Divestment from nuclear corporations

A recent study by the Ploughshares Fund estimates that the United States will spend around US$ 700 billion on its nuclear weapons over the next decade (2012-2022). A 2008 study by the Carnegie Endowment — on which the Ploughshares estimate was largely based — estimated the US nuclear weapons budget for that year to be roughly US$ 52 billion. The international movement Global Zero recently released a report which found that in 2011 the nuclear-weapon-possessing States collectively spent approximately US$ 100 billion on their nuclear programmes and that spending will top US$ 1 trillion (US$ 1,000 billion) over the next decade (2012-2022). 

Much of this money goes to private companies awarded contracts to manufacture, modernize and maintain nuclear weapons and their delivery vehicles. US President Eisenhower’s warning 50 years ago of the threat of the “military-industrial complex” (a formidable union of the armed forces and defence contractors) to democratic government has arguably come true. A recent report (Don't Bank on the Bomb) by the International Campaign to Abolish Nuclear Weapons identifies 20 major nuclear-weapon producers, and more than 300 banks, insurance companies, pension funds and asset managers from 30 countries that invest significantly in these corporations. In addition, scientific research into the development and maintenance of nuclear weapon systems robs such intellectual activity from the areas of health, social and economic need.

Against the backdrop of increasing budgetary austerity and widespread cuts in health and social spending, such allocations for weapon systems appear not only exorbitant, but also counter to the economic and social needs of nation States and the international community. The biennial UN Core Budget, for example, is only US$ 5.1 billion (2012/2013) — or 5 per cent of the annual global nuclear weapons budget.

An equally, if not more important, issue is that no one knows, or ever has known, what nuclear weapons really cost, which makes reliably predicting future expenditure (or savings from future cuts) exceptionally difficult. The nuclear-weapon-possessing States have never tracked nuclear-weapon-related spending comprehensively, making it difficult to engage in effective oversight and weigh priorities in nuclear security policy. As Stephen I. Schwartz, of the James Martin Center for Nonproliferation Studies at the Monterey Institute of International Studies, notes with regard to US nuclear weapons spending:

The problem is not (...) that the government 'has never officially disclosed the exact cost', it’s that no one knows the exact cost because all the relevant data have never been collected and analyzed. For a program that has consumed an estimated $8.7 trillion (in inflation-adjusted 2010 dollars) since 1940, making it the third most expensive government program of all time, that is simply unacceptable, and it should be unacceptable whether one believes current and proposed future spending is too much or too little.

In some of the nuclear-weapon-possessing States, parliamentarians have endeavoured to re-order budget priorities and address the lack of transparency in nuclear weapons budgets. In addition, in some instances parliaments have been able to halt the development of new types of nuclear weapons through their oversight function.

A key lobby for continued nuclear-weapon spending is the corporations securing the lucrative contracts to produce the weapons. Parliamentary oversight in nuclear-weapon States can provide some control on cost over-runs and inefficiencies. Parliaments in some non-nuclear-weapons States have taken more significant action, including divesting public funds from such corporations.

Case study: Norway

Ethical Guidelines for the Norwegian Government Pension Fund

The Norwegian Government Pension Fund (Global, formerly known as the Government Petroleum Fund) is the world’s second largest sovereign wealth fund and the repository of the Norwegian people’s excess oil and natural gas wealth.
In 2002, a governmental committee (the Graver Committee) was established and tasked with proposing ethical guidelines for the Fund. The Committee’s report and subsequent discussions in the Norwegian Stortinget (Parliament) led to the adoption of the Ethical Guidelines for the Fund by parliament in November 2004. In addition, a Council on Ethics for the Fund was established.
At the core of the Ethical Guidelines lies the belief that the Fund should not make investments that carry an unacceptable risk that the Fund may contribute to unethical acts or omissions, such as violations of fundamental humanitarian principles, serious violations of human rights, gross corruption or severe environmental damages.
The criteria set out in the Guidelines prohibit investment in companies which themselves, or through entities they control, produce weapons normal use of which violate fundamental humanitarian principles, produce tobacco or sell weapons or military material to Myanmar.
Although other countries have adopted similar divestment policies, at the time Norway’s scheme was unique in that it included divestment from companies involved in “the development and production of key components for nuclear weapons”. This is based on the Guidelines’ provision that the Fund shall not invest in companies that produce weapons that “violate fundamental humanitarian principles through their normal use”.
The Graver Committee and the Norwegian Stortinget considered that nuclear weapons and cluster munitions, though not indisputably prohibited under international law, might be considered to violate fundamental humanitarian principles, and should thus also fall under the Fund’s divestment scope. The exhaustive list of weapons that were considered to violate humanitarian principles includes: chemical and biological weapons, blinding laser weapons, munitions with fragments not detectable by X-ray, incendiary weapons as referred to in the UN Conventional Weapons Convention, anti-personnel mines, cluster weapons and nuclear weapons.
The conclusion of the Graver Committee and the Stortinget that the Fund should not invest in companies that “develop and produce key components for nuclear weapons” has been interpreted by the Council as encompassing more than just the actual production of nuclear warheads. The exclusion criterion includes delivery mechanisms, such as missiles carrying the warhead (ICBMs), certain forms of testing as well as maintenance of nuclear weapons.
In line with this demarcation, since 2005 ten international companies (BAE Systems Plc., Boeing Co., EADS Co. (including its subsidiary), EADS Finance B.V., Finmeccanica Sp.A., GenCorp Inc., Honeywell International Inc., Northrop Grumman Corp., United Technologies Corp., Safran SA, Serco Group Plc., United Technologies Corp) have been excluded from the Fund’s portfolio, on the grounds that they were involved in the development and production of key components for nuclear weapons.

The potential effects of ethical guidelines for investment policies, such as those adopted by Norway, should not be underestimated. Such divestment can affect the behaviour of both corporations and investors. Furthermore, public divestment policies and ethical guidelines for public funds can help shape international public opinion by further stigmatizing certain instruments, products and behaviour.

Recommendation for parliamentary action:

  • Pursue ethical investment schemes to ensure that public funds are divested from companies involved in unethical practices, including the manufacture of nuclear weapons or their components