Swiss Sustainable Finance: Investing assets to eliminate weapons stocks

The initiative launched by Swiss Sustainable Finance is taking shape: More than 140 asset managers, asset owners, wealth managers and wealth service providers from around the world, representing USD 6.8 trillion worth of investor assets, have joined forces to call on index providers to use controversial arms[1] to be removed from the common indexes.

In an open letter also published today in the Financial Times, Neue Zürcher Zeitung and Le Temps, the signatories addressed representatives of FTSE Russell, Morningstar, MSCI, S&P Dow Jones Indices and STOXX, calling on index providers to act.

Investments in companies related to controversial weapons already violate some national regulations and international conventions. However, mainstream indices still take them into account. For active investors, who exclude them themselves, this means an additional tracking error compared to standard benchmarks and additional costs. Passive investors, on the other hand, usually have no choice, as the overwhelming majority of strategies track traditional indices without exclusions.

As a result, today investors using the benchmarks of the major suppliers are contributing to the financing of companies involved in the manufacture of controversial weapons.

Clean Portfolios: The New Normal
Sabine Döbeli, CEO of Swiss Sustainable Finance, explains: "Aligning investor portfolios with established values and standards is becoming the new normal for pension funds and other institutional investors. The fact that our initiative has been able to gain the support of such a large number of organizations is a strong signal to index providers, and we believe it is a logical consequence to reflect this demand in global indices."

Eric Borremans, Head of ESG at Pictet Asset Management says, "We believe that funding should be less readily available to controversial arms manufacturers in line with international conventions, best investment practice and public opinion. Indexes serve as the basis for many active and passive investment products; we believe that controversial arms manufacturers should be excluded by default."

Peter Damgaard Jensen, CEO of PKA A/S says: "For us as responsible investors representing more than 300,000 pension savers, controversial weapons are unacceptable and therefore excluded from all our investments. Many index product providers do not share this principle, which makes it difficult for other investors to ensure that they are not contributing to the financing of controversial weapons manufacturers.

By joining with other investors from around the world, hopefully we can get this message across and get index providers to exclude controversial weapons from mainstream indexes once and for all."

You can find more information on the website of Swiss Sustainable Finance www.sustainablefinance.ch

^[1] Such weapons-which include cluster munitions, antipersonnel mines, nuclear weapons produced in countries that have not signed the Nuclear Non-Proliferation Treaty, and biological and chemical weapons-can cause indiscriminate and disproportionate suffering. International conventions outlaw or restrict the use of such weapons