2007 - 2021

Targeting Trident: how divestment is impacting the nuclear weapons industry

Every year, the Don’t Bank on the Bomb report profiles the world’s largest nuclear weapons producers and reveals the financial institutions that invest in them. The latest report, published on Thursday, shows that investors around the world made a total of £510 billion available to nuclear weapons companies between January 2019 and July 2021.

UK-headquartered financial institutions account for £23 billion of this total. Scotland’s largest bank, NatWest Group (RBS), provided financing worth £2.2 billion to eight major nuclear arms manufacturers during the period, including BAE Systems, General Dynamics and Raytheon.

The DBOTB report is published by PAX, a Netherlands-based organisation that works to persuade financial institutions to divest from the nuclear weapons industry. Here, the campaign is led by Don’t Bank on the Bomb Scotland. The group focus on Scottish local authority pension funds and universities, as well as financial institutions.

The Case of Serco

Critics of divestment often claim that it “doesn’t work”; it is a “blunt instrument” that won’t change company behaviour and won’t have any real impact on the activities that it targets. But last week, a news story emerged which shows just how effective divestment can be as a tool for bringing about change.

The Sunday Telegraph reported that major UK government contractor, Serco, has been forced to abandon plans to bid for contracts at the UK’s Atomic Weapons Establishment (AWE) after investors threatened to sell their shares in the company. Serco was part of a consortium that managed AWE (AWE Management Ltd) until it was renationalised earlier this year. The facility is responsible for the design, manufacture and support of the UK’s nuclear warheads.

Fund managers warned Serco that “working with nuclear weapons might force them to dump Serco shares as a result of non-compliance with Environmental, Social and Governance (ESG) Standards”, the Telegraph says. The fund managers are not named, but Serco has increasingly appeared on investor blacklists in recent years due to its role in the consortium.
Impact of the nuclear ban treaty

The article reports that fund managers rejected Serco’s argument that investing in a Trident contractor is “ethically no different to owning UK sovereign debt, as both are functions of a democratically elected government”. This detail is significant, as it suggests that investors are adhering to the international norm against nuclear weapons that was established by the Treaty on the Prohibition of Nuclear Weapons, despite that the fact that the UK is not party to the treaty.

The ban treaty has made investors increasingly wary of nuclear weapons producers, as the new Don’t Bank on the Bomb Report explains: “[nuclear weapons] are now comprehensively outlawed, as is any assistance with producing, manufacturing or developing them. Financial institutions that continue investing in companies building nuclear weapons face regulatory risks as more countries join the treaty. They also face an increased reputational risk as clients learn of their support for weapons of mass destruction and terminate their relationships.”

More than 100 financial institutions have divested from the nuclear weapon industry since the treaty entered into force in January this year. This includes Bank of Ireland and AIB (Ireland), and South African firm, Investec. The total amount of financing made available to nuclear weapons producing companies has dropped by £47 billion since 2019.

More trouble for Trident

It appears that the prospect of losing investors was enough to persuade Serco – which previously held long-term nuclear weapons contracts as part of AWE Management Ltd – to pull out of the competition for future nuclear-weapons related work. This provides a clear example of how divestment, or the threat of divestment, can change company behaviour.
Furthermore, the story shows how investor action has the potential to undermine the viability of Britain’s nuclear weapons programme. The Telegraph notes that Serco’s decision “leaves defences chiefs with fewer options as they seek to restructure the management of Britain’s nuclear stockpile”. This could hinder the MoD’s ability to complete the Trident renewal project, which is already in serious trouble.

Join the movement

As the Serco story illustrates, divestment is a powerful tool that we can use to advance the goal of a nuclear-weapons-free world. Don’t Bank on the Bomb Scotland is encouraging individuals to contact NatWest Group about its investment policy, as well as their own bank and pension fund. The group has also created a model resolution targeting local authority pension funds that can be sent to local councillors.
The more financial institutions that divest, the more companies will be forced to withdraw from nuclear weapons work like Serco. This will make it harder for nuclear-armed nations to maintain their nuclear arsenals in the long-run.

Comments (5)

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  1. Dougie Harrison says:

    Linda, many thanks for this, a helpful analysis.

    But I hope you don’t mind if I remind you that the quickest and most complete way to ensure that the UK’s so-called ‘nuclear deterrent’ becomes homeless, and is NOT replaced, is to ensure that the first post-independence Scottish Government chucks the nuclear-armed subs out of Scotland.

    The Tories rented the Holy Loch to the US Navy’s Polaris subs, and the UK base at Faslane, weren’t located where they were just because they’re a long way from London. It’s because the Clyde (and perhaps Scots sea-lochs further north) is the logical strategic location for nuclear-armed subs to guard the entry to Russia’s only totally ice-free Atlantic port at Murmansk. Why does this matter?

    Because the only port in England remotely politically likely to become the Trident base after we chuck them out, is Devonport.

    And Devonport is mibbe 5 or 6 hundred sea-miles in international waters (ie WEST of Ireland), FURTHER from the sea-lane to Murmansk than the Clyde is. Ever supposing that is, that the citizens of Plymouth and Devonport AGREE to becoming the biggest nuclear target in Europe…

    So our independence could help rid the world of a lot of nuclear warheads. A matter which I’m sure will appeal greatly to our more sensible southern neighbours.

  2. Pontifex Minimus says:

    > The Sunday Telegraph reported that major UK government contractor, Serco, has been forced to abandon plans to bid for contracts at the UK’s Atomic Weapons Establishment (AWE) after investors threatened to sell their shares in the company.

    Given how crap outsourcing companies like Serco are, this will surely make UK nuclear weapon production more effective, not less! (I’m slightly tongue-in-cheek here, but basically making a serious point).

    As far as i can tell the 2 main benefits (to the government, not to the people) of outsourcing are:

    1. opportunities for corruption (e.g. giving the contract to whoever paid the biggest bribe)

    2. when something goes wrong, the government can be arms-length about it: “nothing to do with us, it was the outside contractor who did it”.

    > Serco was part of a consortium that managed AWE (AWE Management Ltd) until it was renationalised earlier this year.

    This tends to support my point.

    > the more companies will be forced to withdraw from nuclear weapons work like Serco. This will make it harder for nuclear-armed nations to maintain their nuclear arsenals in the long-run.

    I would argue that the opposite is the case, for reasons I’ve explained above.

    Anyway, if Servo are not renewing contracts, that’s surely a good thing.

    1. Chris Connolly* says:

      As I have explained above?

      I’m sorry. I don’t mean to be clever but I can’t see any explanation at all other than Serco not being much cop as a service provider.

      In case anybody is wondering, or intends to make the case for retaining the WMDs, the 9 nuclear states are: China, France, India, Pakistan, North Korea, USA, UK (in practice, Scotland), Russia and Israel. The rest of the world manages without them.

      We can manage without them too.

      1. Pontifex Minimus says:

        > I’m sorry. I don’t mean to be clever but I can’t see any explanation at all other than Serco not being much cop as a service provider.

        Perhaps I should have explained in more detail.

        If yuo look at Serco’s Wikipedia article (https://en.wikipedia.org/wiki/Serco), they have their fingers in lots of pies, including: health, transport, justice, immigration, defence, citizens services, etc.

        How can one company be an expert in all these fields? What do (to give 3 random examples) manufacturing nuclear weapons, electronically tagging asylum seekers, and running NHS pathology labs, have in common?

        The answer is: nothing! They have nothing in common. Serco’s core competency isn’t to know how to do these things, it’s something else. Their core competency is winning government contracts, and then doing those contracts just-well-enough that they don’t get in trouble for how badly they do them.

        How do they get these contracts? I strongly suspect bribery and corruption are involved somewhere. See for example:

        https://www.theguardian.com/business/2021/apr/26/serco-trial-collapses-as-serious-office-fails-to-disclose-evidence
        https://www.mondaq.com/uk/white-collar-crime-anti-corruption-fraud/826998/uk-serious-fraud-office-agrees-to-deferred-prosecution-agreement-with-serco

        etc

        How do they keep these contracts? The way outsourcing companies work is that they have inpenetrably long and detailed contracts, which are usually secret (“commercial confidentiality” is the usual excuse) and then they have compliance teams make up of hundreds of lawyers who makes sure they adhere to the bare minimum of what the contract says they have to do.

        Outsourceing companies are a scam. They shouldn’t exist.

        > We can manage without them too.

        I agree that it doesn’t make sense in the current geopolitical climate for independent Scotland to have nuclear weapons.

        As for the residual UK, once we are free from them, they will no doubt regard it as none of our business how they manage their affairs. And in fact it will be none of our business since they will be a separate country to us.

  3. SleepingDog says:

    An interesting (and vital) example of how norms can change with real-world impacts. Of course, people and organizations can already choose (more-or-less) ‘ethical’ funds or banks which don’t invest in the arms industry, nuclear or otherwise.

    Since nuclear weapons are antithetical to democracy (the UK acquired its own by secret decision of a tiny group of Labour cabinet ministers, and secrecy has surrounded the weapons systems ever since, as well as undemocratically being bound by outside powers like the USA and NATO), the argument that democracy has anything to do with it is palpably false. And the weapons are controlled by the Royal Prerogative; there is no parliamentary debate on their usage or targetting. I would also not hold up Westminster as the kind of parliament where democratic values are supreme, not just relating to any particulary slew of corruption scandals.

    And of course, the retention of nuclear weapons is illegal, and their threat is terrorism, and their use on our planet a war crime, ecocide, most likely culturecide. And in large part, nuclear terrorism is directed by the executive on its own people, to try to keep them in line, and take large swathes of policy away from democratic influence. And possibly to justify greater personal security for those at the heart of the British nuclear-weapons-of-mass-destruction terror system.

    With that amount of dosh involved, how much is the continuance of tolerance for these evil weapons the result of bribery and secret deals anyway? Perhaps, as this divestment story suggests, that tolerance has its limits and lifespan.

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