ICAN and Etica Funds- Responsible Investments invited investor and investor alliances to sign onto this statement of investor expectations in advance of the First Meeting of States Parties to the Treaty on the Prohibition of Nuclear Weapons (TPNW). The statement encourages treaty members to require that State-owned enterprises fully integrate the TPNW prohibition on all forms of assistance throughout their operation and to ensure that obligations under the treaty are extended to both state and non-state (including private sector) actors within their jurisdiction.

The statement was delivered during the general debate of the meeting. Download the full text here.

Full Text

This statement, compiled by ICAN with the support of Etica Funds – Responsible Investments, is signed by 37 investors, including asset owners, asset managers and investor alliances representing circa EUR 230 billion in assets under management.

Distinguished Delegates,

1. The catastrophic humanitarian consequences of nuclear weapons cannot be controlled in time or space. The only way to prevent the use of nuclear weapons is through their total elimination combined with a legally binding obligation that they will never be produced again.

2. Development, production, manufacture, and any other forms of acquisition of a nuclear weapon or other nuclear explosive device are prohibited under Article 1(1)(a) of the TPNW. The Treaty also prohibits its members, or anyone in their jurisdiction, to assist in any way with, inter alia, the development, production, manufacturing or stockpiling of nuclear weapons or other nuclear explosive devices in article 1 (1) (e).

3. The prohibition on development, production, manufacturing and acquisition also covers key components. It is widely accepted that the missile, rocket, or other munition, including both the container and any means of propulsion, are key components in a nuclear weapon. Many of these are designed specifically for nuclear weapon use.

Financing is “Assistance”

4. It would be illogical to prohibit the production of nuclear weapons without prohibiting the financing that enables the production to proceed.  Financing gives life to the production process. The treaty’s prohibition with assistance on banned acts means it is also against the treaty to authorize investment of public or private funds in the development, production, manufacturing or stockpiling of nuclear weapons or other nuclear explosive devices.

5. Similar treaties have been interpreted to include financial assistance as prohibited conduct. In treaties with language similar to the TPNW, assistance has been understood or interpreted to definitively include financial assistance. The Convention on Chemical Weapons uses the same language as the TPNW does in its assistance provision. Article 1(1)(d) states that “Each State Party to this Convention undertakes never under any circumstances [t]o assist, encourage or induce, in any way, anyone to engage in any activity prohibited to a State Party under this Convention.”  In the Oxford Public International Law commentary on the Chemical Weapons Convention, assistance is understood to include the provision “through financial resources…. to anyone who is resolved to engage in such prohibited activity.”[1]

6. The Convention on Cluster Munitions also uses the same language on assistance[2].

 Existing norms

 7. Our institutions regularly engage on a number of sustainability issues. Our roles have included such acts as encouraging our business partners to publicly commit to action in support of the Paris Agreement, to respect human rights in accordance with the UN Guiding Principles on Business and Human Rights, and to respect the OECD Guidelines for Multinational Enterprises, among others.

8. The UN Guiding Principles on Business and Human Rights provide a mandate to “Seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.”[3]

9. Similarly, the OECD Guidelines for Multinational Enterprises acknowledge and encourage the positive contributions that business can make to economic, environmental and social progress[4]. The Guidelines recommend that businesses carry out risk-based due diligence to avoid and address potential negative impacts associated with their operations, their supply chains and other business relationships.

10. The human rights risks associated with nuclear weapons are severe and irremediable, and the companies producing key components for nuclear arsenals are contributing to these human rights risks.

11. Additionally, the UN Principles for Responsible Investment encourages institutions to consider Environmental, Social and Governance (ESG) issues into investment analysis and decision-making processes, and these are increasingly codified.  There are almost 400 different policy instruments around the world which encourage or require investors to consider long-term value drivers, including factors related to ESG issues.[6]

Financing policies

12. Finally, the example of Financial Action Task Force (FATF) Proliferation Financing Controls show how important non-proliferation norms can be extended to cover non-state actors[5]. As Roelof Jan Manschot of the Center for International Legal Cooperation explains in his 2007 book chapter on “Prosecuting Violations of Non-Proliferation Legislation,” a country’s ratification of the Nuclear Non-Proliferation treaty "means that its international obligations become part of domestic law and thus apply to individuals and other non-state actors of that state”[7]. In the context of the TPNW, the expectations should be the same, because the stakes of nuclear investments are just as high as those of nuclear proliferation.

13. States bear the responsibility for the full implementation of the treaty and its articles, and for ensuring that all those operating within their jurisdiction adhere to the standards set forth. Financial sector actors, including banks, asset managers, pension funds and investment advisors often operate across numerous jurisdictions, and benefit from clear guidance from States. Businesses are much more likely to accept directives from the State if they consider that the State is leading by example and ensuring that the entities closest to it, if not directly associated with it, respect the obligations under the treaty, including by guiding central banks and sovereign wealth funds to adhere to all treaty aspects.

14. Our institutions recognise the importance of both financial and nonfinancial analyses in our investment decision making. We weigh a number of regulatory and reputational risks and assess their materiality to our portfolios.

Conclusion

15. We encourage TPNW members to require that State-owned enterprises fully integrate the TPNW prohibition on all forms of assistance throughout their operations, as role models, and we encourage states-parties to incorporate best practices from the FATF Proliferation Financing Controls and ensure that obligations under the treaty are extended to both state and non-state (including private sector) actors within their jurisdiction.

Thank you

ICAN

Etica Funds – Responsible Investments

[This statement, compiled by ICAN with the support of Etica Funds – Responsible Investments, was signed by 37 investors, including asset owners, asset managers and investor alliances representing circa EUR 230 billion in assets under management]

• Alternative Bank Switzerland (ABS)
• Australian Ethical Investment
• Azzad Asset Management
• Bank fur Kirche und Caritas eG
• Change Finance, PBC
• Cruelty Free Super
• Cultura Bank
• Domini Impact Investments
• Dominican Sisters
• Dominican Sisters ~ Grand Rapids
• Ethius Invest Switzerland
• fair-finance Vorsorgekasse AG
• Folksam
• Fondazione Finanza Etica
• Fondo Pensione Pegaso
• Forma Futura Invest AG
• Friends Fiduciary Corporation
• Future Super
• Green Future Wealth Management
• Hugau Gestion
• Impact Investors, Inc.
• Investor Advocates for Social Justice
• KLP
• KPA Pension
• Niederosterreichische Vorsorgekasse AG
• Pensioenfonds Rail & Openbaar Vervoer (Rail & OV)
• Seva Foundation
• Seventh Generation Interfaith Coalition for
• Responsible Investment
• SfC - Shareholders for Change
• Sisters of Bon Secours USA
• Sisters of Mary Reparatrix
• Sisters of St. Francis of Philadelphia
• Socially Responsible Investment Coalition
• Swedbank Robur Fonder AB
• U Ethical
• Verve Super
• Zevin Asset Management

You can read background information here.  

Notes

• [1] Walter Krutzsch, et al. The Chemical Weapons Convention. Oxford University Press, 2014.
• [2] Article 1(1)(c) states: “Each State Party undertakes never under any circumstances to [a]ssist, encourage or induce anyone to engage in any activity prohibited to a state party under this convention.”   National legislation implementing this CCM assistance provision often includes language specifying that it prohibits both “direct” and “indirect” investments (see Ireland,  Liechtenstein,   Samoa  and Switzerland ). Belgium’s implementing legislation  mandates the creation of a list of companies that engage in prohibited activities, and the Norwegian Council of Ethics similarly makes a list of banned companies. This mechanism of creating an explicit list provides clarity to investors, and bolsters the application of the assistance provision. Although none of the aforementioned pieces of national legislation have yet been invoked to prosecute, they have precipitously affected global investments in cluster munitions. Between 2015 and 2018, investments in cluster munitions tracked by Pax dropped from US$ 31 billion to US$ 8.7 billion worldwide. 
• [3] The Guiding Principles specifically reference international humanitarian law, which binds State and non-State actors, including businesses, as well as individual managers and staff of businesses whose activities are closely linked to an armed conflict. As mentioned by the International Committee of the Red Cross (ICRC), determining which corporate activities are “closely linked to an armed conflict” can be a complex task because businesses carry out a wide range of activities that could be perceived as directly or indirectly connected to armed conflict. Business activities may be considered closely linked to an armed conflict if they provide direct support – be it military, logistical or financial assistance – even if they do not take place during actual fighting or on the physical battlefield and even if the business did not actually intend to support a party to the hostilities.
• [4] The MNE Guidelines are applicable to corporate lending and securities underwriting activities, project-based and asset-based finance, as well as derivative financial products (e.g. securitized debt or credit derivatives).
• [5] Security Council Resolution 1540 has long been interpreted to cover companies and individuals engaging in prohibited WMD proliferation actions, despite containing language applying only to state actors.
• [6] February 2019, 11. ‘An Overview of Responsible Investment’. PRI. Accessed 23 May 2022. https://www.unpri.org/private-debt/an-overview-of-responsible-investment/4058.article.
• [7] In the Netherlands, this application of the law was employed in the successful prosecution of an engineer accused of exporting weapons components to Pakistan.