Every year, the Don鈥檛 Bank on the Bomb听(DBOTB) report profiles the world鈥檚 largest nuclear weapons producers and reveals the financial institutions that invest in them. The , published on November 9, shows that investors around the world made a total of US$685 billion available to nuclear weapons companies between January 2019 and July 2021.
Australian-headquartered financial institutions account for US$6.7 billion. The biggest investors are Westpac (US$2 billion) and Macquarie Group (US$1.8 billion). The latter held bond and shareholdings in several major arms contractors during the period, including BAE Systems, Lockheed Martin, Raytheon and Northrop Grumman.
The DBOTB report is published by , a Netherlands-based organisation that works to persuade financial institutions to divest from the nuclear weapons industry. In Australia, the Medical Association for the Prevention of War (MAPW) leads the targeting superannuation funds.
The case of Serco
Critics of divestment often claim that it 鈥渄oesn鈥檛 work鈥; it is a 鈥渂lunt instrument鈥 that won鈥檛 change company behaviour and won鈥檛 have any real impact on the activities that it targets.聽But last week, a news story emerged that shows just how effective divestment can be as a tool for bringing about change.
Britain's Sunday Telegraph,听聽that major government contractor Serco has been forced to abandon plans to bid for contracts at Britain鈥檚 Atomic Weapons Establishment (AWE) after investors threatened to sell their shares in the company. Serco was part of a consortium that managed AWE (AWE Management Ltd) until it was聽聽earlier this year.聽The facility is responsible for the design, manufacture and support of Britain鈥檚 nuclear warheads.
Fund managers warned Serco that 鈥渨orking with nuclear weapons might force them to dump Serco shares as a result of non-compliance with Environmental, Social and Governance聽standards鈥, the Telegraph reported. The fund managers are not named, but Serco has increasingly appeared on investor blacklists in recent years due to its role in the consortium.
Impact of the nuclear ban treaty
The article reports that fund managers rejected Serco鈥檚 argument that investing in a Trident contractor is 鈥渆thically no different to owning UK sovereign debt, as both are functions of a democratically elected government鈥. This detail is significant, as it suggests that investors are adhering to the international norm against nuclear weapons that was established by the聽, despite that the fact that Britain is not party to the treaty.
The ban treaty has made investors increasingly wary of nuclear weapons producers, as DBOTB explains: 鈥淸Nuclear weapons] are now comprehensively outlawed, as is any assistance with producing, manufacturing or developing them. Financial institutions that continue investing in companies building nuclear weapons face regulatory risks as more countries join the treaty. They also face an increased reputational risk as clients learn of their support for weapons of mass destruction and terminate their relationships.鈥
More than 100 financial institutions have divested from the nuclear weapons industry since the treaty entered into force in January this year. This includes Bank of Ireland and AIB (Ireland), and South African firm Investec.
Divestment in action
It appears that the prospect of losing investors was enough to persuade Serco 鈥 which previously held long-term nuclear weapons contracts as part of AWE Management Ltd 鈥 to pull out of the competition for future nuclear weapons-related work. This provides a clear example of divestment, or the threat of divestment, changing company behaviour.聽
Furthermore, the story shows how investor action has the potential to undermine the viability of nuclear weapons programs. The Telegraph noted that Serco鈥檚 decision 鈥渓eaves defences chiefs with fewer options as they seek to restructure the management of Britain鈥檚 nuclear stockpile鈥. This could hinder the Ministry of Defence鈥檚 ability to complete the Trident renewal project, which is already聽.
Join the movement
As the Serco story illustrates, divestment is a powerful tool that we can use to advance the goal of a nuclear-weapons-free world. MAPW has the superannuation funds that already exclude nuclear weapons from investment and is urging fund members to contact others. DBOTB聽provides a to help people engage with financial institutions, elected representatives and the media.
The more financial institutions that divest, the more companies will be forced to withdraw from nuclear weapons work like Serco. This will make it harder for nuclear-armed nations to maintain their nuclear arsenals in the long run.
[An earlier version of this article appeared in Bella Caledonia.]