Policies What Banks Say About Financing Nuclear Weapons

Chapter 6 Policies What Banks Say about Financing Nuclear Weapons any financial institutions apply ethical standards – such as the UN Principles for Responsible Investment – when deciding how to invest their funds. These Mstandards take into account environmental, social and corporate governance factors. This chapter examines selected institutions’ policies on financing nuclear weapons. Investing in companies that manufacture and arms, they must adopt more stringent policies that modernize nuclear weapons is a grave breach of exclude the financing of nuclear weapons companies ethical investment norms, as nuclear weapons are altogether. The existing policies of some financial illegal to use and cause catastrophic humanitarian and institutions have little if any practical effect. environmental harm. Some financial institutions, in addition to maintaining general policies on ethical or Policies Examined sustainable investment, specifically state that they will In this chapter, we examine the nuclear weapons not invest in nuclear armaments. policies of 14 mainstream banks, asset managers However, as this chapter shows, their policies and pension funds in nine countries. Only two of on nuclear weapons investments often fall short of them – Rabobank and PGGM – were found not to imposing a blanket ban on the financing of nuclear invest substantively in any of the 20 nuclear weapons weapons companies. For example, some banks rule companies studied. The policies here provide a out providing loans specifically for nuclear weapons snapshot of financial institutions’ nuclear weapons projects, but they are willing to provide loans to stances, not an exhaustive list. Selection of the nuclear arms makers for general purposes. financial institutions was based on a desire to show a All nuclear weapons companies are engaged diversity of institutions from a diversity of nations. in a diversity of enterprises, many of which are non-nuclear in nature (for example, Boeing builds SELECTED FINANCIAL INSTITUTIONS commercial jetliners). These companies generally do BBVA Spain not source direct finance from banks solely for the Commerzbank Germany purpose of carrying out nuclear weapons work. Crédit Agricole France Instead, they raise money through corporate loans, DNB Norway syndicated loans, bond issues, share placements and Government Pension Fund Global Norway share ownership. This money is allocated in whatever HSBC UK way a company sees fit. Whether or not the financier ING Netherlands or investor intended the money to be used for nuclear Intesa Sanpaolo Italy weapons production makes little practical difference. KBC Group Belgium When nuclear weapons companies raise finance PGGM Netherlands for “general corporate purposes”, a proportion of the Rabobank Netherlands funds they raise will likely be used to produce nuclear Royal Bank of Canada Canada weapons. If banks and other financial institutions Toronto-Dominion Bank Canada wish to avoid facilitating the manufacture of nuclear Unicredit Italy 107 DON’T BANK ON THE BOMB BBVA Crédit Agricole SPAIN FRANCE BBVA is a Spanish banking group that offers Crédit Agricole is France’s biggest and Europe’s individual and corporate customers a range of second-biggest retail bank, offering insurance, private financial and non-financial products and services. The banking, asset management, leasing and factoring, and group is present in 30 countries and has over seven corporate and investment banking. It has a total of 49 million customers.332 BBVA Group’s defence policy million customers in 70 countries.337 was last updated in 2008 and states that the group will Crédit Agricole’s latest guidelines on the not be involved in financing operations that “include financing of nuclear weapons were issued via an cluster bombs and any weapons of mass destruction internal memorandum in November 2010. In this (nuclear, chemical and/or bacteriological)”.333 memorandum, nuclear weapons fall into the sensitive weapons category, which also includes biological and Investments: We found BBVA to be involved in financing chemical weapons. The whole group is forbidden Babcock & Wilcox, Bechtel, Boeing, EADS, Finmeccanica, General Dynamics, Honeywell International and Thales. from financing the international trade of sensitive weapons. However, less strict rules apply for non- trading activities. The financing of nuclear weapons Commerzbank is governed by the following specific rules: “Any GERMANY investment/holding, financing or provision of Commerzbank is a leading bank for private and services (insurance, merger and acquisition, advisory, corporate customers in Germany. It serves more etc.) involving companies specializing in these than 14 million private clients as well as one million types of weapons must be considered a sensitive business and corporate clients worldwide.334 transaction, unless it is lawful in the jurisdiction in Under its reputation risk management policy, question, and must be submitted for opinion to the Commerzbank states: “All financial arrangements, … Sustainable Development Unit.”338 products and customer relations in which environmental, ethical or social aspects play a Investments: We found Crédit Agricole to be involved in financing Babcock & Wilcox, BAE Systems, Boeing, EADS, significant role are closely scrutinized and assessed Finmeccanica, Honeywell International, Lockheed Martin, by the Commerzbank Reputation Risk Management Rolls‑Royce, Safran, Serco Group and Thales. department and either rejected or accepted with conditions attached. This covers sensitive areas such DNB as weapons and armaments … nuclear power and the NORWAY exploitation of commodities”.335 DNB is Norway’s largest financial services group Commerzbank’s policy about nuclear weapons with around three million retail customers and over appears to have regressed in terms of clarity and 200,000 corporate customers. It provides banking, strictness: up until early 2011 Commerzbank clearly insurance, brokerage and investment services.339 stated that its guidelines governing armaments In its “Ethical Investments Guidelines”, the group transactions did “not accompany financial states that it “will not finance or invest in companies transactions that are related to so-called controversial which develop and produce central components for weapons”. The bank considers the following weapons use in weapons of mass destruction as a key part of as “controversial”: cluster bombs, anti-personnel their operations”. Weapons of mass destruction are mines, incendiary weapons, laser weapons with the defined as atomic, biological and chemical.340 capacity to blind, nuclear weapons, uranium core ammunition, biological and chemical weapons.336 Investments: We found DNB to be involved in financing Honeywell International. Investments: We found Commerzbank to be involved in financing BAE Systems, Boeing, EADS, Finmeccanica, Rolls‑Royce, Safran and Thales. 108 POLICIES Government Pension Fund Global the purchase of other weapons”. Notably, this policy NORWAY may fail to stop services being provided to companies The Norwegian Government Pension Fund Global involved in the manufacture or trade of weapons is one of the largest pension funds in the world with if this is not their sole or primary activity. A stricter a total size of over US$520 billion. The fund is part treatment is given to category-one weapons: “HSBC of the Norwegian Ministry of Finance and is filled does not provide financial services to customers – with the state petroleum revenues. It is not used for including holding companies – which manufacture or pension expenditures, but is used to cover the non-oil sell anti-personnel or cluster bombs”.345 budget deficits of the government. The operational management is delegated to Norges Bank.341 Investments: We found HSBC to be involved in financing Babcock International, Bechtel, EADS, Finmeccanica, In March 2010 the Norwegian Ministry of Honeywell International, Larsen & Toubro, Redhall Group, Finance adopted revised guidelines for observation Rolls‑Royce, Safran, Serco Group and Thales. and exclusion from the Government Pension Fund Global’s investment universe, which state that the “assets in the Fund shall not be invested in ING companies which themselves or through entities they THE NETHERLANDS control produce weapons that violate fundamental ING is a global financial institution of Dutch origin, humanitarian principles through their normal use”.342 which offers banking, investments, life insurance and Although the guidelines do not define which retirement services to its customers. It is one of the weapons meet this criterium, the Council of Ethics largest savings banks in the world.346 has proposed excluding nine companies from ING has a defence policy that excludes the investments because of their involvement in the financing of companies that produce, maintain or production of nuclear weapons. These exclusions trade controversial weapons. This includes “anti- were formalized by the Ministry of Finance.343 All personnel landmines, cluster munitions, biological/ nine are among the companies we researched. chemical weapons and weapons containing depleted uranium … We therefore do not finance nuclear Investments: We found the Government Pension Fund Global weapons”. ING states that it “will not invest its own to be involved in financing Babcock International, Babcock & Wilcox, Jacobs Engineering, Rolls‑Royce and Thales. money in these companies and where possible ensure customer funds are not placed in them through ING managed funds

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