Sweden’s AP funds sell off millions in cluster bomb company shares

Sweden’s AP national pensions buffer funds (AP1, AP2, AP3 and AP4) have sold shares worth tens of millions euros in nine companies that sell cluster bombs. The AP funds, which collectively run almost €90bn ($128bn) in assets, have ousted US companies Alliant Techsystems, GenCorp,
General Dynamics, L-3 Communications, Lockheed Martin, Raytheon and Textron, as well as South Korean groups Hanwha Corporation and Poongsan from their investment portfolios. It is believed many of the companies were held as part of index fund exposure by the AP schemes. The blacklisting follows advice from the Ethical Council of the Swedish National Pension Funds. It recommended a ban after the endorsement by the Swedish government in May 2008 of the Dublin treaty on cluster bombs. Carl Rosén, who chairs the Ethical Council told Responsible Investor it had carried out an “exhaustive analysis” of about 25 defence contractors via GES Investment Services in Sweden, before drawing up the eight-strong boycott list: “The issue concerns inhuman weapons that often injure innocent civilians, an issue that demands action which now has the support of a convention that bans such weapons.” Rosén said the AP funds had spoken with thebanned companies, but noted: “Either you are a company with an important role in the manufacture of cluster bombs, or you aren’t. If you are then our policy is not to invest.” In May, AP7, sister fund to the four AP plans, but which does not adhere to the Ethical Council, declared it was selling out of 10 companies, including EADS, which does not feature on the latest AP fund ban.
Other state pension funds including the NZ$13.5bn (€6.7bn) New Zealand Superannuation Fund, the €250bn Norwegian Government Pension Fund and the €21.3bn ($32.7bn) Irish National Pension Reserve Fund (NPRF) have already divested or are preparing to pull their money from related companies. Many funds already blacklist producers of landmines as a result of the 1997 Ottawa Convention banning their use. Dutch public pension funds ABP and PGGM sold out of several producers of landmines and cluster bombs last year.
Reinhilde Weidacher, senior adviser at Ethix, the Swedish research company, who served as an expert adviser with focus on responsible investment at the Dublin conference, said: “The draft treaty reads: ‘Each state party undertakes never under any circumstances to: (a) use cluster munitions; (b) develop, produce, otherwise acquire, stockpile,
retain or transfer to anyone, directly or indirectly, cluster munitions; © assist, encourage or induce anyone to engage in any activity prohibited to a state party under this convention.” Governments with notable national state pension funds among the 111 countries that signed the Dublin cluster bomb agreement include France, UK, Austria, Finland, Italy and Sweden.
Investors are attempting to compile lists of companies with clearlinks to the manufacture of cluster bombs. It is understood that a group has approached Jane’s, the defence information provider and consultant, to produce such a reference. The new treaty banning cluster munitions requires the destruction of existing stockpiles within eight years. The final treaty will be opened for signatures in Oslo in early December 2008.