(This article may not fit exactly in to the template, British foreign policy, of our blog. However the continuation of the UK as a nuclear weapons power has a direct impact on Britain’s role, behaviour, how it sees its position in the world as well as how it is viewed by other nations throughout the globe)
Following John Stanton’s excellent report on Counterpunch, on the recent report released by the International Campaign to Abolish Nuclear Weapons (ICAN), entitled, Don’t Bank on the Bomb , I decided to take a closer look at this comprehensive report to find out who is financing the nuclear weapons industry within my own country, the United Kingdom.
Your usual suspects turned up: Barclays, HSBC, Lloyds Banking Group and dozens of international investment groups. As I scanned the document I noticed one name of interest cropped up, with investments in Babcock International and The Redhall Group; that name was Universities Superannuation Scheme (USS).
USS pension fund is the second-largest in the UK and provides pensions to both teaching and administrative staff at the vast majority of public sector universities in the U.K. USS Participants . To say that I was shocked is an understatement. That private companies, banks, insurance and investment companies make such investments is not surprising and, in some ways, of little interest to me, but if anyone else would like to raise a complaint to these companies their contact details are listed at the end of the report. The fact that a pension scheme that invests the money of both the university staff and – indirectly – the fee-paying students, is investing in companies directly involved in the nuclear weapons industry is a scandal and needs to be confronted.
As stated in the report, the companies in which USS invest are Babcock International and Redhall Group. According to the report, whose methodological research appears sound and is described in detail within the report, Babcock International’s work in the industry involves:
The marine division of Babcock International in 2007 started the Future Submarines project with BAE Systems and Rolls?Royce. The objective of this project is to develop Successor, a new class of nuclear-armed submarine for the British navy, which will replace the present Vanguard-class submarines armed with nuclear Trident ballistic missiles.
The marine division of the company is also involved in the maintenance of the Vanguard-class submarines. In its 2011 annual report, Babcock International states that the British government committed to retain the current submarine-based nuclear deterrent, providing a key role for the division in the so-called “Vanguard life extension project”.
Additionally, the nuclear services division of Babcock International is a frequent subcontractor for the United Kingdom’s Atomic Weapons Establishment for decommissioning and waste management activities. (‘Don’t Bank on the Bomb’, p. 45)
This information is referenced from Babcock International’s own publicly-available reports.
Redhall Groups involvement consists of:
Redhall Group operates within the nuclear weapons industry via contracts with the British Ministry of Defence to carry out mechanical and electrical engineering activities at the Atomic Weapons Establishments (AWE).221 The group has been carrying out work at AWE Aldermaston – the United Kingdom’s nuclear weapons factory – for over 12 years.222 It is also a contractor of AWE Burghfield, the United Kingdom’s facility for assembling and disassembling nuclear warheads. (Ibid, p. 51)
The investments in these companies by USS are not unsubstantial. The reports highlights that USS has $22.7m worth of direct shares in Babcock International as of 01-09-2011 (Ibid, p.61). USS also holds $2.18m worth of direct shares in the Redhall Group (Ibid, p.97).
I emailed USS for a response on these claims made in the report. I expected that no doubt they would point to the premise that as a private pension fund they can invest in any legal company or industry they wish and that their primary concern is getting the best deal for their customer in monetary fund’s, which indeed they did,
In this regard, it is unlike retail ethical or SRI funds which enable individuals to express their personal values in their investments or church or charity investments which may be able to reflect a particular mission, campaign or issue. (USS e-mail response)
The e-mail continues:
The legal advice that the fund has received is that USS is not permitted to make investment decisions based purely on an ethical or moral stance. Therefore irrespective of how an individual may feel on a particular issue, the fund has to take a broader position and does not screen-out particular companies or sectors.
This appears to be a legally sound response, from a lay person’s perspective, from USS and interestingly points to the differences within the pension sector over the ethi
cs employed. However, I doubt many of those who have taken up a pension scheme with USS will be happy about their long term future being banked upon such an immoral industry.
Not only is this industry (and successive UK governments’ roles in its development) immoral, but it is quite possibly illegal which calls in to question the USS adherence to what they stated within their e-mail.
We expect companies to pay particular regard to legal standards and encourage adherence to best practice norms on corporate responsibility and corporate governance.
The decision by the UK to replace its Trident missile system back in 2006 under Tony Blair’s administration Trident replacement challenged by Phillip Sands QC , a professor of international law at University College London, who stated:
- Renewal, replacement or upgrading of Trident is likely to breach Article VI of the Nuclear Non-Proliferation Treaty (NPT).
- Attempts to justify Trident upgrade or replacement as an insurance against unascertainable future threats is incompatible with Article VI of the NPT.
- The UK has stated a willingness to use nuclear weapons to protect ‘vital interests’ against non-nuclear states which appears to be outside the doctrine of self-defence as recognised under international law.
- The use of nuclear weapons to protect such interests is likely to be disproportionate and therefore unlawful under the UN Charter.use of Trident is likely to breach international humanitarian law through its indiscriminate and uncontrollable effects.
- The Government has broadened its deterrence policy to include non-nuclear states who are believed to possess chemical or biological weapons. Use of this policy to justify any renewal, replacement or upgrade of Trident may be in breach of the UK’s obligations under Article VIoftheNPT.
Take into account that Babcock International is directly co-operating with BAE & Rolls Royce in the building of this fleet of submarines, which will be the sole delivery system for Trident’s replacement.
I brought this report to the attention of some of my own lecturers at The University of Manchester and they were outraged, yet not overly surprised due to the history of dodgy investments within the sector. University boards in this country need to get a grip and start acting within their own stated ethical codes. They may not be directly investing in these industries but they have a duty of care as employer to hundreds of thousands of employees to make it their business to be aware of such information, to inform their employees and to pressure USS to divest from such immoral enterprises and to bring an ethical consideration in terms on investment in to parallel importance with the monetary motivations. I applaud ICAN for commissioning this report and bringing this to the attention of the wider public.
By Jonathan Woodrow Martin
Full USS response:
USS Ltd is an active and responsible shareowner, an approach which USS’s trustees believe will protect and enhance the long-term value of the fund. USS is a multi-employer pension fund with more than 380 member institutions, governed under trust law to invest and pay pensions for currently c. 287,000 individuals. In this regard, it is unlike retail ethical or SRI funds which enable individuals to express their personal values in their investments or church or charity investments which may be able to reflect a particular mission, campaign or issue.
USS’ responsible investment (RI) policy must be consistent with our legal responsibility under trust law. This means treating the financial interests of our members as paramount and managing the fund consistent with proper diversification and prudence. The fund is obliged to invest in a wide spectrum of companies and because of its size (we are the second largest pension fund in the UK), this inevitably involves holdings in a diverse range of sectors, including engineering and support services companies such as Babcock International and Redhall Group.
The legal advice that the fund has received is that USS is not permitted to make investment decisions based purely on an ethical or moral stance. Therefore irrespective of how an individual may feel on a particular issue, the fund has to take a broader position and does not screen-out particular companies or sectors. A copy of the legal advice we have received is available on our website under the Responsible Investment section.
However, USS’s trustees believe that the fund can and should take ethical, environmental, governance, etc., issues into account in its investment-decision making where these issues are material to a company’s performance. We expect companies to pay particular regard to legal standards and encourage adherence to best practice norms on corporate responsibility and corporate governance. If USS considers that a company is not meeting appropriate standards, and that this is damaging the company’s reputation or in other ways putting at risk the value of our investment, we will use our influence as owners to encourage the company to improve its practices. The fund employs an in-house responsible investment function to implement the funds’ strategy in this area.