Disarmament treaty drops bomb on super funds investing in nuclear weapons

by Margaret Beavis | Nov 2, 2020 | Economy & Markets

Many superannuation funds exclude investment in “controversial weapons” but astoundingly this definition does not include nuclear weapons. However, this will change once the Nuclear Disarmament Treaty becomes international law, writes Dr Margaret Beavis. With two of the largest pension funds in the world already having divested, Australian funds are on notice.

It would probably come as a surprise, and a disappointment, to most Australians to hear that some of their superannuation is invested in nuclear weapons. Especially given the strong community backing for nuclear disarmament, with two surveys in 2018 and 2020 (IPSOS) showing that between 71 and 79% of respondents supported Australia signing and ratifying the Treaty on the Prohibition of Nuclear Weapons.

Yet the vast majority of superannuation funds have holdings in companies involved in the manufacture and maintenance of nuclear weapons. While many funds exclude investments in “controversial weapons”, astoundingly this definition often still allows nuclear weapons investment.

But this is about to change. With the Treaty on the Prohibition of Nuclear Weapons (TPNW), which was endorsed by 122 countries at the United Nations in 2017, having just reached the milestone of 50 countries ratifying it, the treaty becomes international law in less than three months. Nuclear weapons, the worst of the weapons of mass destruction, will finally be on the same illegal footing as chemical and biological weapons.

This means assistance of any sort, including financial assistance, towards nuclear weapons becomes illegal under international law.

Only 26 companies support these weapons. Boeing, for example, the second largest weapons producer in the world, has contracts worth more than US$1.7 billion: building new nuclear weapons for the US, key components for the long-range nuclear Minuteman Intercontinental Ballistic Missiles system, sustaining the UK Trident II system and making tail-kit assemblies for the new B61 bombs.

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Divestment is accelerating

Globally, major investors are already ceasing their exposure to nuclear weapons activities. This includes two of the top five pension funds in the world, the Norwegian Government Pension Fund and ABP, which have divested from the 26 companies tied to nuclear weapons. Deutsche Bank and KBC are also divesting.

In Japan, 16 banks (including three mega banks) have flagged ceasing investment in nuclear weapons companies. With accelerating divestment, the risks of holding nuclear weapons stocks increases.

Superannuation funds in Australia are starting to consider the financial risks, reputational risks and ethical imperatives surrounding investments in nuclear weapons.

Some, like Australian Ethical, Future Super and Bank Australia have already acted.

Risk management underpins any good investment strategy. The Covid-19 pandemic has amply demonstrated that low frequency, high impact events can have catastrophic impacts. A pandemic had been predicted by experts for decades, yet it caught many by surprise.

Similarly, experts have been warning of nuclear war for many years. Indeed, the Bulletin of Atomic Scientists’ Doomsday Clock is closer to midnight than it has ever been.

Saved only by good luck

There is an outdated belief that nuclear weapons make us safer. However, any risk analysis of nuclear weapons would find we have come within a hair’s breadth of nuclear war at least seven times over the past few decades. This has been due to human error, radar error, unusual weather patterns and even something as simple as a faulty computer chip.

Only good luck has saved us. With almost 14,000 nuclear weapons globally and almost 2000 on hair-trigger alert, it is clear we cannot continue to rely on luck.

Add to this risk the brinkmanship of unpredictable world leaders, the repeated skirmishes between India and both Pakistan and China, and the risk of hackers and extremists. A 2016 UN analysis found that because of technological advances there is less need to directly access an actual weapon to effect a nuclear detonation.

The same report also noted that substantial investment in nuclear weapons systems and their modernisation have enhanced, rather than decreased, the likelihood of intentional or inadvertent use.

Appalling loss of life

Nuclear weapons cause appalling loss of life. In even a “limited war”, using less than 0.5 % of current arsenals, some 50 to 120 million people would die instantly. The subsequent megafires would loft so much soot into the stratosphere that a decade-long nuclear winter would follow.

Careful modelling finds drops in crop yields of between 10 and 20% for rice, maize and wheat. This would cause global famine, risking 2 billion people dying of starvation.

As with climate change, there is little point accumulating funds on behalf of the community if they contribute to the deaths of billions and a severely damaged future.

Quit Nukes, an Australian-based campaign launched late last year, is working to get super fund portfolios out of the financing of nuclear weapons. The campaign members have met with senior executives at more than a dozen funds, the regulator APRA, several banks, index setters and a number of industry bodies.

Blackrock, MSCI and other index setters have recognised the increasing demand from the public for ethical funds and have created products to suit.

The full list of funds that have already acted is on the Quit Nukes website.

Consumers are increasingly concerned about their funds being invested in destructive and unethical industries and super funds need to respond.

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Dr Margaret Beavis is a director of Quit Nukes, an initiative of the Medical Association for Prevention of War in association with ICAN (Australia). She is also co-chair of ICAN (Australia).

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