Investing in Arms Companies: Financial Limitation Approaches 

This page is under development... if you have found it, it is incomplete and has not been updated recently.
Issue Overview

While decisions on investing in weapons production is traditionally regarded as the purview of states, many financial institutions (including public and private investment funds) have adopted limits and exclusions on how they will support weapons production. This resource page is primarily designed to provide an overview and specific examples of developments related to "behavior-based" exclusions -- those based on where and how weapons might be used -- rather than solely on the weapon itself. The page does, however, have some resources on "product-based" exclusions -- those based on specific weapons (cluster munitions, nuclear weapons) -- in part because many financial institutions explain their practices in ways that combine both exclusion types.

We welcome additional information and suggestions, which can be sent to [email protected].

Forum-listed experts* to contact on this research includes: ____________________
Additional recommended experts: __________________
​
* The Forum itself does not take positions, but does share findings, research, and recommendations by its listed experts and others addressing arms trade issues. Inclusion on the Forum on the Arms Trade expert list does not indicate agreement with or endorsement of the opinions of others. Please contact experts directly for comments.
Behavior-Based Exclusions

Much in the same way that financial institutions adopt environmental, social, and corporate governance (ESG) practices that preclude their investing in assets linked with widespread harm (e.g. tobacco firms, extractive industries), some institutions have begun adopting policies, such as risk management frameworks, that identify and block investments that might fund the sale and use of weapons because of how or where they are used.

These so-called "behavior-based" exclusions are becoming more common, but are still not widespread. The line between a behavior-based and product-based approach is also a bit grey at times. For example, decisions not to invest in emerging technologies in artificial intelligence when they are used for spying/domestic repression or lethal autonomous weapons could be classified as product-based, but for this resource page are included here as behavior-based exclusions, in part because how that technology is being used is driving the exclusionary approach.

In categorizing some of the behavior-based approaches, this page is particularly focused on those that mention the arms trade especially in relation to human rights or similar concerns, the Arms Trade Treaty itself, as well as lethal autonomous weapons systems (aka "killer robots") -- as detailed in the chart below:
Institution
arms trade (including human rights related)
Arms Trade Treaty
Autonomous Weapons
BNP Paribas (France)
x
x
Van Lanschot Kempen (Netherlands)
x
​NIBC Bank (Netherlands)
x
Aegon (Netherlands)
x
BBVA (Spain)
x
Danske Bank (Denmark)
x
x
DZ Bank (Germany)
x
x
Norges Bank (Norway)
x
KD-Bank (Germany)
x
x
Below are examples of the explanatory text adopted by financial institutions, underlining added for emphasis:
​
  • BNP Paribas (France) | "BNP Paribas works to contribute to the  respect of the United Nations Arms Trade Treaty (ATT) as well as to avoid any complicity with human rights violations in armed conflicts and to mitigate the risks of corruption and money laundering linked to the export of defence and security equipment to countries subject to conflict or instability, or which fail to offer reliable legal guarantees for control of financial transactions. BNP Paribas has established a series of due diligence measures to identify the final destination of this equipment, and the intermediaries involved in their trade."
  • Van Lanschot Kempen (Netherlands) | "We are against the funding of weapons and munitions – both conventional and controversial – if there is a substantial risk of these weapons being used for serious violations of international human rights. Neither will we condone the supply of weapons to fragile or failing states, countries engulfed in civil war, dubious and/or corrupt buyers, terrorist organisations or (organised) crime. To identify which countries and people meet the above definitions, we will adhere to the European sanctions list among other resources. Neither controversial weapons, nor conventional weapons may be supplied to the countries and people on the EU sanctions list, and we will exclude manufacturers and traders guilty of doing so."
  • NIBC Bank (Netherlands) | "NIBC does not finance or invest in companies which manufacture, supply, or develop weapons systems, including highly controversial weapons. NIBC will not support the production of any weapons banned by international treaties and protocols. This includes the Treaty on the Prohibition of Nuclear Weapons (TPNW), the Chemical Weapons Convention (CWC), the Biological and Toxin Weapons Convention (BWC), Cluster Munitions Convention (Oslo Treaty), and the Anti-Personnel Landmines Convention (Ottawa Treaty) among others. NIBC will not support the supply of military transport or other military goods to countries where an arms embargo by the United Nations or European Union is in place; to regimes that violate human rights; to countries that are engaged in (civil) war; to countries with unacceptable levels of corruption; to failing or fragile states; to countries which spend disproportionate amounts of their budget to weapons. We will not support the production of 'dual-use' components or systems for which the primary purpose is for military goods, but which also have civilian applications."
  • Aegon (Netherlands) | "The prevention of controversial international arms trade is enshrined in the UN Arms Trade Treaty, which entered into force in December 2014. Recognizing that the primary responsibility of enforcing the UN Arms Trade Treaty lies with governments, Aegon is committed to monitoring companies with heightened risk in this area (and engaging with them where necessary). Aegon uses its best efforts to refrain from investing in companies that are known to supply weapons to countries identified for arms embargoes by the UN Security Council, the United States or the European Union. Aegon excludes:
    • Companies involved in development, production, maintenance and trade of:
      1. Anti-personnel mines;
      2. Biological or chemical weapons;
      3. Cluster munitions;
      4. Ammunitions containing depleted uranium.
    • Based on international agreements established in the Non-Proliferation Treaty signed by 189 countries, the only states allowed to possess nuclear weapons are the United States, the United Kingdom, France, Russia and China. We do not invest in companies involved in the production and maintenance of nuclear weapons for any other country;
    • Companies that produce or develop key and dedicated components for controversial weapons, as listed above, or offer essential services for their use;
    • Companies involved in controversial arms trade to countries where an arms embargo by the United Nations Security Council, the European Union or the United States is in place, or under any other relevant multilateral arms embargo."
  • BBVA (Spain) | "BBVA will not support the provision of financial services to clients, subject to section 2 of this
    Framework, when it has sufficient evidence that clients or their transactions are involved in the
    following activities:
    • Arms trade operations in countries sanctioned with arms embargoes imposed by the United
      Nations, the European Union and the United States.
    • Arms trade operations in countries at high risk of human rights violations.
    • Trading operations with intermediaries or where the end user is not a public organization (police
      and armed forces, defense departments, defense companies).
    • Production and trade of controversial weapons and their key components: anti-personnel mines,
      biological weapons, chemical weapons, cluster munitions, nuclear munitions, white phosphorus
      munitions and depleted uranium munitions."
  • Danske Bank (Denmark) | "To ensure that non-controversial arms will not be used to enhance violations of human rights, Danske Bank follows all relevant sanctions, including EU, UN, UK and US financial sanctions. This implies that Danske Bank will not engage in transactions involving entities identified by HMS or OFAC to be trading in arms with countries subject to a UN arms embargo. Additionally, Danske Bank will not participate in transactions where we believe the principles of the UN Arms Trade Treaty are not met. In practice, our internal ESG experts will assess the risk that arms will be used to facilitate serious violations of international humanitarian law."
  • DZ Bank (Germany) | "In relation to arms, a definition of ‘controversial weapons’ was adopted that is aligned with  relevant international treaties. It defines controversial weapons as weapons that have indiscriminate effects, are  excessively injurious, have a devastating impact on the civilian population, or have been internationally outlawed.  Examples of controversial weapons include nuclear, biological, and chemical weapons, land mines, anti-personnel  mines, cluster bombs, autonomous weapons, and depleted uranium munitions. Under this new definition, DZ BANK  has classified autonomous weapons as controversial for the first time. The scope of the existing rejection criterion  regarding funding for the production and trade of controversial weapons has been expanded to funding for developers, manufacturers, and dealers of controversial weapons and their core components whenever it cannot be ruled out that  the funding may be used in connection with controversial weapons. This means that DZ BANK rejects all direct and  indirect funding of controversial weapons. In line with the definition of controversial weapons, this also applies explicitly  to direct and indirect funding for nuclear weapons. The bank also rejects all financing of arms exports to countries/governments that are known to be involved in serious violations of humans rights based on various external country lists."
  • Norges Bank (Norway) | "Norges Bank decides on the exclusion of companies from the fund’s investment universe, or to place companies on an observation list. Exclusions as of 1 January 2015 are the decision of Norges Bank's Executive Board. Exclusions previous to this date are decisions made by the Ministry of Finance. The decisions are based on recommendations from the Council on Ethics appointed by the Ministry of Finance. For the product-based coal criterion, decisions are based on recommendations from Norges Bank Investment Management. Exclusions are regulated by the Guidelines for the observation and exclusion of companies from the Government Pension Fund Global, adopted by the Ministry of Finance on 18 December 2014. The following alphabetical overview shows companies that are currently excluded or under observation."
  • KD-Bank (Germany) | "Supply of arms and weapons systems, military transport systems, and other military goods to countries that violate human rights, is unacceptable.... The production and trade of LAWs is unacceptable. This is covered by 'military products'. Currently, no clear definition exists on an international accepted level as to what systems qualify as LAWs within the supply chain / production of key components. KD-Bank and ISS are in intense discussions to find a solution."

Additional Resources:
Relevant Forum co-hosted Events:
Product-Based Exclusions

Barring investments in certain products, such as landmines or nuclear weapons, is a more established and in many ways more straightforward approach that impacts on the arms trade by simply aiming to stop a type of weapon from being manufactured. Detailing the array of product-based exclusions is not the purpose of this resource page, but we believe that anyone familiarizing themself with financial approaches to the arms trade should be aware of these important exclusions. 

Below are some civil society resources that detail ongoing developments in countries adopting policies to bar investment in certain weapons, measures taken by and identifying financial institutions, as well as efforts to detail which weapons manufacturers produce. ​

Cluster Munitions Nuclear Weapons