Australian superannuation funds face reputational, fiduciary and regulatory risks through exposure to companies associated with the production or maintenance of nuclear weapons, and should implement comprehensive exclusion policies.


The United Nations Treaty on the Prohibition of Nuclear Weapons will enter into force on 22 January 2021, when nuclear weapons will be illegal – just like chemical and biological weapons, cluster munitions, and landmines.

When the treaty enters into force, international law will prohibit any assistance to anyone producing nuclear weapons.

As illustrated by Covid-19, predicted low frequency catastrophic events do occur. Nuclear war is an accident waiting to happen – be it by human or technical error, extremists, hackers or erratic leadership.

Like tobacco, nuclear weapons kill millions of people. The subsequent “nuclear winter” would lead to a decade long global famine putting a further 2 billion lives at risk.

Current status

Most superannuation funds do not have comprehensive policies in place to exclude nuclear weapons companies.

Nuclear weapons companies are not yet captured by screens for controversial weapons. Options that claim to exclude armaments may in fact fail to screen out nuclear weapons.

Many nuclear weapons companies may have positive ESG ratings, so using ESG criteria is insufficient.

key considerations

Investments in nuclear weapons companies do not meet community standards. In Australia 79% of people agree that the government should sign and ratify the UN nuclear ban treaty (IPSOS 11/18), while 69% agreed or strongly agreed that their superannuation fund should not invest in nuclear weapons companies, and only 7% disagreed. (IPSOS 8/19).

PRI signatories claiming to ‘avoid harm’ may be misrepresenting investors’ exposure to armaments.

Interests of members and beneficiaries in the future are a key responsibility of trustees.

Globally, major investors are limiting their exposure to nuclear weapons activities. Two of the top five pension funds in the world, the Norwegian Government Pension Fund and ABP, have divested from nuclear weapons. Deutsche Bank and KBC are also divesting. The overall number of divested funds has more than doubled since 2014.

In Japan, 16 banks (including 3 mega banks MUFG Bank, Mizuho Bank and Sumitomo Mitsui Banking Corp) have flagged ceasing investment in nuclear weapons companies.

Nuclear weapons-related investments have shown long-term under-performance and may further deteriorate as divestment gains momentum. Broader trends indicate sector downturn in the wake of prohibition by international treaty, even in non-signatory countries.

The MSCI USA Ex Tobacco Ex Controversial Weapons Index has outperformed the MSCI USA Index since its inception in 2012. (see below for data).

Companies recommended for exclusion are international companies and represent a very small proportion of Australian fund portfolios, limiting material risk.

By the first quarter of 2021, international law will comprehensively and categorically prohibit nuclear weapons and associated activities, including assistance for development, production, manufacture and stockpiling.

States parties to the nuclear weapon ban treaty will be required to divest any government money – such as superannuation – from nuclear weapons companies.

Stress testing for a nuclear event scenario (not unlike stress testing for a pandemic) forms part of due diligence requirements, as all portfolios are exposed to the negative impacts of a nuclear event while nuclear weapons continue exist.

Over 80 federal parliamentarians have pledged support for the treaty, and the federal Opposition has a policy to sign and ratify the treaty.

Recommended policy

We recommend superannuation funds adopt a policy that:

1. Excludes all nuclear weapon associated companies:

Whole companies, not only nuclear weapons related projects

Companies associated with nuclear weapons including through joint ventures;

Companies regardless of their country of origin;

Companies regardless of their country of operation.

2. Excludes all nuclear weapon associated activities:

Development, testing, production, maintenance or trade of nuclear weapons related technology, parts, products or services;

Delivery systems such as missiles that are specifically developed for nuclear tasks. It does not include delivery platforms such as bombers and submarines.

3. Applies the policy to all of the institution’s products and services. The institution applies the policy:

For the entire group, including subsidiaries;

In all markets;

To all asset management classes – passive and active, internal and external;

To all existing and future investments.