$63 Billion Drop In Investments.
A new report released by ICAN and PAX today, has found that the number of banks, pension funds, asset managers and insurance companies investing in the production of nuclear weapons has gone down in 2021, and shows significant drops in the shareholder values of investments in the 25 companies involved in nuclear weapon production around the world. There is also an early but visible impact of the entry into force of the UN Treaty on the Prohibition of Nuclear Weapons (TPNW), with many institutions citing the treaty’s entry into force and the risk of a negative public perception as reasons for the change in their investment policies.
The 2021 report “Perilous Profiteering: The companies building nuclear arsenals and their financial backers” exposes the banks, pension funds, asset managers and insurance companies investing in the production of nuclear weapons and examines the companies involved in producing, manufacturing, or developing nuclear weapons for six of the nine nuclear armed countries for which data was available between January 2019 and July 2021.
Key Findings From The Report:
- While $685,184 million was made available to the 25 nuclear weapons producing companies during this period, this actually marks a $63 billion drop from the 2019 “Shorting our security” report, a trend that is affecting the producing companies’ stock holdings. There is also a marked shift in how the nuclear industry is raising funds to off-set debt, from significant loans to issuances, and underwriting of bond issuances rose by $80 billion.
- Northrop Grumman is the biggest nuclear weapons profiteer, with at least $24 billion in outstanding contracts, not including the consortium and joint venture revenues. Raytheon Technologies and Lockheed Martin also hold multi-billion-dollar contracts to produce new nuclear weapon systems.
- The top 10 investors for nuclear weapons producing companies are based in the United States, and accounted for 68% of the total global private investment in these builders of mass destruction.
The Good News:
- In 2021,127 financial institutions stopped investing in companies producing nuclear weapons, valued at $31 billion. .
- Several of these institutions are from states that joined the TPNW, including the Bank of Ireland and AIB (Ireland), and Investec (South Africa), but they are not the only ones. Exclusions by financial institutions based in nuclear-armed states or allied countries are worth billions, such as Longview Asset Management (U.S.) which divested $5.7 billion from General Dynamics or Nomura (Japan) which divested $273 million from Larsen & Toubro.
- The nuclear weapons industry itself is getting smaller, with companies acquiring or merging together, which in turn makes it easier for financial institutions and other investors to exclude them from investments. Instead of tracking down hundreds, or even thousands of contributors to catastrophic threats, it’s simply a matter of exiting a few relationships.
Exclusive Look At Russia and China
Nuclear weapon producers from Russia and China were included in this report for the first time. Historically, it has been challenging to get reliable information on the companies behind Russian and Chinese nuclear arsenals, and whether or not investors can have any influence over their activities. This is starting to change as these companies are also seeking to finance debt through loans and bond-issuances and are newly engaged in the global financial marketplace, creating a new pathway to influence their behaviour.
What’s Next: The Impact Of The UN Ban On Nuclear Weapons
As of January 2021, nuclear weapons are prohibited under international law through the entry into force of the TPNW. While it may be too early to see the full scope of the impact in this report, the findings do show a significant shift.
As of January 2021, nuclear weapons are prohibited under international law through the entry into force of the TPNW. While it may be too early to see the full scope of the impact in this report, the findings do show a significant shift. As Susi Snyder, author of the Perilous Profiteering report, puts it: “Nuclear weapons are illegal under international law, and investors are seeing the companies behind the bomb for what they really are: a risky business. This change in the legal landscape is already changing the financial industry.”
This report found that among the 127 financial institutions that have stopped investing in nuclear weapons, many cited the treaty’s entry into force and the risk of a negative public perception as reasons for the change in their investment policies. Yuanta Financial, for example divested $2.4 billion and has a policy preventing investments in “Enterprises engaged in illegal weapons manufacturing”.
There is reason to expect these numbers will grow. Sustainable and ethical investing trends are transforming the financial landscape, and nuclear weapons are incompatible with sustainability or ethics. Now that nuclear weapons are illegal, financial institutions have a responsibility to end existing and prevent future financing – a form of assistance- to the companies building nuclear weapons.