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Banks and financial institutions profiting from weapons

High street banks are funding some of the world’s most notorious arms companies. We look at which banks are involved and what consumers can do. We also look at the wider financial industry and its links with nuclear weapons in particular.

How are banks financing the arms industry?

Banks are behind almost every industry in the world, through their loans, insurance and other kinds of financing, including the arms industry. 

By funding arms companies, banks allow them to grow and innovate – developing new forms of lethal weapons. 

In fact, banks are behind companies involved in the very worst forms of arms, such as nuclear weapons and cluster munitions, despite the latter being banned by 120 countries. 

Unsurprisingly, arms companies are not generally picky about who they sell weapons to. This means that if a bank is funding an arms company, it may well be one that is selling to oppressive regimes.  

Which banks are involved in financing arms companies?

Unfortunately, many banks still finance arms companies.

While some have said they will not fund the most destructive weapons, lots fall far short of refusing funding to arms companies altogether. And it is not just banks that are involved in the global arms trade. Lots of other financial institutions, such as investors, are also involved.

Over three quarters of the brands included in our ethical current accounts guide lost half a mark under Arms & Military supply for their investments. This included all the five major high street banks: Barclays, HSBC, Lloyds, NatWest and Santander.

Banks such as Barclays, Lloyds, NatWest, Santander and Citigroup, and other financial institutions such as Aviva and Old Mutual have been named in relation to funding cluster munitions, nuclear weapons on the sale of arms to Yemen.

What weapons are banks funding?

Banks funding cluster munitions

“Cluster munitions are indiscriminate weapons that pose a serious threat to civilian populations during and long after an attack. They spread dozens, or even hundreds, of bomblets called submunitions over an area the size of a football stadium or even more. On impact cluster munitions kill or maim anyone that is in that area. Also, many submunitions fail to explode on impact: they remain on the ground like landmines that kill and injure civilians long after the conflict has ended.” 

120 countries have signed a Convention that that bans the use, production, stockpiling and transfer of cluster bombs.

Yet, in 2018, the Cluster Munition Coalition found that financial institutions had invested almost $9 billion in companies producing cluster munitions. Citigroup and Old Mutual were both found to invest in companies involved. 

Amongst the banks named in the report, Triodos, Co-operative Bank and Royal Bank of Scotland were all praised for having divestment policies in place. 

However, Aviva, Axa, Deutsche Bank, Edentree Investment Management, HSBC, Lloyds Banking Group, Bank of Scotland and Standard Chartered were all found to have incomplete policies in place.

Nuclear weapon warheads

Banks and other finance institutions funding nuclear weapons

In December 2022, PAX, a member of the Nobel Peace Prize winning International Campaign to Abolish Nuclear Weapons (ICAN), launched its latest ‘Risky Returns’ report, reviewing the financing of the nuclear weapons industry by global financial institutions.

ICAN argued that "by lending money to nuclear weapons companies, and purchasing their shares and bonds, banks and other financial institutions, [companies and consumers] were indirectly facilitating the build-up and modernisation of nuclear forces, thereby heightening the risk that one day these ultimate weapons of terror will be used again – with catastrophic humanitarian and environmental consequences.”

ICAN was calling for a coordinated global campaign for nuclear weapons divestment.

Nuclear weapons financing increases

The Don't Bank on the Bomb Risky Returns report found that 306 financial institutions had provided financing of $747 billion to the top 24 nuclear weapons producers, like BAE and Boeing, between January 2020 and July 2022.

Amazingly, that was a $61.5 billion increase from the previous year and at a time when the Russian invasion of Ukraine highlighted that the need for nuclear disarmament has never been more urgent.

And during that time period, the Treaty on the Prohibition of Nuclear Weapons (TPNW) came into force on 22 January 2021. The treaty explicitly prohibits the manufacture, production, and development of nuclear weapons, as well as assistance with those prohibited acts. The treaty was adopted by twothirds of UN member states but wasn’t signed by any of the world’s nine nuclear powers (the United States, Russia, France, China, the United Kingdom, Pakistan, India, Israel, and North Korea).

All these nine nuclear-armed states continue to modernise their nuclear arsenal, and many of the companies involved are funded by financial institutions.

What can finance institutions do?

The financial sector can, and should, encourage companies to make such shifts away from nuclear weapons by announcing divestment, issuing policy statements, and undertaking shareholder action.

In 2021, pressure from financial institutions was cited as the reason that Serco, formerly involved in development of the UK nuclear arsenal, would no longer bid for any nuclear weapon related contracts.

At the first Meeting of States Parties to the TPNW, in June 2022, Italian asset manager Etica Funds delivered a joint statement on behalf of a group of 37 investors, that called for the prohibition of all forms of financial assistance to the nuclear weapons industry. As put forward in the statement, ‘‘[i]t would be illogical to prohibit the production of nuclear weapons without prohibiting the financing that enables the production to proceed’’.

Hall of shame for nuclear weapons funding

Twelve finance companies listed as funding nuclear weapons appear in our finance guides and thereby lost a mark in the Arms & Military Supply column on the score tables. See the list below for how much money each is providing to companies making nuclear weapons.

Of all the 306 financial institutions in the report, Vanguard was the biggest investor. It increased its investments in 2022 by $17 billion on 2021 figures.

JP Morgan Chase was the 6th biggest investor. Its funding alone was more than the combined total of the rest of the companies in these guides. Has someone told David Tennant, the new Dr Who, who is the voice-over for Chase bank’s new TV ads?

Finance institutions funding nuclear weapons manufacturers (with amount in $ millions) - ranked by largest first:

(Figures rounded to zero decimal places. *figures from the 2021 report.)

Vanguard's poor environmental and ethical record

Vanguard is the world’s second largest asset manager, and owns shares in nearly every public company in the US.

It tops the list for funding nuclear weapons manufacturers - see above.

It is also pulling back on its (weak) climate commitments, and has a poor record on engaging with shareholders seeking environmental change. Read more about Vanguard in our guide to pensions.

Banks funding sales of weapons to Yemen

Evidence shows that crisis-affected countries are being supplied with arms by companies funded by European banks. As such, these banks are linked to the human rights abuses that occur in these countries.

Since 2000, an estimated 60% of the world’s conflict-related deaths have been in the Middle East and North Africa (MENA) region, while violence in Iraq, Libya, Syria, and Yemen continues to displace millions of people annually.

Non-profit organisation Facing Finance released a report in May 2019 (Dirty Profits 7) highlighting the ten European banks with some of the highest investments in eleven of the global arms companies involved. The total finance amounted to €24.2 billion.

The largest volume of exports overall was to Saudi Arabia and the UAE – countries not only considered controversial for arms exports due to being defined as unfree countries themselves but also due to their role in the war in Yemen.

The civil war in Yemen

Yemen is the poorest country in the Middle East and, since March 2015, has been hosting a civil war between the Yemen government, backed by the Saudi-led coalition, and the Yemen rebels, backed by Saudi oil rival Iran. The Saudi-led Alliance has destroyed Yemen’s means of food production, targeting factories, farmland, warehouses, and markets. Yemen’s health system has “almost collapsed” after the bombing of hospitals, clinics, and vaccinations centres.

The UN had verified the deaths of at least 7,700 civilians by March 2020, with most caused by Saudi-led coalition airstrikes. Monitoring groups put the figure as high as 12,000. Thousands more civilians have died from preventable causes, including malnutrition, cholera, and other diseases. The United Nations has warned that the death toll from the coronavirus pandemic could "exceed the combined toll of war, disease, and hunger over the last five years."

About 80% of the population – 24 million people – need humanitarian assistance and protection. Some 20 million people need help securing food, according to the UN. Almost 10 million of them are considered "one step away from famine".

Who are they funding and how much?

All of the companies listed in the table below are also listed for funding nuclear weapons producers.

Investment company BlackRock has investments of €32.6 billion in the weapons companies included in the report. This is far more than all ten European banks combined. This is despite stating that it expects all the companies in its portfolio to make “a positive contribution to society”.

Lloyds Bank was one of the two largest overall providers of loans to the arms companies, totalling €4.1 billion. Lloyds provided finance to General Dynamics (which has exported to Egypt and Saudi Arabia and is involved in the production of nuclear weapons) totalling €2.4 billion.

In terms of actual shareholdings in the arms companies, Deutsche Bank ranked second of all the banks with holdings in all of the arms companies, totalling €2.6 billion. 

Loans between 2015 and 2019:

  • Lloyds Bank: €4,130 million
  • BNP Paribas (owns 25% of Impax ethical investment fund): €2,320 million
  • Deutsche Bank (owns 19% of ICICI Bank): €1,815 million
  • Banco Santander: €1,635 million
  • Barclays: €1,215 million

Investments, e.g. shareholdings, as of January 2019:

  • BlackRock (owns 10% of Janus Henderson ethical investment funds): €32,600 million
  • Deutsche Bank (owns 19% of ICICI Bank): €2,615 million
  • Barclays: €1,635 million
  • BNP Paribas (owns 25% of Impax ethical investment fund): €1,080 million
  • Banco Santander: €100 million
  • Lloyds Bank: 5 million

Facing Finance e.V. is a non-profit organisation headquartered in Berlin that takes a stand against financial corporations’ violations in the areas of environment and climate change, labour and human rights, corruption, and any use of weapons that are against international law. Read the full Facing Finance report.

How does Ethical Consumer rate banks in terms of arms?

We focus on two key areas when rating banks for Arms & Military Supply:

1. Do they have any investments in companies linked to arms or military supply?

2. Have they been linked to arms companies by NGOs or in the news?

For example, Barclays lost marks under Arms & Military supply for funding companies involved in nuclear weapons, and corporations like BAE Systems who have sold weapons to the Saudi regime, according to the Don't Bank on the Bomb report and the Dirty Profits report.

In our shopping guides to financial services like current accounts and savings accounts, we highlight companies that have the best policies, so you can find more ethical alternatives.

What can consumers do?

  1. Find out how your bank is doing

Our guides to Current Accounts, Savings Accounts and Small Business Accounts rate and rank over 35 companies on Arms & Military Supply. Our rating looks at companies’ investments and includes information from NGO reports, including those discussed above. 

  1. Consider switching

Switching accounts is remarkably quick and easy. Within just seven days, all your money could be transferred to a company that will not fund arms for profit. 

If you set up an account with a new bank, it will usually ask you if you want to switch accounts from an existing one. It is then up to the bank to move all your money, direct debits and standing orders over, as well as closing your existing account. Any money paid into your old account should be automatically forwarded for the next three years. 

  1. Tell your bank why you’ve switched

Companies really care what consumers think, especially when it’s affecting their bottom line. If enough of us tell companies that funding arms is unacceptable, practice may eventually change. 

If you are switching accounts for ethical reasons and want to write to your previous bank to let them know why, we have published a template letter for you to use