INVESTORS UNDER PRESSURE

Amid rising global tensions, investors in Europe are under greater pressure to fund the defence sector. This is despite longstanding policies in the European Union to avoid the risks associated with investment in inhumane and indiscriminate weapons – such as nuclear weapons and other controversial weapons outlawed under UN treaties and conventions, including  chemical and biological weapons, cluster munitions, antipersonnel mines, depleted uranium, white phosphorous, depleted uranium and non-detectable fragments.

The push for increased defence sector investment is less about generating capital but more about providing legitimacy and cover for companies that operate in ways that are in direct opposition to public opinion.
The European Union’s 2025 decision to change the description of controversial weapons to ‘prohibited’ weapons – weapons prohibited under ‘major’ international agreements – is of concern as at this narrows the definition of controversial weapons, including nuclear weapons.

In 2025 the European Commission decided that only weapons prohibited by conventions to which the majority of member states are party should be excluded from sustainable investment indices, and that ‘prohibited weapons’ mean anti- personnel mines, cluster munitions, biological and chemical weapons only.

This means that investors domiciled in EU member states can ignore the Treaty on the Prohibition of Nuclear Weapons (TPNW) in constructing ‘sustainable’ portfolios. And investors in Europe are actively reviewing their exclusion of nuclear weapons with a growing number of investors reintegrating them into their investable universes.

The use of the term ‘sustainable’ investments or portfolios is currently unregulated in Australia.
However, the Responsible Investment Association of Australasia (RIAA) only certifies portfolios as responsible if, at a minimum, financial products exclude producers of tobacco, manufacturers of nicotine alternatives and tobacco-based products, controversial weapons and nuclear weapons from their portfolio, under the
principle of do no significant harm.

It is more important than ever that countries including Australia that are signatories to, and have ratified, the Geneva Conventions and their Additional Protocols (which are the primary treaties that regulate International Humanitarian Law) (IHL) ensure that domestic investors such as superannuation funds recognise their obligations under IHL.

Under IHL parties to an armed conflict must “at all times distinguish between the civilian population and combatants and between civilian objects and military objectives” – a distinction that is impossible to meet with the use of nuclear weapons and other weapons of mass destruction.

Nuclear weapons have no place in the portfolios of Australian superannuation funds. There are no right hands for the wrong weapons.