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SRI Column

Financial institutions urged to halt ‘explosives’ investments

February 2014

According to the latest report from Cluster Munition Coalition member and Nether lands-based IKV Pax Christi a total of 139 financial institutions globally - mainly from the US (67 institutions), South Korea (23) and China (19) - are investing over US$24 billion (c.€17.5bn) in seven cluster munitions producers.

 The 216-page report titled ‘Worldwide Investments in Cluster Munitions: A Shared Responsibility’, partly carried out by Dutch economic research company Profundo, details the scale of investment in the producers of this deadly and abhorrent weapon by banks, pension funds and other financial institutions.

The investment figure of US$24bn since June 2010 comprised loans of at least US$2.3bn, investment banking services totalling at least US$6.1bn plus managed shares and bonds worth at least US$16bn.

Roos Boer, the report’s co-author at IKV Pax Christi, commenting said: “Although too much money is being invested in companies that make cluster bombs, it is encouraging to see a growing trend in governments taking action to put an end to this. It is time for both governments and financial institutions to ban these explosive investments for good.” Cluster Munition Coalition’s Amy Little also called for legislation “banning all investments for good” in these manufacturers.
 
While the majority of the investments come from financial institutions in countries that have not yet joined the Convention on Cluster Munitions, the report contains a ‘Hall of Shame’ that includes 22 financial institutions from six countries that form part of the 2008 Convention on Cluster Munitions, namely Canada, France, Germany, Japan, Switzerland and the UK.
 
Since the June 2012 update of the report, four countries - Liechtenstein, the Netherlands, Samoa and Switzerland - have adopted legislation that prohibits investments in cluster munitions - a weapon containing multiple explosive submunitions.

It brings the total number of countries with an investment ban to nine, while 27 countries have stated that investments in cluster munitions are or can be seen as prohibited by the Convention on Cluster Munitions.

Although the number of financial institutions investing in companies producing such weapons still remains high, the latest findings show that increasing numbers of financial institutions and governments are “installing policies to ensure the capital for cluster bomb producers will eventually dry up.”

A total of 67 financial institutions were identified with a policy on cluster munitions that is available in the public domain in English or Dutch.

“Where only a few financial institutions excluded companies producing cluster munitions when the Oslo Process started [February 1997], a wider group of investors seems to have become aware that producers of cluster munitions are not feasible business partners,” the report stated.

Many investors increasingly view investments in anti-personnel mines and cluster munitions as coming with high reputational risk.

This evolution is reflected in the report’s ‘Hall of Fame’.

Ethical banks, small pension funds and government managed funds are not alone in disinvesting from such explosives investments. Global banks like BNP Paribas, HSBC and RBS too are disinvesting.

Five new financial institutions entered this year’s ‘Hall of Fame’ - all from the Netherlands: insurance companies A.S.R. and Menzis, asset manager APG and pension funds Pensioenfonds Zorg en Welzijn, and Stichting Pensioenfonds voor de Woningcorporaties.

It underscores that financial institutions can establish a policy to ban every kind of investment in cluster munitions producers, even if it takes time to bring change.

IKV Pax Christi’s report, which first appeared in 2009, is available online here  




Cluster Munition Coalition | Global | SRI

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