Swiss ESG gatekeeper tells investors to avoid 15 arms companies
Swiss responsible investment association SVVK-ASIR has given major Swiss pension funds a list of 15 arms companies they should avoid investing in. The list includes General Dynamics, Lockheed Martin and Textron of the US, Motovilicha of Russia and Israel's Aryt Industries. along with companies from Romania and South Korea. SVVK-ASIR said the companies were all in breach of one or more international accords, such as the Ottawa Convention on anti-personnel landmines and the Oslo Convention on cluster bombs. SVVK-ASIR's members, including Compensswiss/AHV, Suva and Pensionkasse Post and Pensionkasse SBB, are believed to have holdings in the proscribed firms.

The Swiss responsible investment association, SVVK-ASIR, has identified 15 arms companies its members – major Swiss pension funds – should not invest in.

The 15 companies are from India, Israel, Romania, Russia, South Korea, and the USA. They are considered to make products that violate Swiss law and internationally recognised conventions, such as the Ottawa Convention – banning anti-personnel mines – and the Oslo Convention on cluster munitions.

The Swiss association announced the recommendation to its members last week. It has also published position statements on different types of munitions.

According to a statement from the association, its members will over the coming months decide on how to implement the recommendation in their portfolios. The assocation’s view is that engagement with companies producing banned weapons or munitions will not bring about change.

It said the decision to eliminate a security from the portfolio remains with each member of the association.

SVVK-ASIR has seven members: first pillar fund buffer Compenswiss/AHV; the pension scheme for telecommunications company Swisscom (comPlan); accident insurance fund Suva; public pension fund Publica; and the pension funds for the postal service (Pensionskasse Post), federal railways (Pensionskasse SBB), and the canton of Zurich (BVK).

IPE understands that each member has holdings in at least one of the identified companies.

Jacqueline Oh, managing director of the Bern-based association, said the board of directors approved the exclusion recommendation at the end of February.

It is separately launching an engagement campaign with companies deemed to fall most foul of certain environmental, social, and governance (ESG) norms.

Oh said it had picked around 15 companies across a range of sectors to begin with.

“We’ll start small and gain expertise, but we want to increase the number of companies we engage with over time, ” she said.

The exclusion recommendation on controversial weapons is the first concrete measure taken by the association since it was founded in December 2015.

Separately, Australian asset manager AMP Capital yesterday announced it would not invest in companies manufacturing tobacco, cluster munitions, landmines, or biological and chemical weapons.

It will divest around A$440m (€315m) worth of tobacco securities across equities and fixed income, which it said is the largest divestment in Australia to date. It will also divest around A$130m from cluster munitions and landmines. The asset manager’s portfolios do not have holdings in companies with known exposure to chemical or biological weapons, but such companies will be excluded from the investable universe.

The divestment will happen under a new “ethical framework” the company has introduced. This establishes minimum ethical standards to be applied across the portfolio. Previously, AMP Capital dealt with ethical issues as part of its ESG analysis on a case-by-case basis and by offering customers responsible investment options.

AMP Capital CEO Adam Tindall said: “The new framework complements our existing approach to addressing ESG investment risks by helping us to resolve complex ethical issues as they arise. It reflects the changing attitudes of our investors, who increasingly do not want to be invested in harmful products.”

“We are not prepared to deliver investment returns to customers at any cost to society,” he added. “This position has been affirmed through consultation with major institutional clients and engagement with retail customers.”

In addition, French public sector pension scheme Ircantec recently announced that it had sold holdings worth €46m across 18 companies as of the end of 2016 under a coal-based divestment policy.