquartered in an NPT state that supply nuclear-capable submarines and aircraft to Israel, which has not signed the NPT. In doing so, they follow the governments (US, Germany) that approve these exports and officially classify them as conventional goods.
