The only international treaty making all nuclear weapons illegal has officially become law. The final instruments of ratification needed to trigger entry into force of the Treaty on the Prohibition of Nuclear weapons were deposited at the UN in October, and as of 22 January, nuclear weapons are illegal under international law.
Many financial institutions apply specific exclusion policies preventing financial exposure to all types of controversial weapon producers. Many policies go on to elaborate that controversial weapons are weapons that cause indiscriminate harm by design. Some institutions deny financial services to companies producing weapons that are prohibited by international law. Nuclear weapons are now both indiscriminate and prohibited.
With the entry into force of the Treaty on the Prohibition of Nuclear Weapons (#nuclearban) now is the time to exclude all nuclear weapon producers from financing. TweetChange is happening
Large financial institutions are already adopting policies to address the inhumane nature of nuclear weapons- the underlying justification for their outlaw in the ban treaty. For example, one of the largest banks worldwide, Mitsubishi UFJ Financial Group (MUFG) has updated its “Environmental and Social Policy Framework” to exclude the financing of nuclear weapons production. As the largest banking group in Japan and among the 5 largest banks globally, MUFG is making a strong contribution to the norm against nuclear weapons.
Also in response to the treaty, soon after it was first adopted in January 2018, the Dutch pension fund ABP decided to start excluding all companies involved in the production of nuclear weapons. ABP uses a list of 4 criteria to decide on the exclusion of companies involved in a specific product: (a) the product is by its nature harmful to humans (b) ABP cannot change that through shareholder engagement (c) there would be no negative consequences if the product no longer existed and (d) there is an international treaty that aims to eradicate the product. The adoption of the TPNW meant all of these criteria were met for nuclear weapons. It recently published research showing this decision has had a positive effect on the return-risk profile of ABPs portfolio.
KBC, headquartered in Belgium announced a new policy “following the line of the United Nations Treaty on the Prohibition of Nuclear Weapons.” KBC serves more than 11 million clients with core markets in Belgium, Bulgaria, the Czech Republic, Hungary, Ireland and Slovakia.
Deutsche Bank also expanded its exclusion of controversial weapons companies. The new policy excludes companies with “clear, direct links” to controversial weapons businesses, including those involved in nuclear weapons. The new policy is a step in the right direction, though can still be strengthened to be sure it divests from the six billion US dollars investments it currently holds.
Financing as assistance
States that have joined the Treaty on the Prohibition of Nuclear Weapons (TPNW) have shown a moral and ethical commitment to bringing an end for all time to the harm and risks associated with the existence of nuclear weapons.
There is a growing shared understanding that financing is a form of prohibited assistance. This is shown by state practice around the Convention on Cluster Munitions, the rationale behind the International Convention for the Suppression of the Financing of Terrorism and the practice of financial institutions from countries that have joined Nuclear Weapon Free Zone treaties.
Just as with Chemical Weapons, the treaty prohibits any form of assistance. In the Oxford Public International Law commentary on the Chemical Weapons Convention, assistance is understood to include the provision of “through financial resources…. to anyone who is resolved to engage in such prohibited activity” and anyone that could be “not only be a State, irrespective of whether or not it is a Party to the Convention, but also an organization, an enterprise, a person, or a group of persons, regardless of Citizenship.”
Many countries raised concerns with financing the production, testing, development and manufacture of nuclear weapons during the treaty negotiations. And Cuba, when it ratified the treaty, made it explicitly clear: “”The financing of any activity prohibited to a State Party under this Treaty is also a prohibited activity according to the provisions of Article 1(e).”
While the financial sector cannot sign or ratify the treaty, divestment activities and policy changes send a clear signal that nuclear weapons are unacceptable, and that clears the path towards their total elimination.