Talking to companies about weapons

Since 2013, Dutch law prohibits financial institutions from doing business with companies which produce or trade in cluster munitions. ABN AMRO has gone one step further: the bank has no business dealings with companies which are involved in other “controversial” weapons, such as biological or chemical, but not before trying to establish a dialogue with these companies.

Defence

Critics will say that all weapons are, by their very nature, controversial. Nonetheless, ABN AMRO deliberately makes a clear distinction, explains Strategic Risk Analyst Myrthe Haase. “As a bank, we respect the right of sovereign nations to defend themselves, and the fact is that weapons are part and parcel of any defence programme,” she says. “That’s why we don’t categorically exclude all weapons. However, we do carry out rigorous due diligence in each and every case, screening any company that comes to us in need of financial services – be it payments or loans – for defence links. We want to make absolutely sure all our clients meet our defence standards.”

Any company with defence links is scrutinised, and special attention is paid to the end use of its products. Although these might be weapons, they could just as easily be bulletproof vests or components like computer chips which have a military application. Are these products destined for the Dutch Ministry of Defence or for the army of a dictatorial regime? “That makes all the difference,” Myrthe says. Depending on the level of sensitivity, a decision is made as to whether a second or third pair of eyes at the bank should review a given case. If needed, the bank asks the client to take additional measures. If the client is unwilling to take the necessary steps, the ultimate consequence can be that ABN AMRO terminates the relationship.

Controversial Weapons List

The bank’s Controversial Weapons List reflects the bank’s standards and enumerates those weapons ABN AMRO considers to be controversial – weapons that have a ‘disproportionate and indiscriminate impact on civilians’. These include nuclear weapons, anti-personnel mines, biological weapons, chemical weapons, cluster munitions and white phosphorus munitions.

Updated annually, the Controversial Weapons List also gives the names of companies involved in the production or distribution of such weapons, companies that have been excluded from the bank’s services and investments by its clients. Twenty-seven listed companies and forty-one private companies from all over the world currently feature on the list. ABN AMRO publishes the list of publicly held companies on its website.

Establishing a dialogue

Yuri Herder, Social Sustainability Advisor at ABN AMRO, explains how the list is compiled. “The independent research agency Sustainalytics investigates which companies are active in the production, trade and sale of controversial weapons. A company identified by Sustainalytics and meeting our criteria is put on our watch list. ABN AMRO then contacts the company by letter requesting an explanation. If the company fails to provide a satisfactory explanation, we notify them that they are to be placed on our Controversial Weapons List and outline the consequences – namely, that our clients will no longer be able to invest in the company and that ABN AMRO will not do business of any kind with it.”

After receiving this letter, companies are regularly interested in establishing a dialogue. Yuri says, “In these cases, companies are understanding and constructive: ‘You’re right – this type of activity is no longer fitting for the times we live in.’ Sometimes they’re already in the process of phasing out these activities, and the dialogue serves to speed up that process.”

Yuri continues, “Since these companies aren’t our clients, the bank’s negotiating position is weaker, but that’s not to say it has no influence at all. Most companies don’t particularly like being on an exclusion list maintained by a Western bank. Obviously, it’s important that we wield what influence we have for the good.”

Awareness

For ABN AMRO, it’s not just about the manufacturers of weapons – it’s also about the companies supplying the arms industry. “Frankly, as a Dutch bank, that’s where we can have leverage,” Myrthe says. “The Netherlands hasn’t got a large arms industry of its own, but it is home to many businesses in manufacturing and the service sector which may supply arms manufacturers. We routinely raise this subject in our conversations with clients. How do they screen their buyers? Have they thought about the ethical and sustainability risks? What does the end user do with the parts they sell? Asking these questions is important because we expect transparency and a solid track record from our clients.”

The bank continues to discuss the ethical risks inherent in the defence industry not only with its clients, but also with civil society organisations. Myrthe concludes, “Ensuring our clients are moving in the right direction means we have to continue to tighten our policy – in the area of autonomous weapons and privacy, for example. A policy review is already in the pipeline.”