14 Jun 2012

British money funding indiscriminate cluster bombs

It’s four years since Britain signed a treaty outlawing cluster bombs. But British money is still being invested in the foreign firms that make them, as business correspondent Sarah Smith reports.

British money being invested in firms making cluster bombs (Reuters)

Do you want to buy a cluster bomb? Have you invested in indiscriminate weapons? You might have done so without realising it

Cluster bombs are a weapon that causes unacceptable harm. They kill disproportionate numbers of innocent civilians.

They continue to kill and maim children for years after they have been dropped. That’s why they have been banned by an international treaty that was signed by the British government in 2008.

British NGOs were at the forefront of the campaign to get these awful weapons banned. But British companies are undermining that good work by investing in foreign firms that continue to manufacture cluster bombs.

It is illegal for British forces to use cluster bombs. It’s illegal for British companies to manufacture cluster bombs. But it is not illegal for British firms to invest in foreign companies that make cluster bombs. And whilst you may not realise it, some of the firms to which we entrust our pensions and savings invest in companies that make these despicable weapons.

Some of the big UK high street banks used to provide loans and underwriting services to the worlds largest cluster munitions makers.

But RBS have recently responded to public pressure and agreed not to provide funding or financial services to any companies involved in the production and stockpiling of cluster munitions. They also banned any dealings with companies that produce only certain components of cluster munitions to make sure they comply with “both the letter and the spirit” of the Oslo Convention on Cluster Munitions. Well done RBS.

Lloyds Bank now also operates a similar policy.

Shame other British financial institutions haven’t followed suit. Several of the biggest asset management companies in Britain own shares in weapons manufactures that still produce cluster bombs

A report published today by IKV Pax Christie and Fair Fin
details all the companies world-wide that invest in cluster munitions manufacturers and quite a few UK firms are listed in their Hall of Shame.

Some of the companies named and shamed have refused to answer my questions.

To get Veritas Asset Management to talk about cluster bombs I had to phone them repeatedly. They started off by trying to tell me that Lockheed Martin don’t make cluster bombs (they are probably the best known cluster munitions manufacturer in the world) and ended up by not returning my calls. Maybe too ashamed to talk about their holding in Singapore Technologies?

I’ve been e-mailing Invesco for over a week to ask them to confirm their investments in Allaint Techsystems, Singapore Technologies Engineering and Textron. They pointed me toward their anodyne corporate governance policy published on their website. But never got back to me to explain how investing in companies that make bombs which indiscriminately kill and maim children is part of their “clear and considered policy towards its responsibility as a shareholder on behalf of all its investors”.

Schroder Investment Management also invests in Singapore Technologies despite the fact that they claim “Our Responsible Investment Policy has been in place for over a decade”. They think the implementation of the Oslo Convention is “complex”. Some might say it would be very simple to just refuse to invest in firms that make these bombs.

Some of them do have the decency to be embarrassed about their shareholdings:

Aberdeen Asset Management
admits that they have a long term shareholding in Singapore Technologies Engineering. And they admit that one of STE’s subsidiaries produces cluster munitions. They say “we would prefer the company to exit from this business, and have made frequent representations to the management emphasising this point. Our discussions with management on this issue will continue as part of our regular engagement with the company.” You could argue that if those frequent representations are not working to change STE’s policy then maybe removing the investment might.

Prudential admit to holding shares in an American company called Textron. They say “We are transparent about our investments. Furthermore, we expect all the companies in which we invest on behalf of our customers to comply to the fullest extent of the law of the countries where they operate”. It is true that Textron are based in US, a country which has not signed the convention on cluster munitions. But is that good reason to invest British money in that company?

The UK government bans the direct financing of cluster munitions by any UK company.

But is not illegal to fund companies like Textron, STE or Alliant that make cluster bombs as well as other kinds of weapons. The Foreign Office says they would like British firms to think about corporate social responsibility before investing in companies like these. But they don’t plan to stop them from doing so. Only consistent public pressure will do that.