About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds Other Sites:   tmmonline.nz  |   landlords.co.nz
Last Article Uploaded: Wednesday, August 21st, 6:02PM
rss
Investment News

Why are Australian banks investing in nuclear weapons companies?

New Zealanders have strong and clear opinions about where our money is invested, and not supporting the manufacture of nuclear weapons is right at the top of the list. Our country has a long and proud anti-nuclear weapon history.

Wednesday, August 7th 2019, 6:31AM 3 Comments

by Pathfinder Asset Management

Yet, according to a just-released report by the Nobel Peace Prize-winning International Campaign to Abolish Nuclear Weapons (ICAN)1, three Australian Banks (ANZ, Westpac and CBA – the owner of ASB), have loaned or invested over US$2.7 billion to companies involved in the design, manufacture, testing and servicing of nuclear weapons. ANZ and Westpac are responsible for most of this lending and collectively manage more than 35% of the KiwiSaver market. Their shares, as investments, are owned by a substantial number of KiwiSaver schemes.

Each year ICAN publishes a report showing which financial institutions have invested in the 18 companies most heavily involved in the nuclear weapons industry. ANZ and Westpac are prominent on this list, with both banks providing significant capital (a total of more than US$1.3 billion each in investment in equity and debt) to companies integral to the production of nuclear weapons.

The companies include names such as AECOM, Fluor Corp, General Dynamics, Honeywell International, Jacobs Engineering, Lockheed Martin, Northrop Grumman and Serco Group. AECOM, in which ANZ invested or loaned US$28 million, for instance, is involved in the research, design, development and production of nuclear bombs at Lawrence Livermore National Laboratory in the US.

Fluor Corp, in which ANZ invested US$70 million and Westpac invested US$112 million, is involved in several US nuclear weapons enterprise facilities including Savannah River Nuclear Solutions where it develops key components for nuclear warheads. Honeywell International manages and operates numerous nuclear weapons production, design and testing facilities, as well as manufacturing numerous components for warheads and missiles. Westpac lends $686 million, and ANZ $112 million to this firm. 

Jacobs Engineering, where ANZ invested US$95 million, has a 25-year contract to maintain the UK nuclear missile arsenal. Lockheed Martin has numerous defence businesses in the USA and along with Serco manages the UK Atomic Weapons Establishment. According to ICAN, ANZ invested US$258 million in Lockheed, and US$33 million in Serco.

This pattern of investment is problematic for two reasons. Firstly, in our view most KiwiSaver investors assume that their savings are not used to fund problem companies like the nuclear weapons industry.

Yet any KiwiSaver scheme that owns either ANZ or Westpac shares is doing just that – supporting the nuclear weapons industry.

Secondly, it shows the weakness of the banks approach of applying different ethical standards to different parts of the business. ANZ has excluded companies that invest in firms involved in the testing or manufacture of nuclear weapons from its KiwiSaver scheme, while Westpac only excludes those involved in the manufacture of nuclear weapons. Yet both banks are content to lend money or invest in those same companies that they exclude from KiwiSaver.

That kind of selective ethical behaviour is not adequately explained to investors which just isn’t good enough. In our view financial institutions face a very simple ethical choice: you either choose to do bad stuff or you choose to not do bad stuff, and you explain both very clearly to investors. There is no in-between.

However, as the Australia Royal Commission of Inquiry into the Banking, Superannuation and Financial Services Industry showed such compartmentalisation of ethical choices is rife in the banking industry. To date consumers have suffered the consequences. 

Even before our company Pathfinder thinks about the ethical arguments of investment, ANZ has been a tough investment choice, we believe there are better places for us to deploy our investment capital. ANZ and Westpac have underperformed the best performing Australian bank by more than 13% over the last year. We are committed to investing wisely but also with a close watch on how good the environmental, social and governance (ESG) standards are at each company.

The New Zealand Super Fund is among several investors in New Zealand that is setting the tone for responsible investment in New Zealand. It has taken the important step of publishing an exclusion list of companies in which it will not invest due to their involvement in the manufacture of cluster munitions; the manufacture or testing of nuclear explosive devices; the manufacture of anti-personnel mines; the manufacture of tobacco; the processing of whale meat; recreational cannabis; and the manufacture of civilian automatic and semi-automatic firearms, magazines or parts.

This list has become a solid baseline for what KiwiSaver schemes should or should not invest in. It is based on a comprehensive and principled approach to responsible investment that is aligned with a responsible investment framework, international conventions and New Zealand law.

In this respect Pathfinder and CareSaver share the Super Fund’s approach. We establish a bottom-line list of exclusions as the first rung on a truly coherent and principled ethical investment strategy.

However, our exclusion list is based on a higher standard. One of our very first steps is to eschew investment in nuclear and other controversial weapons as well as investment in those who enable their manufacture and maintenance. Westpac and ANZ fall squarely into this camp.

We believe Westpac and ANZ (among many others) would do well to reconsider their approach. If companies purport to embrace responsible investment, they should hold themselves accountable to the same standards and abide by such exclusions across all their operations, not just those parts where it is expedient to do so.

 

 

Paul Brownsey is Chief Investment Officer of Pathfinder Asset Management, a responsible investment specialist, which also runs the CareSaver ethical investment KiwiSaver scheme.

1 The study covers the period between January 2017 and January 2019.

Link to NZ Super fund exclusions

Link to ICAN report

Tags: ESG ethics Pathfinder Asset Management responsible investing

« Countdown to Brexit: Will the UK Leave on Halloween?Lower and lower domestic interest rates »

Special Offers

Comments from our readers

On 6 August 2019 at 12:01 pm Kimble said:
Can we get these numbers converted to percentages of invested assets?
Or is this intended to be an exercise in homeopathic investment?
On 7 August 2019 at 12:05 pm MPT Heretic said:
While I am all for bashing the banks Paul and pointing out there clear double standards I do wonder where this ESG conversation is going. You say there is a clear choice about bad stuff but it seems very far from clear to me. Using your Super Fund example do most NZ'ers consider recreational canabis bad stuff? Maybe, maybe not.

As with respect to your own firms investment approach and avoiding supporting these bad industries, I take it you also have excluded the water, gas, electricity and technology companies that enable them to operate... or it expedient to ignore those parts of the supply chain?
On 15 August 2019 at 2:45 pm Longitude68 said:
Where does one draw the line? Hold onto aging ineffective weapons whilst others dont? Be righteous whilst protected under our allies ultimate defence (we are master spongers at this); or only companies soley into neuclear waepons; or over 50% in say revenue; or any percentage at all? Boeing is involved as an example.... so no importing or use of their commercial planes? ('But wait I like my international holidays at a cheap price'). Its tougher to be righteous with simple bans once you think it through.
Ive never seen simplistic answers as a workable pathway in complex matters.

Sign In to add your comment

 

print

Printable version  

print

Email to a friend

Good Returns Investment Centre is brought to you by:

Subscribe Now

Keep up to date with the latest investment news
Subscribe to our newsletter today

FundSource Research
  • Westpac Premium Investment Funds
    27 May 2019
    The Westpac Premium Investment Funds offers a focused investment menu of multi-manager single sector funds that draws on all of the BTNZ investment teams...
  • Westpac KiwiSaver Scheme
    27 May 2019
    The Westpac KiwiSaver Scheme offers a focused investment menu of multi-manager diversified funds that draws on all of the BTNZ investment team full capabilities...
  • Milford KiwiSaver Balanced Fund
    3 May 2019
    The Milford KiwiSaver Balanced Fund is a multi-asset portfolio that is best suited to long term investors who can accept some investment risk over the...
© 2019 FundSource Research.

View more research papers »

Edison Investment Research
  • Lowland Investment Company
    21 August 2019
    Value-orientated portfolio with 4.5% dividend yield
    Lowland Investment Company (LWI) has suffered a period of poor performance recently, with both its share price and NAV close to 12-month lows, as its value...
  • Aberdeen Latin American Income Fund
    19 August 2019
    Outperforming a volatile market
    Aberdeen Latin American Income Fund (ALAI) offers broad exposure to Latin America (both equities and government debt). It is managed by Aberdeen Standard...
  • Aberdeen Asian Income Fund
    16 August 2019
    Long-term record of double-digit total returns
    Aberdeen Asian Income Fund (AAIF) aims to generate an above-average level of income and long-term capital growth, even in challenging times, from a diversified...
© 2019 Edison Investment Research.

View more research papers »

Today's Best Bank Rates
Westpac 2.05  
Based on a $50,000 deposit
More Rates »
Cash PIE Rates

Cash Funds

Institution Rate 33% 39%
ANZ 0.10    0.10    0.11
ASB Bank 0.10    0.41    0.42
ASB Bank 0.10    0.59    0.56
ASB Bank 0.10    0.61    0.64
ASB Bank 0.15    0.66    0.69
ASB Bank 0.20    0.72    0.75
BNZ 0.10    0.10    0.10
Heartland Bank 1.50    2.59    2.70
Kiwibank 0.75    0.77    0.88
Kiwibank 1.75    1.81    1.89
Nelson Building Society 3.75    3.90    4.08
SBS Bank 1.50    -    -
TSB Bank 1.60    1.64    1.71
Westpac 0.35    0.36    0.38
Westpac 0.05    0.10    0.11
Westpac 1.40    2.16    2.26

Term Funds

Institution Rate 33% 39%
ANZ Term Fund - 90 days 2.50    2.60    2.79
ANZ Term fund - 12 months 3.00    3.39    3.55
ANZ Term Fund - 120 days 2.65    3.09    3.22
ANZ Term fund - 6 months 3.05    3.45    3.60
ANZ Term Fund - 150 days 2.80    -    -
ANZ Term Fund - 9 months 3.05    -    -
ANZ Term Fund - 18 months 3.00    -    -
ANZ Term Fund - 2 years 3.05    -    -
ANZ Term Fund - 5 years 3.20    -    -
ASB Bank Term Fund - 90 days 2.60    2.67    2.79
ASB Bank Term Fund - 6 months 3.20    3.29    3.43
ASB Bank Term Fund - 12 months 3.20    3.33    3.48
ASB Bank Term Fund - 18 months 3.50    3.65    3.81
ASB Bank Term Fund - 2 years 3.65    3.81    3.98
ASB Bank Term Fund - 5 years 4.10    4.28    4.48
ASB Bank Term Fund - 9 months 3.60    3.75    3.92
BNZ Term PIE - 120 days 2.45    -    -
BNZ Term PIE - 150 days 2.60    3.38    3.53
BNZ Term PIE - 5 years 3.00    3.86    4.04
BNZ Term PIE - 2 years 2.90    3.91    4.09
BNZ Term PIE - 18 months 3.00    3.65    3.81
BNZ Term PIE - 12 months 3.00    3.38    3.53
BNZ Term PIE - 9 months 2.85    3.44    3.60
BNZ Term PIE - 6 months 2.85    3.75    3.92
BNZ Term PIE - 90 days 2.20    2.72    2.85
Co-operative Bank PIE Term Fund - 6 months 3.40    -    -
Heartland Bank Term Deposit PIE - 12 months 3.20    3.53    3.69
Heartland Bank Term Deposit PIE - 6 months 3.15    3.43    3.58
Heartland Bank Term Deposit PIE - 9 months 3.15    3.85    4.02
Heartland Bank Term Deposit PIE - 18 months 3.20    -    -
Heartland Bank Term Deposit PIE - 2 years 3.25    3.43    3.58
Heartland Bank Term Deposit PIE - 5 years 3.50    3.85    4.02
Kiwibank Term Deposit Fund - 90 days 2.65    2.72    2.82
Kiwibank Term Deposit Fund - 6 months 3.40    3.49    3.65
Kiwibank Term Deposit Fund - 12 months 3.50    3.39    3.55
Kiwibank Term Deposit Fund - 150 days 3.15    3.65    3.81
Kiwibank Term Deposit Fund - 120 days 2.95    3.03    3.17
Kiwibank Term Deposit Fund - 9 months 3.40    3.49    3.65
Westpac Term PIE Fund - 150 days 2.60    2.88    3.00
Westpac Term PIE Fund - 120 days 2.50    3.38    3.53
Westpac Term PIE Fund - 18 months 2.75    3.29    3.43
Westpac Term PIE Fund - 12 months 2.75    3.49    3.65
Westpac Term PIE Fund - 6 months 2.80    3.44    3.60
Westpac Term PIE Fund - 9 months 2.80    3.17    3.32
Westpac Term PIE Fund - 90 days 2.20    2.56    2.67
Westpac Term PIE Fund - 2 years 2.75    3.79    3.96
About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
 
Site by Web Developer and eyelovedesign.com