Australian Future Fund divests from defence companies

Exclusions amid treaty ratification and increased ESG focus

The A$74.6bn (€54.8bn) Australian Future Fund has excluded 10 mine and cluster bomb manufacturers ahead of domestic legislation ratifying the Convention on Cluster Munitions, according to news reports.

The exclusions also follow an increased focus on environmental, social and governance factors at the fund. In November 2010, Responsible Investor reported that the fund was planning more extensive direct engagement with investee firms and that it would take greater account of ESG risks in its portfolio. The fund, set up in 2006, has corporate governance enshrined in its mandate from the government.

The newly excluded firms include Lockheed Martin, General Dynamics, Alliant Techsystems, L-3 Communications Holdings, Raytheon and Singapore Technologies Engineering, Bloomberg reported.

Citing information on portfolio holdings requested under Australia’s Freedom of Information Act, the news agency said the civil servants’ fund had A$239m invested in defence and aerospace companies at the end of last year. It quoted a fund spokesman as sayingthe fund undertook a “rigorous process” of exclusion in 2010. He added that the fund would not invest in economic activities that are illegal in Australia or contravene conventions – and that it would continue to monitor the portfolio. Australia introduced legislation in October last year to ratify the cluster munitions treaty, which it signed up to in 2008.

Australia’s Treasurer Wayne Swan pointed out in a press conference today (May 3) that the fund invests independently of the government. Asked about the cluster munitions investments, he said: “It is incumbent upon them to explain their reasons for their investment decisions which they make under their mandate which is independent of the Government.”

Earlier this year, the fund faced calls from the Australian Greens party for tobacco stocks to be excluded from its investment universe. The Greens have welcomed the weapons divestments, Bloomberg reported.

In March the fund named Mark Burgess, former CEO, Europe and Middle East at Credit Suisse Asset Management London, as General Manager.