Recommendation on Divestment from Arms Manufacturing Companies (April 2012)

Notice: Content under review

With effect from 26 April 2021, the Socially Responsible Investment Review Committee (SRIRC) was replaced with the Ethical Investment Representations Review Subcommittee (see Gazette notice on 10 December 2020). As a result, the content on this page is to be reviewed and updated.


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This issue of investments in arms manufacturing companies was originally raised by students and, at the request of Council, was considered at the inaugural meeting of the Socially Responsible Investment Review Committee (SRIRC) on 26 May 2009. This committee continued its deliberations at its meetings in Michaelmas Term 2009 and Hilary Term 2010. Minutes of these meetings can be found on the SRIRC information page. These deliberations resulted in a Report to Council dated February 2010 which can be viewed at C1032 (PDF, 54kb)  (the Report).

At its meeting on 15 March 2010, Council considered the SRIRC Report. Council thanked the SRIRC for the careful thought it had applied and the effort it had put in. However, Council deferred a decision on the recommendation of the Report, agreeing that before it could take a decision on the recommendation of the SRIRC, it should be apprised fully of the implications of accepting the recommendation. Council therefore referred the report to the Investment Committee for comment, liaising with Oxford University Endowment Management Ltd (OUEM) as appropriate, focusing particularly on the financial ramifications and the practicalities of implementing the recommendation. In addition, agreeing that it would be desirable to have a consistency of approach as between its investment decisions, receipt of research funding and receipt of donations, Council also referred the report to the Research Committee for its views on the potential implications for the receipt of research funding, should the report's recommendation be accepted.

Council considered the matter further at its meeting on 21 June 2010. During this discussion it was emphasised that investment in such companies was actually very difficult to achieve as such a tiny minority of companies manufactured such weapons or munitions, and most were state-owned. Furthermore, it was very difficult to establish with certainty that an investment in such a company had been made because of the paucity of reliable information in this field. Noting the extent to which, as the charity trustees of the University for the purpose of charity law, Council could take policy decisions that might have a detrimental effect on the investment return of the charity, and coupling this with the robust advice of the Investment Committee that, for pooled vehicles, the implementation of such a policy would have considerable financial ramifications, Council was clear that in applying the policy, it would have to distinguish between direct investments and investments in pooled vehicles. It therefore agreed that it should pursue the implementation of the recommendation with respect to direct investments, subject to providing the necessary notification to external investors. Where there were pooled investment vehicles, it was agreed that it should implement a policy of monitoring investment in such companies by those vehicles. The difficulties of obtaining reliable information were acknowledged and OUEM was asked to use its best endeavours to obtain such information.

A related issue arose in discussions at later Council meetings. At its meeting on 14 November 2011, the question was asked whether the University’s existing policy prevented investment in companies whose activities in this respect were lawful according to the place of manufacture but would be illegal if manufacture took place in the UK. At the subsequent Council meeting on 5 December 2011, it was confirmed that, if the activity was illegal under the Cluster Munitions (Prohibitions) Act 2010 and the Landmines Act 1998, then the University’s policy would ban investment in that company, irrespective of where the company was based, or where the manufacture was taking place. So a company in the US that was manufacturing cluster bombs, for example, would be on the prohibited list, notwithstanding that the company, or its manufacturing facilities, were not based in the UK.

OUEM has put in place processes to seek to ensure that the Funds which it manages do not invest directly in companies whose activities are illegal under the Cluster Munitions (Prohibitions) Act 2010 and the Landmines Act 1998. These processes are detailed below.

First, a list of prohibited investments has been agreed by the Investment Committee. This list is derived from information provided by Ethical Investment Research Services Ltd (EIRIS); EIRIS updates its information quarterly and OUEM reviews the reports on a quarterly basis; where information from EIRIS is inconclusive or outdated OUEM speaks to the companies directly.

The second measure OUEM has put in place is to report on a quarterly basis to the Investment Committee that it has complied with the guidelines concerning the prohibited list; if any changes to the list were proposed, OUEM would seek the Committee's permission for those changes.

Finally, although the prohibition does not apply to pooled vehicles, OUEM reviews reports from the managers of these vehicles regularly. If OUEM found evidence of ownership of any of the companies on the prohibited investment list, it would raise this with the manager concerned. To date OUEM has had no such issues.

In addition, given the concerns raised about investment in Lockheed Martin, OUEM contacted Lockheed Martin directly to request information about its manufacturing activities. Lockheed Martin confirmed to OUEM that it does not manufacture cluster munitions or land mines. When pressed about media reports concerning the existence of a current contract in this area, the company stated that while it was still formally in existence, it was not active i.e. Lockheed Martin was not actually manufacturing and delivering under the contract. On the basis of this information, the Investment Committee is satisfied that Lockheed Martin's manufacturing activities would not be illegal under the Cluster Munitions (Prohibitions) Act 2010 or the Landmines Act 1998. The company has not, therefore, been added to the prohibited investment list. If any facts are discovered to the contrary, the position will of course be reviewed.

SRI Review Committee, April 2012