SSF Calls for Mainstreaming Exclusions

    Stockholm (NordSIP) – The Swiss Sustainable Finance association (SSF) has sent an open letter to index providers calling on them to exclude weapon manufacturers from their mainstream indices.

    Founded in 2014, SSF currently unites 113 members and network partners from financial service providers, investors, universities and business schools, public sector entities and other interested organisations. The SSF’s goal is to strengthen the position of Switzerland in the global marketplace for sustainable finance by informing, educating and catalysing growth.

    “We strongly believe that – in line with international conventions, investor practices and public opinion – the default position should be to exclude controversial weapons from active and passive investments,” argues the open letter from SFF.

    The relevant weapons targetted for exclusion by SFF include cluster munitions, anti-personnel mines, biological and chemical weapons, as well as nuclear weapons are produced for countries that have not signed the Treaty on Non-Proliferation of Nuclear Weapons.

    The letter, which was coordinated and sent by SFF at the end of January, represented the demands of 141 signatories representing USD 6.8 trillion in AUM. By the end of March, another 15 signatures added US$ 2 trillion to the weight of the letter’s demands. Other signatories can add their name to the letter by following this link.

    “For institutional and individual investors, excluding companies involved in controversial weapons has become standard practice or expectation. However, mainstream indices continue to include such companies. This is causing a problem for active and passive investors who may be subject to extra tracking error and/or additional costs, or unable to invest in controversial weapons-free solutions,” says the press release from SFF.

    The call turns the present approach of the index industry on its head. Instead of creating a specialised fund that excludes those companies, index providers are called upon to exclude them from their mainstream funds. The default approach to index building would be for indices to be free of controversial weapons and for access to this sort of companies to require direct investment or investment in a specialised fund.

    “The financial industry is in a position to make a huge difference to responsible investing, and that should include making funding less easily available for such [weapons] companies,” says the letter. “Anyone who does still wish to invest in controversial weapons would still be free to use a specialist index, or invest directly.”

    SFF has engaged with index providers since 4 February 2019, sharing with them background on the initiative, a list of current co-signatories and an invitation to enter into discussions.

    Picture © Shutterstock

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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