“Today you are shareholders. Feel entitled to be there and ask your questions to the board,” says Sarah Waldron, Public Campaigns Coordinator for the Campaign Against Arms Trade (CAAT) at the early morning briefing ahead of BAE Systems’ annual meeting.
At the Waterloo Action Centre in London, a community charity next to the mainline train station from where we will travel to the event, CAAT is gathering the proxies appointed to attend the meeting – myself among them.
In the absence of the press pass I requested, I’m trying this alternative method ‘embedded’ within CAAT’s convoy of more than 20 shareholders to Farnborough, the home of British aviation where the AGM is being held.
CAAT has been using these shares to challenge one of the world’s largest arms sellers. This has proven critical during the last four years of the war in Yemen led by Saudi Arabia – one of BAE’s main customers.
The owner of my share turns out to be a Reverend Matthew Harbage, who could not make it this year but who’s a regular at the AGM.
Waldron tells us what to expect at this unusual AGM, which will feature intimidating airport-style security. I will later discover that after being scanned, any belongings are to be searched and bags handed in.
She emphasises that we pre-register our questions, to counter the number of those “planted” by BAE itself – none of which would presumably touch upon Yemen.
Nonetheless, it has been declared the world’s worst humanitarian crisis by the UN Office for the Coordination of Humanitarian Affairs (UNOCHA).
During the train trip, the CAAT group goes through the questions they have prepared and continue the briefing with AGM newcomers like myself.
That morning Radhya Almutawakel, Chairperson of Mwatana, the Yemeni human rights organisation, had appeared on BBC Radio calling on the UK government to stop selling weapons to Saudi Arabia and the UAE.
“It is like giving them the green light to keep committing horrible violations,” she said.
The House of Lords Select Committee on International Relations, in the Parliament’s upper house, has recently expressed its concerns on the issue.
In a report entitled Yemen: giving peace a chance the Lords stated that the UK Government’s licensing of arms sales could be “on the wrong side of international humanitarian law” given the indiscriminate and high number of civilian casualties.
The human rights law firm Leigh Day is representing CAAT on this issue in an ongoing lawsuit against the government, which in April reached the Court of Appeal.
This misuse of weaponry by the Saudi-led coalition was documented in an August 2018 report by the UN Human Rights Office of the High Commissioner, concluding that there are reasonable grounds to believe that Saudi Arabia could be responsible for human rights violations and breaches of international humanitarian law.
The first Yemen-related question at the AGM was based on these UN findings. Samuel Perlo-Freeman, CAAT’s Research Coordinator, asked the board:
“When these atrocities happen, do you seek information on whether BAE aircrafts were used in these attacks? Do you make any effort to find out the actual direct use and impact of your equipment?”
Chairman Sir Roger Carr replied: “We operate on a government-to-government contract basis. We supply equipment and skills for maintenance, services and training. We do not load equipment, we do not involve ourselves with the operations, we do not have or indeed seek to have access to mission data. We simply deliver our contractual commitments.”His responses during the Q&A featured variants on this theme: Any civilian death is a tragedy; Saudi Arabia is not the aggressor but the defender; BAE is just a contractor of the UK government; BAE’s equipment ultimately encourages peace in the region; if not BAE and the UK government, then someone else – allegedly worse – would take their place, etc.
CAAT’s Rehab Jaffer challenged Carr, reminding him that the Saudi-led coalition has targeted schools, ambulances, funerals and weddings.
“We respectfully decline your offer to opine on any engagements.”
Jaffer, a 26-year-old Yemeni law graduate and future pupil barrister, said: “You follow these instructions blindly and you do not conduct your own investigations. Will there ever be some sort of due diligence or an internal review on what your weapons are used for?”
Carr replied that innocent people are hurt in warfare.
Jaffer answered: “It is not done in every war. The Geneva Conventions are literally there to legalise that, so civilians should not be targeted.”
The CAAT group pressed further on the issue about whether BAE carries out human rights due diligence to prevent the adverse impacts of its business activities.
“I’ve said it pretty clearly, we don’t. But we abide by the rules and regulations and contracts that we have. [BAE] is one of the world’s greatest companies doing amazing things in the pursuit, ultimately, of peace-keeping,” Carr said.
The CAAT shareholder then asked if that meant BAE would be signing the UN Guiding Principles on Business and Human Rights (also known as the Ruggie Principles).
“I don’t know that particular set of principles,” Carr said.
I managed to briefly approach Carr after the AGM, where I mentioned I couldn’t find the word Yemen in the 224-page annual report.
Did it mean that human rights-related risks are not discussed at board level? He replied that they report on what the company is responsible for.
The way responsibility is approached by BAE (which has never been, nor has it applied to be, a signatory to the UN Global Compact) might make it difficult for institutional investors to engage.
How could they reconcile BAE’s 15th consecutive year of dividend growth, as well as its 2018 record £48bn order book, with Carr’s statement that “wars, anywhere, are undesirable”?
When peace does not seem an opportunity but a business risk for BAE, what else can investors do but sell the stock?
That’s has been the case at the Universities Superannuation Scheme, although a spokesperson says they would not disclose the reasons behind such divestment.
Likewise, a spokesperson for the Church of England says that for their two investment bodies, the Church Commissioners and the Pensions Board, BAE is “a restricted stock”.
Other investors that have distanced themselves from the company are Norway’s Government Pension Fund Global and KLP, the Netherlands’ PGGM and Nordic group Nordea.
But many institutions which hold BAE declined to comment on whether they engage with it on human rights issues.
Among those who declined to comment were AXA Investment Management, Deutsche Bank’s asset manager DWS and the Canada Pension Plan Investment Board.
Other houses like Legal & General Investment Management, RPMI Railpen, Jupiter Asset Management and Royal London Asset Management did not reply to requests for comment.
Brunel Pension Partnership, one of the eight UK pooled local authority pension funds, says it outsources engagement to asset managers and specialist providers.
Brunel says they are expected to engage with portfolio companies, “particularly those operating controversial activities or countries”.
Brunel has Hermes Equity Ownership Services as its specialist engagement overlay provider. A spokesperson at Brunel says: “We have not received recent engagement reports on the matters raised in your enquiry but are following up with engagement providers.”
A Hermes EOS spokesperson says that companies are generally expected to apply the UN Guiding Principles on Business and Human Rights – the same principles that BAE’s Carr is not familiar with.
As for the engagement itself, Hermes EOS says: “We aren’t able to comment on our specific engagements with BAE Systems any further due to ongoing discussions.”
Another pooled pension fund, Border to Coast Pensions Partnerships, says there is ongoing collective engagement from the Local Authority Pension Fund Forum (LAPFF), of which it is a member.
Jane Firth, Border to Coast’s Head of Responsible Investment, says: “LAPFF is engaging with BAE Systems and a number of other defence companies in relation to the Yemen crisis. Our understanding is that its approach is fully rooted in the UN Guiding Principles on Business and Human Rights and UK government guidance in this area.” LAPFF did not reply to a request for comment.
Back at the Farnborough conference centre, the screens show that the majority of BAE’s shareholders, nearly 100,000 shareholders, have voted for all the resolutions en masse.One exception is the $227bn California State Teachers’ Retirement System, but it has nothing to do with human rights risk. It is because CalSTRS’ voting standards require that two thirds of board members are independent.
“We respectfully decline your offer to opine on any engagements,” a spokesperson adds.
It’s also time to cast my vote before I leave. I’m about to vote against the entire board, inspired by the Church of England at Exxon.
But that’s tricky as Elizabeth Corley, the senior Allianz Global Investors executive who leads a taskforce on impact investment, sits at the BAE board as a non-executive director.
The arms business and impact investing seem strange bedfellows, but I decide to abstain on Corley, who is perhaps the point of contact for the investors engaging behind the scenes.
ShareAction’s “AGM Army” is also at the meeting — although fighting a different battle to CAAT.
The ShareAction representative starts by congratulating BAE on “building renewable energy capacity into its facilities, reducing energy costs and emissions”.
ShareAction asks BAE if it is willing to commit to the Science Based Targets Initiative (the joint project of CDP, WWF, the UN Global Compact etc.) and meet ShareAction and its partners.
While the focus on climate change is laudable and needed, it reflects how arguably the most material issue at BAE – its involvement in Yemen – risks being ignored amid the focus on the environment.
How terrible if the Yemeni civilian casualties are to be the first carbon neutral ‘collateral damage’ of modern warfare.
Sometimes the fight against climate change takes no prisoners. Fear and loathing in Farnborough.