A study by Dutch church non-governmental organisation IKV Pax Christi has claimed that 139 financial institutions, including names such as Deutsche Bank, Allianz, BlackRock and Goldman Sachs, have either invested in cluster bomb manufacturers, lent them money or underwritten their bond issues.
According to IKV Pax Christi, these institutions – placed in a “Hall of Shame” – have done $24.4bn (€17.7bn) worth of business with the manufacturers. The latter are identified as Alliant Techsystems and Textron of the US; Hanwha and Poongsan of South Korea; China’s Norinco and the China Aerospace Science & Technology (CAST); and Singapore Technologies Engineering.
The business includes $16bn worth of stocks and bonds, $6.1bn in bond underwriting and $2.3bn in loans.
Three years ago, 30 countries, including Germany, signed a UN treaty banning cluster bombs. The US, Singapore, South Korea and China are not among the 30 countries, which is how the manufacture of, and investment in, the controversial munitions can continue in those countries.
Yet according to the study, German insurance group Allianz owned shares and convertible bonds issued by Alliant as well as shares in Poongsan as of August 31. Deutsche Bank, Germany’s largest, also owned shares in Alliant and Hanwha and had provided a loan to Textron.
To determine the shareholdings, Dutch research company Profundo – working with IVX Pax Christi – set a 0.1% threshold for Hanwha, Poongsan and Singapore Technologies and a 1% limit for Alliant and Textron.
Contacted by RI, Allianz spokesman Nick Tewes said that while Allianz’s investment divisions in Europe were not invested in cluster bomb makers, it was likely that they had small shareholdings in Asia or the US.“The reason is that they invest in the main equity indices from those regions and by default have exposure to some of these firms,” Tewes said. “We try to keep the exposure small, but their inclusion in the indices is a fact.” Deutsche Bank, meanwhile, declined to comment – though a ban on cluster bombs is in effect for the European business of its investment unit Deutsche Asset and Wealth Management (DeAWM).
IKV Pax Christi acknowledged the index problem in the study. But it also insisted that asset managers investing in Asian or US indices could exclude cluster bomb makers if they really wanted to. “Although it may well be difficult and cost more time and money, we think that if it is possible, it should be done,” the NGO said, adding: “We invite financial institutions that see no possibility of meeting this criterion to demonstrate why they are unable to do so.”
Owing to the index issue, the study showed that leading passive investors like BlackRock and State Street were among the institutions that had the biggest equity exposure to cluster bomb makers. Both managers held shares in all the companies except CAST and Norinco. Goldman Sachs, meanwhile, had shares in Alliant, Poongsan and Textron as well as providing the latter with a loan and bond underwriting.
On the positive side, IKV Pax Christi noted that since its last study in June 2012, five new financial institutions had entered its “Hall of Fame” by abandoning all business with cluster bomb makers. They are all from the Netherlands, including the insurers A.S.R. and Menzis; asset management giant APG; and pension funds PFZW and SPW. “The examples show that a financial institution can establish a policy to ban every kind of investment in producers of cluster munitions,” said IKV Pax Christi.