1.3 Divesting from nuclear weapons makes financial sense

Entry into force of the Treaty on the Prohibition of Nuclear Weapons (TPNW) (see section 1.2) has increased the regulatory and reputational risks facing companies that continue to be involved in nuclear weapons production.

The TPNW has increased the stigma associated with nuclear weapons and it is anticipated that, as more and more states ratify the treaty, the demand for nuclear weapons will eventually decrease.[1] In addition, companies that continue to undertake work on banned weapons may experience reputational damage which will affect their profitability and share value. The reputation of their investors will be affected too.

This makes nuclear weapons producers a risky long-term investment choice. It is not surprising, therefore, that a growing number of financial institutions are choosing to end their ties with the nuclear weapons industry.[2]

Then there is the catastrophic risk that nuclear weapons pose to the local and global economy. The detonation of just one nuclear weapon in a major city like Glasgow would destroy infrastructure and businesses across a wide area.[3] A nuclear war would make economic activity, and potentially human existence, impossible (see section 1.1 above).

Ultimately, there is no point in investing in the nuclear weapons industry in anticipation of future returns if our future is destroyed by nuclear war.

The best way for financial institutions to guard against these risks is to divest from the companies that make nuclear weapons. This may actually result in financial gains. A recent report found that indexes of stocks that exclude nuclear weapons tend to track the overall economy and sometimes produce higher returns.[4] Dutch pension fund ABP’s exclusion of nuclear weapons producers led to an improved risk-return profile for the fund.[5]


[1] The demand for landmines and cluster munitions fell following entry into force of the Mine Ban Treaty (MBT) in 1999 and the Convention on Cluster Munitions (CCM) in 2010 and production has nearly ceased: https://www.icanw.org/entry_into_force_briefing_paper.

[2] 77 financial institutions had policies restricting investment in nuclear weapons in 2019, up from 54 in 2016 (the year before the TPNW was adopted): M Beenes, Beyond the Bomb: Global Exclusion of Nuclear Weapons Producers (PAX, 2019): https://www.paxforpeace.nl/publications/all-publications/beyond-the-bomb.

[3] https://nukedivestmentscotland.org/what-would-happen-if-a-nuclear-weapon-detonated-in-glasgow/.

[4] M Bolton, Nuclear Weapons are a Risky Business (International Disarmament Institute Discussion Paper, December 2019): https://cpb-us-w2.wpmucdn.com/blogs.pace.edu/dist/0/195/files/2020/01/Nuclear-Weapons-are-a-Risky-Business-011620.pdf.

[5] https://www.dontbankonthebomb.com/how-a-dutch-pension-funds-exclusion-of-nuclear-weapon-producers-was-a-smart-business-choice/.