If the ongoing COVID-19 pandemic has taught us anything, it’s that every individual on the planet is interconnected and each person’s actions matter. The simple decision to step outside a front door can have long-term and even deadly consequences for others. This cause and effect has never been more confronting, but it certainly supports the idea that an individual’s actions – no matter how small or seemingly negligible – can affect the wider community.
When people start to gain awareness of the knock-on effects of their actions, they suddenly realise the power is in their own hands – and in the hands of their neighbours. As history has shown time and time again, when humans come together behind a common cause, the power of the people united is unstoppable.
Beyond the current pandemic, there is a silent war causing destruction throughout communities, governments and countries – a vicious cycle of technology and weaponry. This cycle is being fuelled by politics, culture and society. Citizens in Hong Kong and Yemen, aggravated by their governments and perceived foreign interference, are taking up arms. Rampant militarisation is on the rise – not just in third-world countries but from superpowers like the United States of America who are kidnapping citizens off their streets. The United Nations is nowadays regarded as more of a toothless tiger than peacemaker. And technology is influencing new weapons of war – faceless drones and AI that attack without conscience or empathy.
For many, the question is simple: “What can we do about it?”
Despite such feelings of helplessness, there is something everyone can do to effect change: understand their investments. There is an incredible amount of wealth being held by investment managers and superannuation funds that are propping up the weapons industry – even in Australia. These funds hide behind the veil of ‘doing the right thing’ for their clients, which is to generate more wealth for them. And without intervention from the clients themselves, they will continue to bury their heads in the sand and therefore unconsciously contribute to more violence and destruction around the world.
Crescent Wealth wholeheartedly disagrees with this strategy. As a single super fund, our investment decisions are but a drop in the ocean, but it is our social responsibility to take a stand at a grassroots level. As corporate citizens, we feel a moral obligation to spread awareness and encourage Australians to step away from organisations who deliberately pour money into the defense and weapons sectors for their own gain.
This discussion paper will seek to shine a light on how the weapons sector operates, how the wider superannuation industry is contributing to global disruption, and how you can make a change through the simple act of investing your super ethically.
“It seems only timely to consider super fund allocations to weapons given the recent and shocking reminder of the destructive power of explosives, with the horrible events unfolding in Beirut in the same week as the 75th anniversary of the bombings of Hiroshima and Nagasaki,” says Jason Hazell Sydney based, Chief Investment Officer of Crescent Wealth.
“Crescent Wealth takes a very simple approach. We do not, and will not, ever invest into weapons manufacturers.” For that Crescent Wealth Super received an honor roll award for ther stance against weapons from ICAN
Crescent Wealth Managing Director Talal Yassine OAM said, “It is way past the expiry date for super funds to continue to invest in the armaments industry. Crescent Wealth has taken a moral, and ethical stand on weapons with a focus on sustainable development and positive investments. We never have and never will invest in companies involved in the manufacturing, financing or even stockpiling chain of nuclear and other controversial weapons, including chemical and biological weapons, landmines, and cluster munitions. It is our obligation to create and contribute to a world free of such destructive harms,” he added.
Our duty as a superannuation provider
Most industries that form the backbone of the Australian economy have no tangible links to weapons manufacturing. In the superannuation sector, however, the opposite is true.
As a super provider, Crescent Wealth’s profitability, and therefore our ability to provide members with the best-possible service, is directly tied to our investment strategies. In the case of many super providers, those strategies involve investing in less-than-ethical investing sectors.
At Crescent Wealth Super, we’ve deliberately set ourselves apart as an ethical investing super provider with a difference. While we would never deign to describe ourselves as a spiritual authority, what we can provide is a unique position from which to deliver credible perspectives from Islam – all within the context of the investment space and weapons manufacturing.
Taking a progressive stand
It has always been Crescent Wealth’s goal to deliver high-quality financial services to members in a manner that conforms to Islamic investment principles.
There has been a significant investment of time spent speaking to the right spiritual authorities – some of whom you will hear from throughout this discussion paper – as well as relevant non-profit corporate bodies like the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
“As Australia’s only super fund that invests according to Islamic investment principles, Crescent Wealth’s number-one priority is to ensure that at all times the fund is consistent with the faith-based values of our members. This means implementing an ethical investment options governance process that maintains compliance with Islamic investment principles. This explicitly excludes weapons.”
The price of doing nothing
It’s impossible to put an exact price on how much money the Australian super sector has contributed to the weapons industry globally. What is clear is that in 2019 a number of local superannuation funds were found to have invested $6.4 million in a weapons company supplying Saudi Arabia. While that figure may appear low at face value, consider that the death toll in the Yemen war exceeded 100,000 in 2019 – including at least 12,000 civilians and 20,000 killed in that year alone.
Super funds investing in weapons is nothing new – but it has evaded the public’s consciousness for a long time. Extrapolate that small $6.4 million figure across multiple investments and across multiple decades and the scope of the full situation becomes clearer. And that is only in Australia – arguably a minor player when it comes to investing in the weapons sector, especially compared to global superpowers.\
Ultimately, whatever direct impact Crescent Wealth’s investment strategies have on the weapons sector will be small, but through shared knowledge and a commitment to spreading more ethical investment opportunities with the wider community, we can – and will – effect change.
Islam’s stance on defence and weapons
Couching the issues of weapons, defence and war with the philosophies of Islam is a complex subject, but one that is inextricably linked. What is the true context of jihad? Where is the line drawn between defensive and offensive weapons? How has the rise of violent terrorism and rapid arms production in the Middle East contributed to a distortion of Islam’s tenets?
Professor Mohamad Abdalla (AM) has significant expertise about Islam’s stance on defence and weapons. He has worked in Islamic studies for more than two decades, and played a leading role in establishing the study of Islam as an academic area in Australian education.
War is not holy
The default position is that Islam advocates peace, not war. The exception – which is where misconceptions can snowball into something much worse – is that war may be necessary at times, such as to protect your home and innocent people. This exception is what Professor Abdalla says creates confusion that leads to people turning jihad into the need for war.
“War itself is not holy,” he says. “War must be avoided at all costs, and there are many imperatives in the Quran and the Hadith to avoid war altogether. If there is war, then there must be strict conditions around it, and it must end as soon as possible. And if your opponent leans towards peace, then you must also.”
These conditions of war include everything from rules of engagement to the harming of innocent people, defined as non-combatants, women, children, the elderly, and religious leaders and houses of worship (e.g. imams, rabbis, priests, mosques, churches and synagogues). There are also guidelines around weaponry.
“Islam’s position on weaponry is that they must be prepared and used only to defer the enemy. They must not be used to unlawfully to maim and harm others.”
Decision-making in a modern context
Under the laws of warfare in Islam, an enemy must never be taken by surprise. Moreover, if conflict is unavoidable then the damage inflicted should be minimal and never harm innocent people. “That is why the vast majority of scholars today would prohibit suicide bombing even in war time, as it takes the lives of oneself and innocent individuals,” says Professor Abdalla.
He also adds that these rules must be applied in our modern context as they are fixed laws that do not change according to time or place. “These are unambiguous views from the Quran and Hadith, making them universal laws.”
One major challenge today, however, is that it is no longer jurists who make decisions on conflicts, armament and ultimately war. Instead, it is the executive powers – often from foreign countries, as seen in the Iraq War – with small groups of political leaders who make lifechanging decisions for entire nations.
“Stipulation of the Shariah is that it should not be a single group or authority who decides when a war should be waged or when peace should be signed. This is a problem today because you have groups deciding these big decisions without an accurate assessment of the Shariah.”
The multiple definitions of jihad
Historically, the term jihad has been negatively associated with the religion and its practitioners. But the term jihad has multiple meanings, the vast majority of which have nothing to do with war.
“There are 14 definitions of jihad – kitan is one associated with fighting, but the 13 other definitions have nothing to do with fighting. Dying while giving birth is a form of jihad; a person who dies protecting their house from robbery is an act of jihad.”
The Quran tells us to “withhold your hands” from fighting, and instead to perform a mighty jihad against them, which is to invite them to the truth.
“The Hadith says that the greatest jihad is to speak the truth in the presence in any tyrannical regime,” Professor Abdalla says. “Also seek out other forms of jihad. Helping to achieve equality for people is a form of jihad. Are your mother and father still alive? If so, go and serve them. Looking after those in need is a form of jihad.
“It is a mistake to assume that fighting is the only high form of jihad.”
The universality of peace across religions
There is clear and unquestionable evidence that the Abrahamic religions – Islam, Judaism and Christianity – espouse a positive, non-violent approach to living and spreading love to our fellow man.
“Thou shalt not kill” is one of the ten Christian commandments. Judaism decrees that before war is declared or a battle commences that there must be significant attempts at peace in order to avoid a conflict at all. According to their non-violent principles, even when pushed into conflict to protect themselves, their homes and the innocent, Buddhists say “even the most extreme circumstances do not erase those principles or make it ‘righteous’ or ‘good’ to violate them.”
So the universal approach, then, is to avoid violence altogether. To love thy neighbour. To make peace and not war wherever possible. These core tenets across almost every religion stand in defiance of what is happening in the modern world – the unnecessary militarisation of governments against their peoples, the rampant arms production, the influence of foreign entities on wars and conflicts.
These core tenets also stand in defiance of what many Australians are doing through their own investment strategies – whether unconsciously or not.
The impact on humanity
While there are undoubtedly base human contributors – whether political, religious, fanatical or otherwise – that can turn minor rabbles into full-blown and long-lasting wars, it is foolish to believe war is not motivated by profits.
Consider the War in Afghanistan, for example – without arguing semantics about why the US invaded or whether they even had a valid reason to. From the outside it appears the nearly $2 trillion the United States spent on the War in Afghanistan amounted to little tangible return. And while that is true for the everyman, it is patently false for the weapons manufacturers and merchants of war who profited off 18 years of conflict. All the major manufacturers are among the biggest winners from that long war: Lockheed Martin, Boeing, Raytheon, BAE Systems, Northrop Grumman and many more.
Along with the wasteful trillions comes the sad and harsh reality of the specific language of war to soften the violent reality. Terms such as ‘collateral damage’ have become part of the lexicon when war and conflicts are reported on, instead of describing the true cost of war being innocent victims killed unnecessarily.
The world is also grappling with the millions of displaced people deemed stateless, having to flee their countries and homes due to the devastation of war tearing apart their lives, their families being killed, and being forced to escape what was once their serenity to seek refuge elsewhere.
According to the UNHCR Global trend report, at the end of 2019 a mind-blowing 1% of the world’s population had been forcibly displaced due to conflicts, persecution, violence and human rights violations. That’s 79.5 million people, with 40% being children.
A refugee’s personal story
For Yara (whose name was changed for this story), she experienced firsthand the human cost of the weapons trade. Forced to flee her home country Syria while she was two years into her Medicinal Degree at Damascus University, Yara is able to share the truly devastating impact of war on innocent people.
“Over half a million humans have perished as a result of weapons of war in Syria alone,” she says. “This conflict has torn our country apart and devastated the lives of a generation. Terrible conditions meant that my family was forced to split up and escape – reaching a point of no return and a shock I would not wish on anyone. Leaving behind my family, my friends, and my dreams – I left my country and said goodbye to my home.”
Mental health from those who experience war
Yara is not alone in bearing the scars of war, compounded by foreign influence and the rampant weapons industry. Victims of war and conflict are exposed to more threats than merely being killed – injury, disability, sexual violence, illness and malnutrition are common consequences of war, not to mention the mental trauma that can manifest in anxiety, depression, and post-traumatic stress disorder (PTSD).
And PTSD is not restricted to civilians. It is far and away the largest mental health issue for returning servicepeople. Up to one in five veterans from the Iraq War suffer from PTSD. Here in Australia, 8.3% of all Australian Defence Force members will have experienced PTSD in the previous year – far higher than the community average of 5.2%.
War’s impact on our changing climate
Beyond the physical and mental toll on humans, war and conflict are contributing to the destruction of our planet. If the US military was reclassified as a country, it would rank as the 47th biggest contributor to total greenhouse emissions – and that is only measuring its military fuel use.
From 2001 to 2017, they emitted around 1.2 billion metric tons of greenhouse gases – equivalent to putting 257 million new cars on our roads, while the US’s machines of war require 85 million barrels of fuel every year.
Then there’s the long history of the US creating financial and ecological problems due to their interventions – or outright instigations – of conflicts and wars, including in Panama, Chile, Vietnam, Korea, East Timor and Iraq.
Consider also the US military’s $738 billion budget for the 2020 fiscal year alone. They outspend the next eight biggest military spends combined, with that money being poured into non-renewable energy, weapons manufacturing and supply, and of course violent warfare.
What is the source of the problem?
The historical issues of these affected countries, peoples and religious groups are long and complex. Their suffering is highly visible if you want to seek it out – the media covers such conflicts in great detail. But it is just as easy to look away.
Similarly, throwing money at a problem of this magnitude is not the solution. Certainly it is noble to support positive causes and help those in need, but money can only change so much. Ingrained belief systems, decades – and even centuries – of infighting, plus the immense influence of financially motivated governments to maintain wars are difficult to combat.
The solution may not be immediately clear, but through understanding and acknowledgement of the intricate relationship between corporate objectives, investment flows and political manoeuvring – as well as their historical significance – people can start to move in the right direction.
The nature of geopolitics and war
When viewing the roles and intricacies of the merchants of war from a bird’s-eye perspective, there is a complex ecosystem at place – from the power players who prop up the likes of Lockheed Martin and Raytheon, to the trickle-down effect of the global weapons trade that is run like a business and frequently leads to world-changing outcomes.
When looking to the future, it’s difficult to look beyond the rapid dehumanisation of weapons – how they are developed, how they are distributed and, ultimately, how and where they are used. When money so easily feeds into destruction, we must ask ourselves if there is anything we can do to change the tide of geopolitics influencing wars.
This section would not only include the budgetary relationships between merchants of war (in a executive govt sense) and their diplomatic relationships with fuel this cycle – but also the nature of how the system propagates war through a glorification via media reports which showcase guns, ammo, blasts and high tech weaponry, as well as the extravagant trade shows involved in this political / commercial relationship.
Nuclear Weapons- A real and unnecessary evil to mankind.
The nuclear weapon threat we currently face poses grave consequences that has somehow not taken precedence over its very real human and environmental devastation. Read more on how weapons of war contribute to environmental climate change.
Just one warhead can kill hundreds of thousands of people, with major inter-generational impacts. Several nuclear explosions over modern cities would kill tens of millions of people.
The risks heavily outweigh the existence of these deadly weapons, with unfortunate exposure killing and causing major sicknesses and deformities with the ionizing radiation. Not to mention its catastrophic contaminations to the clean energy environment.
Russia, the United States, the United Kingdom, France, China, India, Pakistan, Israel and North Korea possess an estimated total of nearly 14,000 nuclear weapons, most of which are many times more powerful than the nuclear weapon dropped on Hiroshima.
“It takes around 10 seconds for the fireball from a nuclear power explosion to reach its maximum size. A nuclear explosion releases vast amounts of energy in the form of blast, heat and radiation. An enormous shockwave reaches speeds of many hundreds of kilometres an hour. The blast kills people close to ground zero, and causes lung injuries, ear damage and internal bleeding further away. People sustain injuries from collapsing buildings and flying objects. Thermal radiation is so intense that almost everything close to ground zero is vaporized. The extreme heat causes severe burns and ignites fires over a large area, which coalesce into a giant firestorm. Even people in underground shelters face likely death due to a lack of oxygen and carbon monoxide poisoning”.
Whether or not they are detonated, nuclear weapons cause widespread harm to health and to the environment.
Diverting investments from nuclear weapons is a far greater movement that requires governments across the world to do the right thing by the very citizens they serve.
There is no legitimate or lawful reason for the existence of such weapons.
Governments are taking vital funds away from social services or infrastructure projects that can have the potential to create positive long lasting impacts.
[Pull out page for the President Eisenhour speed decrying the rise of military industrial complex. I think there is value in that with regard to balancing perceptions of the US in this paper]
The role of capital and investments
“When the Howard Government banned the sale and possession of automatic and semi-automatic weapons following the 1996 Port Arthur tragedy, it would have been reasonable to assume that Australian super funds would follow suit,” says Jason Hazell, Chief Investment Officer of Crescent Wealth.
“But while the vast majority of super funds and fund managers in Australia claim to exclude weapons from their portfolios, a closer look reveals that most only exclude ‘controversial’ weapons.
“The MSCI, an index provider, defines ‘controversial’ weapons as the following list of very specific items:
- Cluster bombs
- Depleted uranium weapons
- Chemical and biological weapons
- Blinding laser weapons
- Non-detectable fragments
- Incendiary weapons (white phosphorus)
“Excluding these controversial weapons does nothing to stop the storage of vast amounts of ammonium nitrate or nuclear weapons manufacturers. Nor does it appear to stop Australian super funds from investing in the companies that produce the weapons used at Port Arthur and which are now banned in Australia.
“Isn’t that strange? Isn’t it a massive contradiction that Australia has banned weapons, but it is fine for our superannuation industry to finance the manufacture and sale of weapons for other countries?”
Australian super is inextricably linked with US stocks
Investors aren’t stupid. They understand that looking abroad for foreign investments is likely to reap the greatest rewards.
Individual super does the same thing. It’s an investment, and a fair portion of all super goes to global stocks with the hopes of bringing higher returns to clients. Moreover, these gains are usually achieved in a much faster time than other – especially Australian-based – investments.
In fact, according to ASFA’s Superannuation Statistics February 2020 report, funds with more than four members contributed 25% of their total investments into international shares. That’s more than any other asset class, beating Australian listed shares (22%), cash (10%), listed and unlisted property (8%), and infrastructure (6%). Put another way, those funds are investing nearly half a trillion dollars ($488 billion) into international markets.
So why is there such significant investment into overseas shares? Because the giants like Boeing, Raytheon and Lockheed Martin are reaping the huge financial rewards of ongoing global turmoil. The average super fund may not make it obvious that their customers’ money is going towards weapons manufacturing and arms sales, but the evidence shows that it’s a reality – and investors are mostly uninterested in taking an ethical stance against it.
The predictable trends of pre- and during-war market performance
What we hear from daily media outlets is that war is expensive – not only financially but also the human cost. So why would the US continue their war posturing when they’ve already spent $6.4 trillion on wars post-9/11? Because of the financial boost that conflict brings – at least to stable Western nations.
Source: LPL Research, S&P Dow Jones Indices, CFRA, 01/06/20
[Credit will be important for this table and below table: https://www.investopedia.com/solving-the-war-puzzle-4780889]
Consider that over the course of World War II – a six-year period – the Dow was up 7% year-on-year for a total of 50% by 1945, and the US ASX stock market enjoyed a combined boost of 115% over both World Wars. According to Ben Carlson writing for Fortune, the US saw similar trends for the Korean War (up 16% year-on-year; almost 60% total), Vietnam (up nearly 5% year-on-year; almost 43% total) and the US invasion of Iraq in March 2003 (stocks up 2.3% on the day of the invasion; up more than 30% by the end of that year).
Source: Mark Armbruster/CFA Institute
In almost all instances, there’s a very predictable drop or brief downward trend in the lead-up to a major conflict, but within the span of months – or even days in some cases – that dip quickly levels out only to surge skyward, putting a smile on the faces of US asx investors and particularly weapons manufacturers who know to expect a major boost to their annual revenue.
An unbreakable triangle
It’s important to recognise that the military, government and economy are not separate entities conducting businesses in siloed ecosystems. On the contrary, all three are firmly interconnected – with any fluctuation in one having a significant knock-on effect to the others. This is often referred to as the military–industrial complex.
Picture it as a military-government-economy triangle, one that has grown to such a size that it is too big to fail. For example, even if the military began to falter, the government would prop it up with renewed funding and larger budgets to ensure it stays resilient, despite what may be happening beneath the surface.
This co-dependent relationship results in governments – and in the case of the United States, congresspeople – defying the will of the people they are supposed to serve in order to generate profits for themselves and their own departments. Indeed, consider the latest coronavirus bill put forward by Republicans and note that it comes saddled with an inexplicable $7 billion for weapons programs – which obviously has no relevance to finding a vaccine for COVID-19 or supporting citizens who are enduring financial and healthcare hardships.
The triangle has become so solidified in Western politics that elected officials may feel they have no other choice but to bow to the will of weapons manufacturers and arms lobbyists. After all, if they fail to provide them with the funds requested, it will result in job losses, which may hurt their chances for re-election. Not only that, but it will impact foreign relations, and ultimately show their military as being weak – all while they demolish less-powerful nations like Iraq, Afghanistan and Syria.
Yemen: A case study in destruction
The ongoing conflict in Yemen is not the first war to drive profits in foreign countries – and neither will it be the last. The collapse of Yugoslavia is but a distant memory for many, and while the initial maelstrom was arguably the result of multiple ethnic conflicts and wars for independence, the profiteers didn’t take long to come out of the woodwork and seek out ways to make a dollar from the deaths of others.
Right now in Yemen, however, our hyper-connected digital world has made it much easier to monitor the largest players in the war-profits game. Raytheon has made billions of dollars in its dealings with Saudi Arabia, and the results can be seen by American bombs killing innocent Yemeni civilians.
Consider also potential war crimes that can be traced back to US manufacturers. A Saudi-led coalition airstrike killed 26 children and 19 adults in northern Yemen back in 2018. Photos of the destruction revealed markings on shrapnel from General Dynamics Corporation, which is based in Texas, as well as other markings identifying Lockheed Martin.
Yet as these US-made weapons are killing innocent people, Raytheon profits soar. Investors see only the increase in returns and continue to reinvest in international stocks because they are beneficial to their clients.
Australia’s role in all of this
Australia may not have weapons giants akin to Lockheed Martin and Boeing, but a little research uncovers that firms like Xtek, Electro Optic Systems and Quickstep Holdings all end up profiting from increased defence budgets and the deployment of Australian troops into overseas conflicts.
The three organisations mentioned above also make for smart investment opportunities, according to financial players. As Uwe Boettcher, Chairman of Xtek, noted of the government mandate to include 50% local content in any supply deal, “the outlook is … bright for defence suppliers”.
But Australia also has a well-documented past with some of the biggest global players. Raytheon, for example, which employees around 1,500 staff in Australia, has 19 workplaces around the country, including its headquarters in our government hub of Canberra. The weapons manufacturer also has a dedicated agenda to improving maths and science in the wider communities. Their ability to pour millions into Australia-based programs only serves to sink their tentacles into our community, and therefore makes it much more difficult for the government to reduce spending on national defence.
Then there’s the difficult discussion around politicians and weapons spending. This table from the 2016 Integrated Investment Program white paper from the Department of Defence shows where $166 billion of Australian taxpayers’ money is going over the coming decades:
Source: Australian Financial Review
Australia is also not immune from foreign influence, particularly the United States. The most recent example involves a Donald Trump threat. He indicated that he intended to stop offshore manufacturing for the F-35 Joint Strike Fighter Program, run by US-based Lockheed Martin. Doing so would cost the Australian Government billions over the next few years, not to mention massive job losses.
Better use of investments
The fact is that Australia has spent nearly $20 billion on military deployments in the past two decades. When compared to the $335 million in humanitarian and development assistance given to Iraq since the war in 2003, that figure pales in comparison. The argument could be made, then, that those millions – and even billions – would be better spent on local jobs, supporting the arts, investing in technology to fight climate change, and a wealth of other outlets to improve the lives of Australian citizens over the long term.
The obstacles to progress
If it were easy to stop super funds from investing in sectors like weapons, then there would be no need for ethnical funds to exist at all. The problem is that in a world where capitalism reigns supreme, the almighty dollar is king.
The obstacles to progress are as diverse as they are complex. Whether it’s the belief that “It’s always been done this way” or a case of citizens simply not connecting the dots themselves (only an incredibly small percentage of Australians actually know what their super fund invests in), there are many major hurdles to overcome.
There are, however, some that – while deep-rooted in our society – have the potential to be softened over time if the right voices for change are heard.
- The false assumption of ‘conflicting duties’ in the investment industry
Most people have had similar experiences throughout their careers. A company refuses to make a drastic – yet far more positive – change to their work policies because it would impact on their ability to deliver their service or offering, thereby affecting profitability. Whereas in a café or gardening business, that decision would have a minor ripple effect, the fallout is compounded to the nth degree on the global financial stage.
In the United States, for example, there’s a default stance on Wall Street that they are merely investors, not statesmen or policymakers. Could the same be true for Australia’s own financial hubs? There are many reasons to believe that our financial power-players – like those who wander the business-suit-dense Martin Place – are actually more at fault through their unwillingness to recognise the immorality of their day-to-day activities.
As opposed to Wall Street’s confident – though questionably scrupulous – belief that they are merely acting in the best interest of their clients, scrutiny in recent years has shown that the Australian sector is unashamedly blind to their own ethical problems.
A 2017 survey conducted by the Responsible Investment Association Australasia (RIAA) found that nine in 10 (92%) Australians expect their superannuation or other investments to be invested responsibly and ethically. Despite this level of support, any changes to super funds’ investment behaviours has unfortunately fallen short of being a force for real change.
Looking at a 2019 study also undertaken by RIAA that covered the largest 50 regulated superannuation funds in Australia, significant asset owners, including the two sovereign wealth funds in Australia and New Zealand, comprising an estimated $1.75 trillion in assets under management (AUM) as at 30 June 2019, found that 21 funds cited exclusions in armament investment.
These exclusions refer to controversial weapons including cluster munitions, land lines and nuclear weapons. However, taking a closer look this seems no more than lip service the industry providers to label their efforts as ethical. While the steps taken by these funds to exclude controversial weapons from their portfolios is a positive decision, they stop short from implementing real change. These funds are still investing a large portion of money into the weapons industry including military and civilian weapons.
- Political backing and lack of government support
The sad truth is that for the vast majority of recent governments in Australia, superannuation has been a small fish in a big pond. There are other matters to attend to, and unless it’s seriously impacting the economy then they are more likely to offer soft recommendations rather than make hard-line changes or restrictions.
Then there’s the case that unethical investments are actually benefiting the government. There’s no denying that the Australian Government has involved itself in weapons dealings in the past, and they’ve made it clear they intend to invest billions into our defence sector over the coming decades. So if super funds are making a dollar off less-than-‘halal’ strategies, then who is the government to tell providers what to do?
A question that needs to be asked to the current Australia Liberal Government is their failure to take a stand against eliminating the existence of nuclear weapons. The treaty is officially known as the Treaty on the Prohibition of Nuclear Weapons and will be legally binding once 50 nations have signed and ratified it. There are currently 44 signatories; Australia is not one of them.
Australia chose to not sign, ratify or participate in the negotiation of the treaty at the United Nations in New York in 2017 and thus did not vote for the treaty’s adoption. It also voted against a UN General Assembly resolution in 2018 that welcomed the adoption of the treaty.
“The treaty is incompatible with Australia’s ongoing support for the retention and potential use of US nuclear weapons on its behalf, as indicated in various policy statements, including its defence white paper of 2016 and its foreign policy white paper of 2017.”
A public opinion poll conducted by Ipsos in November 2018 found that 79% of Australians believe that the Australian government should sign the treaty, with 8% opposed to signing and 13% undecided.
The Australian Labor Party, adopted a resolution in 2018 committing to sign the treaty in government. “Our commitment to sign and ratify the nuclear weapon ban treaty in government is Labor at its best,” said Labor Party leader Anthony Albanese. Most Labor parliamentarians have also individually pledged to work towards this goal.
- The fallacy of limited impact
There’s a very real risk that a single citizen won’t make an ethical change simply because they are one person in an ocean of billions. After all, what difference would that make? Would the weapons industry be affected? No. Would that individual be financially impacted? Possibly.
However, much like the Downs paradox – in which the author opines how an individual vote may or may not make any real difference to an election’s outcome – it is not about making a change in one person or one super fund or even one government. Rather, it’s about building a concerted movement with informed individuals who want to see real change. This can even – and does – occur within organisations of all sizes, where one or a group of employees take a stand to drive social change from the bottom up.
Perhaps all it will take is one pebble being dislodged. Over the subsequent months and years, that single pebble may turn into a landslide.
Knowledge is power: Value-driven action
It’s easy to think about an individual’s super investments as not having any real impact on the wider world. But consider just how much cash is flowing through investments into the weapons sector – right around the world.
In Yemen, foreign-led arms shipments are only serving to heighten the ongoing violence. China is taking countermeasures against the US’s ban on military exports to Hong Kong, while at the same time the Western superpower is fuelling further unrest by approving arms sales to Taiwan. While back home, Australia’s international security outlook is looking increasingly uncertain – and unpalatable to many citizens.
The unfortunate truth: to help the economy rebound from historic lows, arms industrialists are boosting weapons sales wherever – and however – possible.
Moving forward in an ethical manner
At the end of the day, it’s very easy to feel powerless against these global issues, but it’s positive to see that the tides of change are slowly occurring. According to the Responsible Investment Benchmark Report 2019, weapons (31%) is the most popular institutional exclusion across super funds and investment portfolios, followed closely by tobacco (30%).
The prevalent issue, however, is that despite it being one of the most popular responsible investment (RI) approaches, uptake is slow due to misconceptions. As Mark Spicer, Director of Sustainability Services at KPMG, says in his company’s Super Insights Report 2018:
“One of the key detractors to RI growth has been the perception that RI options underperform the wider market. Our research indicates that the opposite appears more likely with the RI approach of incorporating ESG performance into investment decisions appearing to drive long-term sustainable value and outperform equivalent funds.”
In addition, we’re seeing real growth of Islamic finance around the world. More and more people are wanting to know the truth behind what their money is doing. Where are their funds making investments? Where is their government spending their tax dollars? What steps are super funds taking to avoid supporting countries and industries that spend aggressively on weapons, and instead look to investment strategies that discourage uber-capitalist behaviours? With a truly ethical super fund, such as future super, Australian ethical, you can find out all the socially responsible answers to those questions.
What can you do about it?
It’s the question without a one-size-fits-all answer. We must all look inward to determine what we want in life. How do we balance our investment goals with our moral compass?
It could start as simply as encouraging your friends, your family members and your co-workers to investigate what their super funds are really doing with their money. And if they are unhappy with the truth, point them in the direction of responsible investment strategies and ethical superannuation funds. After all, a single ripple in the ocean, given enough time, can cause a tidal wave.
“Every general and every soldier was conscious of his own insignificance, aware of being but a drop in that ocean of men, and yet at the same time was conscious of his strength as a part of that enormous whole.” – Leo Tolstoy, War and Peace
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Talal currently serves as a Non-Executive Director on the Whitlam Institute and Western Sydney University Foundation Council Board. He also serves as Chairman of First Quay Capital and Chairman of the Australian Arab Dialogue. Talal has also served on the Australia Post, Board of Sydney Ports, Macquarie University and the Western Sydney Area Health Service and the Chairman of the Department of Foreign Affairs and Trade; Council of Australia Arab Relations. In an executive capacity, Talal spent 10 years at PwC as a director and strategist, and at investment firm Babcock & Brown in the Corporate Finance Group and later in the Technical Real Estate Division. Later Talal held leadership positions in Better Place Australia, Platinum Hearing and Star Transport Australia.