Booster puts pressure on index funds over weapons investments

Booster is one of the first New Zealand co-signatories to the recent global investor initiative, calling for action on continued investment in controversial weapons.

Tuesday, January 15th 2019, 7:21AM

David Beattie

The request to global index providers, including S&P Global, MSCI and FTSE Russell, is to remove companies involved in controversial weapons manufacture from the major index funds.

Index funds are an efficient and cost-effective way for investors to invest in a diverse range of stocks. Most investment managers use index funds to some extent. The continued inclusion of manufacturers of controversial weapons in the index funds makes it difficult to avoid them completely, particularly for everyday investors.

This initiative calls for index providers to remove these types of companies from the major index funds, as a way to provide certainty to investors that they are not passively investing in the manufacture of controversial weapons.

The open letter calls for global indices to exclude companies involved in the manufacture of cluster munitions, anti-personnel mines and chemical, biological and nuclear weapons from the main benchmarks. The initiative highlights a growing expectation that index providers need to reflect investor practices and expectations, making it easier for investors to actively avoid investing in companies that still manufacture controversial weapons.

“Booster has always taken a responsible approach to investing. Kiwi investors are increasingly wanting to know that their investments are not supporting harmful or controversial activities. Becoming a co-signatory to this global initiative is further confirmation of our commitment to responsible investing,” Booster Principal David Beattie said.

New Zealand has existing legislation in place that prohibits investment in cluster munition production. Many countries have banned the development, production, acquisition and stockpiling of such weapons, but few have legislation in place to address the investment or funding of companies that produce these weapons.

“This initiative is a way for the global investment community to use its collective voice to persuade the major index providers to change their approach to one that better reflects the beliefs of everyday investors - as well as international conventions,” said Beattie.

Since the initiative’s launch, over 115 signatories across the world, controlling USD $6.167tn in assets, have signed the open letter (as at 7 Jan 2019).

The Swiss initiative, led by Pictet and Swiss Sustainable Finance, was launched in August 2018. Initially addressed to the Swiss investment community, the initiative received the backing of more than 60 asset owners.

Following on from the initial success, the initiative was opened to global asset managers in December 2018. Since then, more than 55 asset managers have also joined the campaign, including Booster.

The campaign’s call for industry signatories is open until 31 January 2019.

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