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Scots financial firms invested £7bn in nuclear weapons

Three major Scottish financial institutions — NatWest Group, Lloyds Banking Group and Standard Life Aberdeen — invested a total of £7bn in nuclear weapons over a two year period.

A new report, seen by The Ferret, also reveals two Scots universities held £2.4m of investments in companies that undertake work related to nuclear weapons, while 11 council pension funds together had £275m invested in 20 firms in the sector.

The study is by Don’t Bank on The Bomb Scotland, a network of organisations campaigning for banks, universities, pension funds and public bodies to divest from companies involved in the production of nuclear weapons. It says these organisations together held investments worth £7.2bn in nuclear weapons producers between 2018 and 2020.

Don’t Bank on the Bomb is calling for divestment. It argues that organisations investing in nuclear weapon producers are “supporting activities that contravene commitments made under the Nuclear Non-Proliferation Treaty”.

In reply, investors say they have robust environmental, social and ethical policies in place and some fund managers claim engagement is more effective than divestment at changing company behaviour.

Medact Scotland, Scottish CND, Pax Christi Scotland and the Edinburgh Peace and Justice Centre are all members of Don’t Bank on the Bomb Scotland.

The umbrella group says there is a heightened global nuclear risk at the moment. It points to tensions between the US, Israel and Iran over the latter’s nuclear programme, and deadly clashes between nuclear-armed nations India and China in the western Himalayas. 

In the UK, nuclear weapons are once again a major political issue following the UK government’s recent announcement it would increase the number of nuclear warheads in its stockpile by up to 44 per cent, a move described by Don’t Bank on the Bomb Scotland as “shocking”.

Its report says that nuclear armed nations are spending “vast sums of money” maintaining and upgrading their nuclear arsenals, with many companies profiting from these modernisation programmes. 

The group argues these programmes are at odds with international treaties. It claims organisations investing in nuclear weapons’ producers are “supporting activities that contravene commitments” made under the 1968 Nuclear Non-Proliferation Treaty (NPT). 

International law on nuclear weapons was strengthened in January 2021 by the UN Treaty on the Prohibition of Nuclear Weapons (TPNW), the study says. The treaty prohibits the development, production, testing, possession, transfer, use and threat of use of nuclear weapons. 

Don’t Bank on the Bomb’s report says the treaty is important to note for investors because financial assistance may be viewed as unlawful under international law.

The roles of three major financial groups based in Edinburgh are highlighted by the report. It says Natwest Group, formerly RBS, held investments worth £2bn in 15 companies between January 2018 and January 2020. These investments were made primarily in the form of loans and through the underwriting of bond issuances, while shareholdings make up a small proportion of the total. 

Natwest has a policy which “only partially restricts investment in nuclear weapons producers”, the report claims. Meetings were held with the bank in 2020 and March 2021 and Don’t Bank On The Bomb said it sent an open letter to it, drawing attention to the “catastrophic humanitarian and environmental consequences of nuclear weapons” and the recent entry into force of the TPNW.

The letter called on the bank to exclude nuclear weapons from investment and was co-signed by over 40 civil society organisations, including trade unions, faith organisations and environmental NGOs.

In reply, a NatWest Group spokesperson told The Ferret: “We have robust policies and processes relating to the defence sector through our environmental, social and ethical risk management framework.

“Our policies reflect adherence to national and international laws and regulations, wherever they apply. We have also incorporated a number of voluntary standards such as the Equator Principles and the UN Global Compact.”

Lloyds Banking Group, which is registered in Edinburgh, is also named. It invested £3.4bn in 10 nuclear weapons producers between January 2018 and January 2020, the report says. These investments were made primarily in the form of loans and through the underwriting of bond issuances. 

The report says: “Lloyds Banking Group’s defence sector policy states that the group will not support businesses involved in the manufacture, sale, trade, servicing or stockpiling of nuclear weapons other than when these activities are undertaken in connection with the national nuclear weapons programmes of the UK, US or France. Companies that may be involved in the manufacture, trading, storage or  servicing of nuclear weapons for the UK, US or France are subject to ‘robust due diligence’. This policy applies to Lloyds’ subsidiaries, including Bank of Scotland.”

But Don’t Bank on the Bomb Scotland argues this policy is “not comprehensive” because nuclear weapons producers are not excluded unless they are involved in the nuclear weapons programme of a non-NATO state.

Lloyds Banking Group told The Ferret: “We do not comment on client relationships, viewing them as confidential.” A statement on its website says: “We aim to offer customers sustainable investment choices and challenge companies we invest in to behave more sustainably and responsibly.”

Standard Life Aberdeen, headquartered in Edinburgh, is also cited. The report says the company offers customers some socially responsible investment funds that exclude nuclear weapons producers but adds that most of its funds do not. 

“The company owned or managed shares worth over £1.5bn in 20 of the world’s top 28 nuclear weapons producers between January  2018 and January 2020. Standard Life Aberdeen should stop investing in weapons of mass destruction,” the report says. 

Standard Life Aberdeen did not reply to our request for a comment. A statement on its website says: “We have been integrating environmental, social and governance considerations into our investment process since the 1990s. Investing responsibly is not only the right thing to do, it also helps us to identify opportunities and manage risks.

“ESG investment is about active engagement, with the goal of improving the performance of assets we manage around the globe. We want to make a difference – for our clients and customers, society and the plane.”

Both Glasgow University and Strathclyde University also invest in the nuclear weapons industry. The former held shares worth £1.9m in 16 companies as of 30 September 2020. Strathclyde University owned shares worth £473,633 in two companies – BAE Systems and Thales.

Don’t Bank on The Bomb calls for “student activism” to “persuade” these universities to change their investment strategies. It claimed the University of Edinburgh changed its policy on arms investments in 2016 in response to a five year “responsible investment campaign”, led by students. 

The university decided against currently disinvesting in companies in the defence sector… but has lobbied governments and businesses against licences being granted to companies to export arms equipment to countries which are classed by the UK Government as having committed, or are at risk of committing, human rights abuses.

University of Glasgow spokesperson

The report adds that at least six Scots universities have policies that either explicitly or implicitly restrict investment in nuclear weapons producers. “It is clear that the University of Glasgow and the University of Strathclyde are outliers when it comes to nuclear weapons investments in the Scottish higher education sector,” the study says.

In reply a spokesperson for Glasgow University said: “The university has taken the decision not to invest in tobacco companies and to actively disinvest in those dealing in fossil fuel.

“The university decided against currently disinvesting in companies in the defence sector (including major local employers such as Thales and BAE Systems) but has lobbied governments and businesses against licences being granted to companies to export arms equipment to countries which are classed by the UK Government as having committed, or are at risk of committing, human rights abuses.”

Strathclyde University did not reply to our requests for a comment.

On council pension funds, the study found that 11 funds collectively held shares worth over £275m in 20 companies that undertake work related to nuclear weapons as at 30 September 2020.

Lothian Pension Fund was the largest investor in nuclear weapons, holding shares worth nearly £126m in five nuclear weapons producers. This includes £102m invested in the world’s largest arms company, Lockheed Martin. Strathclyde Pension Fund came second, holding shares worth £120m in 16 companies.

Don’t Bank On the Bomb Scotland said: “Most Scottish local authority pension funds are reluctant to exclude harmful industries from investment. However, a growing number of Scottish councils are taking a stand against nuclear weapons investments by passing a resolution that calls on their pension fund to divest from nuclear weapons producers.

“One fund, Scottish Borders, already has a policy that restricts investment in controversial weapons, including nuclear weapons.”

Council funds say they address environmental, social and governance issues through “engagement” with the companies they invest in. Some funds also point out they are subject to a legal obligation to act in the best interests of fund members which precludes them from divesting from harmful industries.

A spokesman for Strathclyde Pension Fund said: “The previous asset list will have reflected the period when the US index was held directly – and the second the fund’s preferred position to hold indexes in pooled funds.”

This story was published in tandem with The Sunday National.

Photo thanks to Paul Sableman, CC BY 2.0.

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