Pursuing what some say is a logical step required for the implementation of the Convention on Cluster Munitions (CCM), several countries have taken action at the national level by barring investment in companies that produce cluster munitions.
That step is backed by the Cluster Munition Coalition, an international group of nongovernmental organizations (NGOs) that actively supports the CCM. The group maintains that the prohibition on assistance outlined in Article 1(c) of the treaty should be broadly interpreted to include a ban on investments in companies that manufacture cluster munitions. The provision states that “each State Party undertakes never under any circumstances to assist, encourage or induce anyone to engage in any activity prohibited under this convention.” Because “financing and investing are active choices, based on a clear assessment of the company and its plans,” the group argued for the investment ban in a 2007 policy paper.
Currently, Belgium, Ireland, and Luxembourg are the only countries that prohibit investments in cluster munitions producers. Australia, Denmark, New Zealand, Norway, and Switzerland are at various stages of considering parliamentary action on investments. In a June 2009 report, Human Rights Watch noted that several other states, including Bulgaria, Lebanon, and Mexico, had voiced support for a broad interpretation of the prohibition on assistance to include investment although they have not enacted laws to prohibit investment in cluster munitions production.
Such efforts by a growing number of states have been endorsed by the NGO coalition, which on Oct. 29 launched a disinvestment campaign aimed at encouraging governments to end investment in the production of cluster munitions through national legislation. The groups supported their case with a report entitled “Worldwide Investments in Cluster Munitions: A Shared Responsibility,” published by coalition members IKV PAX Christi of the Netherlands and Netwerk Vlaanderen of Belgium.
The report shows a clear trend toward action by governments and financial institutions to limit or end involvement in financing cluster munitions production since the beginning of the Oslo process. That process was led in part by Norway and named for the site of the effort’s first global conference on cluster munitions, which took place in February 2007. The process brought together NGOs, UN organizations, and interested governments in a series of major conferences to draft a ban on cluster munitions. (See ACT, December 2008.)
The report lists 136 financial institutions in 16 countries as being involved in the direct or indirect financing of cluster munitions production, with 45 of them in CCM signatory states. One-half of the institutions are in the United States, which has not signed the treaty. Together, they provided almost $5.1 billion in commercial banking services, $4.2 billion in investment banking services, and $11.8 billion in asset management services over the last two years to eight major producers of cluster munitions worldwide: Alliant Techsystems (United States), Hanwha (South Korea), L-3 Communications (United States), Lockheed Martin (United States), Poongsan (South Korea), Roketsan (Turkey), Singapore Technologies Engineering (Singapore), and Textron (United States).
The report shows that there are now 30 financial institutions, nearly all in Europe, with policies on excluding funding for investment in cluster munitions or other weapons. Of those 30, the report considers 14 of them to compose a “hall of fame” of financial institutions that have pioneered disinvestment by establishing transparent and comprehensive policies of exclusion for funding of cluster munitions. Some of the institutions on this list, including banks, government pension funds, and private financial institutions, based their policies on their country’s involvement with the CCM.
The report also listed 16 “runners-up.” Companies in that category have policies on cluster munitions in place, but the authors of the report consider those policies ineffective because of certain shortcomings or loopholes, such as allowing for indirect financing of cluster munitions production.
According to the report, Belgium was the first country to ban the use, production, transfer, and stockpiling of cluster munitions in 2006. In 2007 its parliament unanimously expanded an existing law, which prohibits direct or indirect financing in the production of anti-personnel landmines, to ban investment in companies that produce cluster munitions. The law covers banks and funds operating in Belgium.
After the law passed, Reuters quoted the lead author, Sen. Philippe Mahoux, as saying, “The financial groups which invest in or finance cluster bomb manufacturers will be outlawed.” Yet, according to a November report to the United Nations Association of Sweden from Ethix SRI Advisors, a consulting firm, the Belgian government “has yet to publish a list of restricted entities—companies and investment institutions—as set out in the law.”
Ireland and Luxembourg banned investments in cluster munitions production through national laws designed to implement their ratification of the CCM.
The European Parliament indicated its support for banning investment in cluster munitions in October 2007 when, citing the example of the Belgian law, it passed a resolution calling for a moratorium on using, investing in, stockpiling, producing, transferring, or exporting cluster munitions. The resolution calls on EU countries to follow the lead of Belgium, Ireland, and Luxembourg in adopting national measures that fully ban the use, production, export, and stockpiling of cluster bombs.
In the United States, student groups have called on universities to exclude investments in cluster munitions production from their endowments. At the University of Vermont, the board of trustees recently approved a measure to divest from producers of cluster munitions, other weapons, and depleted uranium, according to the student newspaper, the Vermont Cynic. At ColumbiaUniversity, the Columbia Spectator reported on Nov. 17 that the university’s Advisory Committee on Socially Responsible Investing heard a number of proposals from students on divestment, including one on cluster munitions. Students cited the high failure rate and impact on civilians as the reason for their proposal.
Disinvestment campaigns have been used in the past to apply pressure on countries to change their behavior or to achieve certain goals. During the 1980s, state and local governments in the United States were targeted by campaign organizers to disinvest from companies that did business with the apartheid government in South Africa. More recently, state and local governments have been encouraged to divest from companies that operate in Iran. (See ACT, July/August 2008.)