Deadly Investments - Swedish Banks Investments In Controversial Arms Trade

Thursday, September 1, 2016

Sweden - This report assesses the financial links between Sweden’s seven largest banks (Danske Bank, Handelsbanken, Länsförsäkringar, Nordea, SEB, Skandia and Swedbank), and companies involved in controversial arms trade. The objective of the report is to assess whether the banks invest in companies that are actively involved in controversial arms trade, to what extent the banks have policies in place that provide guidance in this area, and whether they comply with their own policies.

The overall aim is to contribute to the development of policies and practices on the part of banks which ensure a responsible behaviour in this regard. The report also aims to contribute to increased transparency and possibility of bank customers to influence the way their savings are utilized. The research is limited to the investments by the banks’ mutual funds.

The methodology is based on a study by the Dutch Fair Finance Guide and the research consultancy firm Profundo, published in 2015. The report assesses arms trade during the past five years to 38 countries to which delivery of arms can be considered particularly controversial. The selection of countries is based on a number of international indices from well-renowned international institutions. The selection should be seen as a sample, rather than a comprehensive list.

Controversial arms trade in this report refers to the supply of (important parts of ) weapons and weapon systems, military transport systems and other military goods to countries:

• placed under UN or EU arms embargo;

• classified as “unfree” i.e. that are authoritarian regimes and to regimes that violate human rights or where there is an overriding risk that the arms will be used for serious violations of international human rights and/or humanitarian law;

• involved in armed conflict;

• with high corruption risks in defence establishments;

• considered to be fragile states;

• categorized as low human development countries that spend a disproportionate share of their government budget on military equipment.

The report analyses the banks’ investments in 15 companies involved in the export of arms to the selected 38 countries. Finally the report analyses to what extent the investments align with the banks’ own policies.


The report concludes that all of Sweden’s seven largest banks invest in companies involved in controversial arms trade. For example, all seven banks have made investments linked to controversial arms exports to Saudi Arabia – a case seen as particularly controversial due to the domestic human rights situation, and more recently due to the country’s military engagement in Yemen.

The total value of the banks’ investments in the companies involved in controversial arms trade amounts to a little less than 4.7 billion SEK. None of the investments align with relevant international principles and the indices of well-renowned international institutions underpinning these principles, according to our analysis. The investments were mostly found in passively managed funds but also in actively managed funds, and sometimes in ethical funds.

Six out of seven banks do not take a clear stand against controversial arms trade in their policies. Nordea is the only bank that lacks a policy in this area. The bank with the most comprehensive policy is SEB.

Four banks’ investments (Danske Bank, Länsförsäkringar, SEB and Skandia,) are considered not to follow their own policies according to our analysis. Still, all seven banks claim that their investments are in line with their own policies or the procedures to deal with deviances. Furthermore, a majority of the banks consider their investments to correspond with the expectations of their clients. None of the banks made a commitment to strengthen their policy on controversial arms trade, besides the regular updates of their policies.


The results clearly demonstrate that controversial arms trade is an area where the banks have not done enough to ensure their investments are responsible and in line with relevant international principles. Based on the results of our analysis we make the following general recommendations to the banks:

1. Adopt and publish a policy against controversial arms trade that will provide guidance for all of the bank’s financial activities.

The policy should be comprehensive and apply groupwide to all financial services, credits and investments, including investments managed by third party and index funds. The policy should be publicly available on the bank’s webpage. The policy should ban investments in, and financing of, companies that deliver weapons or military goods to destinations considered as controversial, based on the Fair Finance Guide responsible investment principles listed in this report.

2. Develop a method to identify to which countries arms trade would violate the principles in the policy, and create tools that can be used for the screening of companies.

It is not sufficient to rely on the assessments of export controlling authorities to judge whether arms trade is in line with the banks’ policies or not. The banks should make their own assessments to identify to which countries arms trade can be considered controversial, based on a comprehensive policy. The banks should screen all companies involved in arms trade before investment decisions are taken. The independent indices of the international institutions referenced in this case study can be used in the screening to assess the risk of company involvement in controversial arms trade. The screening will help to ensure decisions are in line with the banks’ policies.

3. Publish the list of companies that have been blacklisted by the bank due to their involvement in controversial arms trade

Transparency on company exclusion provides clarity about the implementation of the bank’s policy and enables clients to make well-informed decisions about their bank. It also puts pressure on other investors to act.

In the case where a bank has chosen engagement and active ownership to try to influence a company, the bank should provide a public explanation of why this strategy is considered to be successful and provide regular updates on the process. There should be a clear and limited time frame for bringing about changes that can be seen as improvements in line with the bank’s policies.

Read the full report here

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