Exposure to Nuclear Weapons Through Private Investments

Investing in nuclear weapons raises significant ethical concerns for investors due to the profound humanitarian and moral implications. Nuclear weapons have the capacity to cause massive destruction, indiscriminate loss of life, and long-term environmental harm. Their use and even their production and stockpiling contribute to global insecurity and perpetuate the threat of catastrophic conflict. Additionally, the existence of these weapons often supports authoritarian regimes and escalates international tensions, conflicting with principles of peace, human rights, and sustainable development. For many investors, these ethical considerations make the nuclear weapons industry an untenable choice.

To avoid exposure to nuclear weapons in their investments, investors can take several strategic steps. Firstly, they can opt for Socially Responsible Investing (SRI) funds, which specifically exclude companies involved in the weapons industry, or choose funds that adhere to Environmental, Social, and Governance (ESG) criteria, which often screen out weapons manufacturers.

Private Companies and The Nuclear Weapons Industry

According to the recent report produced by the Don't Bank on the Bomb project which regularly publishes information on the private companies involved in the production of nuclear weapons and their financiers, private funding plays a key role in perpetuating the Nuclear Weapon industry. Altogether, 287 financial institutions were identified as having substantial financing or investment relations with 24 companies involved in nuclear weapon production. $477 billion was held in bonds and shares, and $343 billion was provided in loans and underwriting (Dontbankonthebomb).

To be included in this list, a company must be open to private investment and produce goods or services that specifically contribute to the development, testing, production, manufacture, possession, stockpiling, or use of nuclear weapons, activities that are prohibited under the Treaty on the Prohibition of Nuclear Weapons (TPNW).

Companies from China, France, India, Italy, the Netherlands, the Russian Federation, the United Kingdom and the United States are significantly involved in the production of nuclear weapons. Many of the companies involved have multi-year contracts, totalling at least $280 billion and continuing for decades (Dontbankonthebomb). Access to private funding is vital for companies that manufacture the key components required to sustain and enhance countries' nuclear arsenals. Therefore, banks, pension funds, asset managers, and other financiers play a crucial role by providing investment or credit to these companies.
 

Asset Classes Linking to Nuclear Weapons

Investors can have exposure to nuclear weapons through various types of investments in asset classes that include equities, fixed income, and mutual funds or exchange-traded funds (ETFs). Here's how this exposure occurs and what asset classes are involved:

Equities

• Direct Stock Ownership: Investors may directly own shares in publicly traded companies that are involved in the nuclear weapons industry. These companies might be engaged in the development, testing, production, or maintenance of nuclear weapons and related technologies.
• Indirect Ownership through Index Funds: Many index funds and ETFs include companies that are part of the broader defense sector, which can encompass firms involved in nuclear weapons. Investors holding these funds indirectly own shares in these companies.

Fixed Income

• Corporate Bonds: Investors may hold corporate bonds issued by companies involved in the nuclear weapons industry. These bonds provide capital to the companies for various operations, including potentially those related to nuclear weapons development and production.
• Government Bonds: While less direct, some governments that issue bonds might allocate part of their budget to nuclear weapons programs. Investors in these bonds indirectly support these programs through their investments.

Mutual Funds and ETFs

• Mutual Funds: Mutual funds often invest in a diversified portfolio of stocks and bonds, some of which may include companies involved in the nuclear weapons industry. Unless a mutual fund specifically excludes such companies (as in an ESG or SRI fund), investors can be exposed to nuclear weapons through these investments.
• ETFs: ETFs, like mutual funds, can include a mix of stocks and bonds. Standard ETFs tracking broad market indices (like the S&P 500) or specific sectors (like defense) may hold shares in companies involved in the nuclear weapons industry.

Private Equity and Venture Capital

• Private Equity: Some private equity funds invest in defense contractors and technology firms that may be involved in nuclear weapons programs. Investors in these funds can thus have exposure to nuclear weapons through their private equity investments.
• Venture Capital: Although less common, some venture capital funds might invest in startups and emerging companies developing technologies with potential applications in the nuclear weapons industry. This exposure is typically more indirect.

Pension Funds and Retirement Accounts

• Pension Funds: Pension funds often have diversified investment portfolios that include equities, bonds, mutual funds, and ETFs. Without specific exclusions, these portfolios can contain investments in companies involved in the nuclear weapons industry.
• Retirement Accounts: Individual retirement accounts (IRAs) that offer a range of investment options may include funds or securities with exposure to nuclear weapons. Investors might unknowingly invest in these through their retirement savings plans.

Summary

Investors can be exposed to nuclear weapons through various asset classes, including equities, fixed income, mutual funds, ETFs, private equity, and retirement accounts. This exposure often occurs indirectly through diversified investment products that include companies involved in the nuclear weapons industry. To avoid such exposure, investors need to carefully select investment options that adhere to ESG criteria or specifically exclude companies associated with nuclear weapons.