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SRI Column

Time to step up divestment in ‘man’s most evil creation’

July 2013

Not mincing his words, Nobel Peace Prize laureate and anti-apartheid campaigner Desmond Tutu said in a 2012 International Campaign to Abolish Nuclear Weapons (Ican) report: “Nuclear weapons are an obscenity. They are the very antithesis of humanity.”

Divestment was vital in the campaign to end apartheid in South Africa, he wrote. The same tactic must be employed to challenge what Tutu describes as “man’s most evil creation.”

Yet despite what many believe is a moral imperative to exclude nuclear weapons from investment portfolios, many financial institutions continue to profit from backing the sector.

Banks such as Bank of America, BNP Paribas, HSBC and Deutsche Bank invest in nuclear weapons manufacturers, either directly or through subsidiaries, while institutional investors – many signatories to the United Nations’ Principles of Responsible Investment (PRI) – are well represented in Ican’s 322-strong ‘blacklist’.

US-based CalPERS, the largest public pension fund in that country, owns or manages at least 0.5% of GenCorp, a company which develops and produces nuclear ballistic missile systems, according to Ican’s Banking the Bomb report.

Netherlands-based ING has a defense policy that excludes the financing of companies that produce, maintain or trade controversial weapons. Yet ING is involved in financing Boeing, EADS, Honeywell International and Safran.
Understanding the importance of not just excluding nuclear arms manufacturers the NZ$22.5bn ($17.3bn) New Zealand Superannuation Fund (NZSF) has just announced the divestment of nuclear base operators that take part in nuclear warhead modification and maintenance activities as part of recent programmes to extend the life of nuclear stockpiles in the US and the UK.

“The exclusions we have announced reflect new information and changes in company circumstances,” said NZSF head of responsible investing Anne-Maree O’Connor. “We aim to be consistent in applying our exclusion criteria.”
The fund first pulled out of companies involved in the manufacture of nuclear explosive devices in 2008. The move to pull out of nuclear operators because of the involvement in weaponry is a step further in the divestment paradigm and could have serious implications for private-sector owned operators.

Fostering good returns
The Benevolent Society, Australia’s oldest charity, has launched a A$10m social benefit bond to support an intensive family support service. In the first bank-backed issue of a social benefit bond in Australia, the bond is expected to unlock new funding to invest in reducing the number of children needing to enter foster care and provide investment returns based on reducing the cost to government.

This type of financing, backed in this instance by Westpac and the Commonwealth encourages discipline in the reporting of social outcomes and creates an asset class which does not require a choice between being a philanthropist or an investor.

Oliver Wagg is a journalist & leading SRI commentator 




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