Pension fund investments in arms firms profiting from Yemen’s war worth £130m

Council pension funds in Scotland have investments worth nearly £130 million in arms firms linked to Yemen’s conflict, a war that has led to the deaths of an estimated 70,000 people.

The local authority funds have shareholdings in five arms companies who are key suppliers to Saudi Arabia, which leads a coalition of Arab states accused of multiple war crimes including the bombing of school bus when 40 children were killed.

The arms firms supported by council workers’ money are BAE Systems, Airbus, Lockheed Martin, Raytheon and Northrop Grumman, some of whom have also received taxpayers’ money through grants from Scottish Enterprise.

Critics of the arms industry have condemned these investments on ethical grounds and called for divestment but the funds have responded by saying this is not an option and that “responsible investment” is a core part of their investment strategy.

Documents seen by The Ferret reveal that Lothian Pension Fund has investments totalling £91,276,095 in Lockheed Martin, Northrop Grumman and Raytheon, which makes laser guided systems for Paveway IV smart bombs in Glenrothes.

Strathclyde Pension Fund has total investments worth £18,886,971 in four defence firms – Airbus, Raytheon, Lockheed Martin and Northrup Grumman. Falkirk Pension Fund has shares worth £2,769,142 in BAE Systems while Tayside Pension Fund has £16,008,862 in BAE Systems and Airbus.

The above four funds have collectively £128,941,070 worth of investments in major arms companies profiting from a prolonged conflict now in its fifth year.

The UK has been arming Saudi Arabia during Yemen’s conflict via BAE Systems, Europe’s biggest arms company. Its portfolio includes fighter aircraft, warships, tanks, armoured vehicles, artillery, missiles and small arms ammunition. BAE Systems’ fighter jets are being used by Saudi forces in Yemen and the firm is currently in negotiations to sell a new batch of aircraft to the Saudi regime.

Lockheed Martin is the world’s biggest arms company. It specialises in fighter jets and is one of the main contractors for the UK’s trident missiles. The US company has sold arms to Saudi Arabia, Israel, Bahrain and Egypt, among others.

A Lockheed Martin bomb was used in the bombing of a school bus in Yemen last August, which killed dozens of children. The attack on the 9 August 2018 killed 40 boys aged from six to 11 who were being taken on a school trip. Eleven adults also died.

Scots pension funds linked to Yemen bus atrocity

Local authorities said that 79 people were wounded, 56 of them children. CNN reported that the weapon used was a 227kg laser-guided bomb made by Lockheed Martin, one of many thousands sold to Saudi Arabia as part of billions of dollars of weapons exports.

Airbus is the second largest arms producer in Europe and the seventh largest in the world. The firm is a partner in the Eurofighter consortium and its customers include the Saudi regime. Its products include fighter jets, artillery systems, missiles and helicopters. Airbus markets include authoritarian regimes such as Saudi Arabia, the UAE and Kazakhstan.

Raytheon – which has a factory in Fife employing more than 700 people – has exported arms to 80 different countries. Its Paveway IV bombs are made in Glenrothes and have been used by Saudi forces throughout the bombing Yemen. Human Rights Watch linked Raytheon bombs made in the UK to attacks on civilian targets in its Bombing Businesses report.

Northrop Grumman is the fifth largest arms company in the world, with a portfolio including combat aircraft such as the ground-attack A-10 and the B-2 Spirit “stealth” bomber. It also manufactures a wide range of military drones, including the Global Hawk which is used in surveillance and targeting.

According to the company website, “Northrop Grumman has been heavily involved in the training and development of the Saudi military personnel, most notably providing technical services for the Ministry of the National Guard.”

Andrew Smith of Campaign Against Arms Trade questioned the council funds’ investments and said: “The last four years of bombardment have inflicted the world’s worst humanitarian crisis on the people of Yemen. It is totally inappropriate for local authorities to be profiting from investing in the companies that have enabled the destruction.

“The arms industry may be a global industry, but that doesn’t mean that changes can’t be made on our doorsteps. One small step that every council in Scotland can take is to promise that they will end their support for it by bringing in an ethical investment policy. This wouldn’t just end their complicity in the war, it would set a major ethical precedent for others to follow.”

Stephen Smellie, depute regional convenor for UNISON, said that pension funds should be “seeking profitable investments in line with the values of their members”. He added that UNISON is calling for a merged local government pension fund with an ethical unit to advise on investments.

Smellie said: “Council staff spend their working lives delivering essential services to the public, and their pension funds are under a duty to assess environmental, social and corporate governance in their investment portfolios. This research highlights the risk that some are falling short.”

Scottish Greens external affairs spokesperson, Ross Greer MSP, claimed that public sector workers will be “horrified to learn their pension contributions are funding the arms dealers whose bombs have slaughtered thousands of innocent children in Yemen”.

“Saudi Arabia’s relentless bombing campaign there has caused mass starvation and a cholera outbreak, all made possible thanks to companies such as Raytheon who sell their lethal products to this brutal regime. It’s time our pension funds were divested from this industry of death. I’m grateful to the coalition of trade unions, Green councillors and others campaigning for exactly that.

“In Holyrood the Green MSPs are working to end the handouts of public money and business support given to these multi-billion dollar arms dealers. I hope others who see what is happening in Yemen and other war zones across the world will have the courage to join us.”

A spokesperson for Lothian Pension Fund (LPF) said that “responsible Investment” is a core part of its investment policy and that the fund operates at all times within applicable policy, legal and regulatory frameworks.

“We invest on behalf of our members and their dependants and have a fiduciary duty to act in a financially prudent manner and to consider factors of environmental, social and governance (ESG) in the context of the financial risk that arises from the investment,” the spokesperson said.

“The issues raised by lobby groups often centre on complex social, legal or moral issues, and while the fund is unable to divest investments solely for these reasons, we can use the views of lobby groups, where supported by credible evidence, to support our assessment of financial risk.

Furthermore, as a responsible investor LPF engages with companies in whom we invest to influence improved ESG outcomes and our belief is that doing so as an active investor is more responsible.”

Alastair McGirr, pensions manager at Falkirk Council, said:  “The fund’s primary and legal purpose is to invest the monies given to it by its stakeholders in order to meet future pension payments. The fund has a legal obligation to invest its assets in a prudent and diversified manner so as to achieve the returns necessary to meet those long term financial commitments.

“The fund’s investment managers are required to take environmental, social and governance risks into account when making investment decisions in case these have an impact on the value of the fund’s investments. By engaging with companies, the fund and its managers are able to encourage better corporate behaviour. This is potentially more beneficial to society than outright divestment which could simply lead to shares being passed to less responsible owners.

“In relation to the fund’s investment in British Aerospace, this is very small, being only 0.1 per cent of the fund’s overall investments. In addition, only part of the British Aerospace production lines relate to offensive weapons – other lines include defence systems, aircraft/satellite design and space craft engineering.”

A  spokesperson for Airbus said: “The European Union has some of the most robust arms export control rules in the world and Airbus is absolutely compliant with all of these rules.”

There were calls by UNISON last year for a new ethical investment unit after it emerged that Scots funds were investing in firms bankrolling the US immigration detention industry.

Our revelations, published with The Sunday Post, followed widespread condemnation of President Trump after it emerged that hundreds of migrant children had been separated from their parents and detained in immigration detention camps near the border with Mexico.

Earlier this year, UNISON called for Scotland’s 11 local council pension funds to be merged into a single body. The union believes that a single fund would refocus on cleaner and more ethical investments.

Last year Lothian Pension Fund voiced support for a full merger of the country’s 11 local government pension schemes. The £6.7 billion Lothian Pension Fund backed the option in its response to a consultation launched by the Scottish Local Government Pension Scheme Advisory Board (LGPS) last June.

The advisory board presented Scotland’s LGPS funds with four options: retaining the current structure; promoting greater co-operation in administration and investments; pooling investments in a manner similar to the LGPS funds in England and Wales; or merging into one or more larger funds.

Lothian’s preference was completely different to that expressed by the £21.5 billion Strathclyde Pension Fund.

The Glasgow-based fund told the advisory board there was no evidence to suggest the current model was fundamentally flawed, and that no major change was necessary.

A decision by the Scottish Government following the consultation is imminent, The Ferret understands.

Raytheon, Lockheed Martin, BAE Systems, Airbus and Northrop Grumman did not respond to our requests for comments. Neither did Tayside Pension Fund or Strathclyde Pension Fund.

Pension fund documents

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