Investors must do more to mitigate the risks of nuclear catastrophe

The risk of nuclear war looms large, and investors should play their role in managing a potential social, environmental and financial disaster, says David Epstein

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COVID-19, like many climate-related catastrophes that have already occurred, should make it apparent that the unimaginable can happen if we don’t work to prevent it. Let us take these as a warning that we must be proactive in heading off another underappreciated risk of global proportions – that of conflict involving nuclear weapons. And, just as with COVID-19 and climate change, we clearly cannot count on government alone to take the necessary preventative steps.

Sustainable investors have an important role to play and should begin factoring assorted nuclear weapons risks into their work. Their role needs to extend beyond the current state of affairs, which is largely limited to sustainable investors just making a decision whether to divest manufacturers of nuclear weapons and/or “controversial weapons”.

It is not just a question of global thermonuclear war. If and when a belligerent detonation of just a handful or even a single nuclear weapon occurs… anywhere… it could deeply affect us all, even if the incident itself kills or injures just a tiny fraction of the global population. A single detonation could shock global capital markets and economies, our jobs, and our way of life.

For ESG investors, the discussion should move well beyond the question of whether to avoid manufacturers of nuclear weapons/controversial weapons

Most experts agree that it is a near miracle that there has not been a nuclear detonation that was an act of aggression (i.e. excluding tests) since the end of WWII. The decades since have been littered with false alarms and near-misses that could have resulted in unintended nuclear conflict, and it is extremely dangerous to assume that such luck will continue if nothing is done to change the odds. 

The situation with North Korea, while dialed down from the blustery rhetoric of 2017, has deteriorated of late and remains extremely volatile – probably the most dangerous nuclear hotspot over the short to intermediate term. The ripping up of treaties and lack of dialogue among the US and Russia, the evolving perspective around there being potentially acceptable use cases of lower payload tactical nukes, the introduction of hypersonic weapons by the Russians, and a host of other factors have increased risks of a confrontation between the US and Russia to the highest level in decades. Other potential flashpoints include how the evolving Iran nuclear agreement ultimately plays out, the deteriorating US-China relationship, the always-poor India-Pakistan relationship, and even the tense India-China relationship. Inadequate limitations on the ability of certain world leaders, including the US President, to unilaterally launch nuclear weapons only increases the odds that parties somehow miscalculate and blunder their way into nuclear conflict.

I have just released a new report “Preventing Nuclear Catastrophe: Making the Case for Investors and the Private Sector to Work Towards Reducing the Risks of Nuclear Weapons”. The report lays out nuclear risks in more detail and calls upon sustainable investors, along with the broader private sector, to leverage their capacity for innovation and tremendous resources in order to help prevent a nuclear conflict.

Potential ESG Screens

For ESG investors, the discussion should move well beyond the question of whether to avoid manufacturers of nuclear weapons/controversial weapons. Investors should engage with companies both inside and outside the Aerospace & Defense industry, along with other market participants, in order to devise a set of reasonable disclosures around risks relating directly or indirectly to nuclear weapons. Such disclosures and related screens might include:

Aerospace and Defense

  1. The amount of money spent on lobbying relating to nuclear weapons projects along with specific details around that lobbying
  2. Conflicts of interest for the board or management in terms of who may be rotating between the company, Congress, the Department of Defense and lobbying organisations

Other Industrial Companies

  1. Procedures in place in order to remain in compliance with all existing sanctions in terms of shipments to certain countries
  2. Procedures in place, including proper training of staff, to limit the export or diversion of dual-use technologies, products, or commodities and to understand internally which technologies or products could be part of a nuclear supply chain


  1. Procedures for enforcing sanctions and for any dual-use or other export controls
  2. Procedures for vetting and accepting both sender and receiver of goods.

This is just a small sampling. In the full report, I detail additional types of issues that should be disclosed and screened for by sustainable investors. Not just for the above industries but also for port operators, utilities, banks, insurers, media & entertainment firms and tech & social media companies. They potentially all can factor in the level of risk that exists for nuclear conflict. 

The exact disclosures companies should make and the screens ESG investors should use are open for debate, as are what constitutes reasonable behaviour by companies, but apparently there is little to no debate currently taking place on many of these issues. Such discussion needs to begin.

Additional Initiatives

  • Building out of a pipeline of potential investments for impact investors to make in startups, particularly dual-use technology startups with products that can address nuclear risk reduction in addition to other commercial applications;
  • The issuance of transition bonds from those in the broad nuclear weapons ecosystem that might need to clean up past dirty practices (e.g. related to pollution caused by mining or weapons manufacturing);
  • Taking a page from other innovations in climate and conservation finance – whether that be carbon cap-and-trade markets, carbon offsets, or ‘Rhino Bonds’ – to devise novel financing mechanisms that incentivise a reduction in the risk of nuclear conflict.

The fact that these are such under-explored areas provides an opportunity for thought leadership, growth in AUM, and potentially new investment opportunities for those ESG and impact investors that further develop some of the concepts suggested here.

David Epstein spent nearly 20 years as a buyside and sellside analyst, before launching the Cross Capital Initiative to encourage sustainable investors to get involved in reducing the risks of nuclear conflict.