The parent companies of New Zealand's major banks continue to finance companies involved in nuclear weapons. Photo/Supplied.
The parent companies of three of New Zealand's biggest banks continue to lend money to the nuclear weapons industry, despite local policies which ban investment in the sector though KiwiSaver.
Research by the International Campaign to Abolish Nuclear Weapons found 325 institutions made US$748 billion available to the top 18 companies involved in nuclear weapons between January 2017 and January 2019.
Those institutions include Australian banks Westpac, ANZ and Commonwealth Bank of Australia, which owns New Zealand's ASB bank. Collectively, the three invested or loaned US$2.89b ($4.37b) to companies involved in nuclear weapons.
Of the three, Westpac had the most exposure to the sector - US$1.49b in total. Its largest loan was US$686m, to US conglomerate Honeywell.
Honeywell International manages and operates numerous nuclear weapons production, design and testing facilities, as well as manufacturing components for warheads and missiles.
Westpac's responsible investment policy for BT Asset Management, which manages its KiwiSaver scheme, says it excludes assets including "companies involved in the manufacture of nuclear weapons, cluster munitions and anti-personnel mines."
But its Australian parent Westpac Banking Corporation remains open to financing nuclear weapons makers.
In its policy on investment in the defence industry, the bank states: "Westpac may extend financial services to entities in the defence sector.
"Westpac will not provide financial services to entities involved in nuclear weapons, except where they only contribute to government-controlled nuclear weapons programs in Nato countries that are authorised to possess nuclear weapons under the Nuclear Non-Proliferation Treaty."
Those countries include the United States, the United Kingdom and France.
Asked why it appeared to have a double standard, a Westpac New Zealand spokesman said: "Westpac NZ is a different entity to our Australian parent and operates independently with a local board of directors under different laws and regulations."
The bank's Australian spokesman said Westpac did not comment on matters relating to specific companies or projects.
"... all activity within the defence sector must comply with our 'Financing the Defence Sector Position Statement' which outlines our approach to financing any organisation involved in the manufacture of weapons and other defence equipment."
He said Westpac had a strong commitment to responsible banking and it took that very seriously.
ANZ Group, which owns New Zealand's largest bank, ANZ New Zealand, is involved in financing companies involved in nuclear weapons to the tune of US$1.31b.
Its largest involvement is with Lockheed Martin, where its loans total US$258m.
Lockheed Martin has numerous defence businesses in the United States and along with Serco, it manages the UK Atomic Weapons Establishment.
An ANZ New Zealand spokeswoman said it did not invest its clients' savings in nuclear weapons companies.
"This is true across all of our products."
An ANZ Group Australian spokesman said it applied social and environmental standards to all institutional and corporate banking customers and their activities, including sensitive sectors such as military equipment.
Its military equipment policy states: "... we do - and will continue to - provide financial services to defence sector customers, including the provision of general corporate facilities.
"We recognise that military equipment has a role to play in ensuring that governments are
able to defend their citizens and territories."
The bank acknowledged that some defence sector customers had been the subject of claims about involvement in the manufacture of controversial weapons such as cluster
munitions.
"Our policy states that we do not wish to be involved with customers that are involved in
the sale or manufacturing of controversial weapons as defined in our policy, or the
production of components designed for specific use in controversial weapons."
Those controversial weapons include cluster munitions and anti-personnel mines, but don't mention nuclear weapons.
Of the three banks, CBA, which owns ASB, had the smallest involvement at US$188m. Most of that - US$115m - was loaned to aeroplane maker Airbus.
Airbus, through its German-headquartered division Airbus Defence and Space, is also involved in the ongoing maintenance and development of several nuclear armed missiles for the French nuclear arsenal through ArianeGroup, a joint venture with the French company Safran.
ASB's investment policy is that it excludes companies "if international conventions oppose or New Zealand laws prohibit investment in an industry, such as manufacturers of cluster bombs, land mines or nuclear weapons."
Its New Zealand spokeswoman would not comment on the conflict between that policy and its parent's lending.
"CBA is best placed to answer any questions regarding its investment approach.
It would be inappropriate for us to comment on CBA's behalf as ASB's investment committee is independent of CBA."
A CBA spokeswoman said it had a compulsory environmental, social and governance (ESG) risk assessment process for all institutional bank loans, and for large loans in other business units.
But its defence policy is similar to Westpac's in that it recognises the right of countries to defend themselves and protect their national security and only bans providing financial services to companies involved in nuclear weapons which are "outside Nato country government-controlled programs that are authorised under the Nuclear Non-Proliferation Treaty."
However the bank said its investment arm Colonial First State was on track to get out of its investments in controversial weapons makers, including nuclear weapons, by the end of the year, which would bring it into line with ASB.
Paul Brownsey, chief investment officer of Pathfinder Asset Management, a responsible investment specialist which also runs the CareSaver responsible investment KiwiSaver scheme, said the nuclear investments showed the weakness of the banks' approach of applying different ethical standards to different parts of the business.
"ANZ has excluded companies that invest in firms involved in the testing or manufacture of nuclear weapons from its Kiwisaver scheme, while Westpac only excludes those involved in the manufacture of nuclear weapons.
"Yet both banks are content to lend money or invest in those same companies that they exclude from KiwiSaver."
Brownsey said he believed the selective behaviour was not being adequately explained to investors.
"In our view financial institutions face a very simple ethical choice: you either choose to do bad stuff or you choose to not do bad stuff, and you explain both very clearly to investors. There is no in-between."
He said most KiwiSaver investors would assume their savings were not used to fund companies involved in nuclear weapons.
"Yet any KiwiSaver scheme that owns either ANZ or Westpac shares is doing just that – supporting the nuclear weapons industry."
Barry Coates, who runs Mindful Money, a website which allows people to screen out industries they do not want to invest in through KiwiSaver, said its research showed 84 per cent of Kiwis did not want their money invested in controversial weapons and about the same number objected to weapons in general.
"I think if people found out where their bank was lending money to, they would be rightly concerned."
Banks partly fund their loans from people's deposits. Coates said while there wasn't a direct connection between depositors and borrowers, there was a pretty close association.
He said there was a gap in the market for a New Zealand bank to stick its hand up and be ethical with its lending.
Coates said a lot of KiwiSaver funds would own shares in Westpac, ANZ and CBA, as many invested across the Tasman.
Its weapons screening does not exclude funds which invest in the banks.
The New Zealand Superannuation Fund excludes all companies involved in the manufacture and testing of nuclear explosive devices as well as some companies involved in the operation or management of military bases where nuclear explosive devices are deployed, maintained, refitted, stored or developed.
But it does not exclude companies that provide finance to the sector.
A fund spokeswoman said its policy was to focus on the companies with primary responsibility for the excluded activity.
"Excluding companies with less direct involvement, such as bank financing, would increase the number of excluded companies to an unworkable extent.
"We have the same approach across all the industry categories and companies we exclude from the fund."
Reserve Bank says leaving banks to their own devices hasn't worked.