Swedish clothing giant Hennes & Mauritz makes and sells affordable fashion produced in low-wage countries. The company often faces criticism on labour standards and on its impact on the environment. So why then does Triodos invest in H&M?
Pressure on controversial arms producers can create change
12-12-2011 | Can investors change the behaviour of controversial arms companies through the instrument of exclusion? Yes! The broad exclusion of arms-makers, and especially the production of controversial arms, has caused changes in that sector.
Triodos has a zero tolerance for arms producers and traders. Even if only a small part of a company’s activities relates to arms or tailor-made arms components, we will not invest in it. Triodos takes it a step further by also excluding banks that provide loans to or invest in companies that are involved in controversial arms such as anti-personnel mines and cluster weapons. Triodos raises awareness in the investment community on our position and we are glad to see that there is a growth visible in the use of these types of exclusion criteria used by the investment community.
Ban on controversial weapons
The United Nations has adopted several legally binding conventions that ban specific weapons: among others, the Ottawa Convention (1999), which bans anti-personnel mines; and the Oslo Convention (2010), which bans cluster weapons. The legal scope extends to countries that have ratified the conventions, and many countries have done so. Unfortunately however there are several major countries, such as the US, Russia, China and Israel, which have so far refused to sign. But international pressure is mounting. Countries like Belgium, Ireland and New Zealand have even gone a step further by adopting legislation that forbids investment in producers of anti-personnel mines and cluster weapons. Other countries, for example The Netherlands, are also preparing comparable laws.
Triodos challenges other banks
One important aspect of our screening of banks for potential inclusion in our Sustainable Investment Universe is that of banks’ investment in controversial arms producers. Before a bank can be approved, Triodos requires that it has no investments in, or relations with, producers of anti-personnel mines and cluster weapons. As a result of our on-going dialogue with several banks and helped by the growing international awareness for the issue, a number of them have reviewed, or are starting to review policies, and are developing or refining blacklists. In a few cases we have even seen immediate sales of disputed investments as a result of our contact with the bank.
Arms producers are feeling it
The scale of investors’ restrictions seems to be limiting certain arms producers to attract (new) investors, which in turn can limit them in their activities. Recently, an arms producer approached Triodos because its occurrence on the Triodos blacklist of controversial arms producers was causing it problems with a series of investors that make use of our list. A growing number of arms producers issue statements that they are not involved in specified controversial arms. Some of them even explicitly state that they have stopped producing such arms, for example German company Rheinmetall, and Saab from Sweden. Although US arms producers are not bound by their government, they’re also feeling more and more uneasy because of investor criticism. Some major US arms producers, such as L3-Communications and General Dynamics, have also issued comparable statements.
Positive impact
On the one hand we see that banks are developing black lists of companies involved in controversial weapons and on the other hand we see that companies that used to be involved in the production of controversial weapons are suffering from these black lists and are stepping away from these activities. These examples show that exclusion criteria used in determining the sustainable investment can bring about lasting positive change.
Note: The issues explored in this article are relevant for sustainable investments on the stock market. Triodos Bank believes that our socially responsible investments are a powerful means of promoting our values and working for greater sustainability, while enabling us to offer a complete range of attractive investment options to customers who choose to invest on the stock market.