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Ethical Investment

The LSE SU pursues an official policy of ethical investment, having divested in companies involved in the arms trade and those companies who operate in Sudan in cooperation with the government responsible for inflaming ethnic tensions in the Darfur conflict. As with other campaigns, the SU has taken the struggle for justice to the school.

 

In 2007, as part of the high-profile Darfur Divestment Campaign, the LSE passed a policy to follow the SU in divesting from companies involved with the Khartoum government in Sudan who have caused the current death and destruction plaguing Darfur. The school has announced that, following student pressure, the adoption of a Socially Responsible Investment (SRI) Policy will be a priority this year.

 

Divestment in Arms Companies

 

Why should students care about the arms trade? Essentially, the arms trade is a hugely destructive influence throughout the world, spreading misery and suffering in the pursuit of profit; universities, colleges and SUs are sometimes linked through investment to these arms companies, which is morally unacceptable; and students should campaign to make more and more peolpe see that the waste of public money on the arms trade is an outrage. The money should instead be used on education, public services and more pacific pursuits.

The Effects of the Arms Trade

The arms trade inflames conflicts and wastes public and development funds, while not improving British security or alliances and not being vital to the economy.

Inflaming Conflicts

UK arms have inflamed a number of bloody and destructive conflicts, including the Iraq-Iran War, fighting between Israel and Lebanon, conflict in the Israeli-Palestinian struggle in the Occupied Territories, the oppressive actions of Indonesia against separatists in East Timor, Aceh and West Papua, and the Democratic Republic of Congo Civil War (the bloodiest conflict since World War Two). Despite the Foreign Office’s 2005 Human Rights Report identifying 20 major countries of concern for human rights abuses, the government still approved arms export licences to 13 of these, including Saudi Arabia and Indonesia.

 

The cruel irony of the arms trade is that often both sides of the conflict are armed, as are enemies of the UK, as exemplified by the use of British arms by the Argentinians against British soldiers in the Falklands/Malvinas War.

Wasting Public and Developmental Funds

Spending on arms wastes money that could otherwise be used for aid programs, with South Africa, despite its HIV/AIDS epidemic, being a major UK arms recipient, and Malawi and Nigeria regular purchasers despite their low UN HDI human development ranking.

 

Most alarmingly for students, arms companies are subsidised by £890 million public money annually – just short of the £950m raised each year by top-up fees (according to the Institute of Fiscal Studies). Given that many students at LSE come from overseas and pay huge fees (and may in fact come from the very countries whose conflicts are inflamed by Britist arms), it seems entirely reasonable that the UK government and its academic institutions should value education and pacific forms of study over war.

 

The Arms Trade Does Not Enhance British Security or Alliances

While many argue that arms exports support allies, over one hundred countries receive UK arms, many of which are not allies. At the same time, while many argue that arms exports promote international security, often both sides of the same conflict are armed and, in the Falklands/Malvinas War, Argentina used British arms against the British. This is an irony lost on those who suffered in this meaningless, yet relatively bloody, conflict.

The Arms Trade Is Not Vital to the Economy

A great deal of people argue that arms exports are vital to the economy. In reality, however, arms exports account for only 1.8% of total exports and employ 0.2% of the workforce.

 

This is not to say that banning the arms trade would lose people jobs (which would be a serious qualification to the policy). The fact is that workers in the arms trade have transferable skills that could be used in more pacific enterprises. The government’s Defence Diversification Agency (DDA) could assist with the reorientation of the economy from military to civil production. Unfortuntaely, the DDA is being closed down this year.

The DDA would minimise the job losses that could be caused by success against the arms trade, and would serve to give engineering students (and others) more options on graduation, rather than the treadmill from university into the arms industry.

 

The Arms Companies

Arms companies may deal in other sectors but gain massive profit from the sell of death and destruction. The arms sector is notoriously corrupt and get afloat by intertwinning ties with government and militartistic approaches to foreign affairs.

Arms Companies Deal in More than Just Arms – But Still Receive Massive Revenues from Arms Sales to Abusive Regimes

It is certainly true that arms companies deal in more than just arms. Even so, BAE Systems’ military sales account for 80% of total sales (recipients include the USA, Saudi Arabia and Israel), Rolls Royce receive a total military revenue of $3bn, VT Group’s military sales account for 75% of total sales, Cobham’s military sales account for 50% of total sales and GKN Aerospace’s military sales account for 70% of total sales.

The Arms Trade Is a Corrupt Business

Arms companies have famously and repeatedly been implicated for corruption, as the Serious Fraud Office is currently investigating allegations into BAE Systems (which the company denies) that suggest that the company operated a £60m slush fund for Saudi Arabian officials involved in a previous UK-Saudi arms deal, leading to the arrest of a former BAE executive; the National Audit Office (NAO) investigated the contracts and has so far not published its conclusions, the only NAO report ever to be withheld; and press coverage also alleged that the company paid £1m to Chilean dictator Augusto Pinochet.

The Arms Trade Is Propelled by Structural Factors, Not Genuine Security Needs

The arms trade is perpetuated because arms companies, the government and the armed forces are connected through formal arrangements (such as Defence Export Services Organisation and advisory quangos) and the ‘revolving door’ between these sectors, and a militaristic approach to security continues to support the arms trade.

Why Universities and Students Should Campaign against the Arms Trade

The arms trade is inconsistent with the purpose of academic institutions and SUs, and adversely afffects students as members of world society.

Investment in Arms Exports Are Not Consistent with Academic Institutions' Programs and Research Priorities

Students’ Unions, universities and colleges particularly should divest in and not accept donations from those dealing in the arms trade, when many universities have departments and research projects that deal in human rights, public health and other issues that are diametrically opposed to the effects of the arms trade.

The Arms Trade Affects Students

Many of the 300,000 international students at UK universities come from countries experiencing the effects of conflicts sustained by UK arms sales. It could be argued that we are all victims of this policy in numerous ways, through:

a) The fact that the money invested in the arms trade could be spent on education, including Higher education, as well as health and public services;
b) The direct effects of the arms trade, including death and injury that affect and inflame conflicts across the world and reduce human security;
c) The 'indirect' effects of the arms trade, including increasing refugees, environmental damage, food disruption, disease and more.

Universities and the Arms Trade

Out of 183 colleges and universities contacted by the Campaign against the Arms Trade (CAAT) last year, 67 confirmed, in response to Freedom of Information Act requests, that they hold investments in at least one of BAE Systems, VT Group, Rolls Royce, Smiths Group, Cobham or GKN, six leading arms companies. Although 75 universities replied to CAAT indicating that they owned no shares in any of the six companies, only a very small number of these confirmed that they have an ethical investment policy that excludes arms companies. The policy of the remaining 41 universities is still unclear, as some have not replied to requests.

The picture is somewhat more complicated than this. Some universities and colleges may hold shares indirectly as part of a managed fund or several managed funds, thus making it difficult to ascertain whether they are investing in arms companies. Some institutions, such as LSE, may receive funding from more companies than the six listed companies: in a response to an FOI request, LSE admitted that academics had received funding for research projects to the sum of £125,295 from several of 13 companies, namely BAE Systems, EADS, GKN, Lockheed Martin, Thales Groups, Boeing, Cobham, Finmeccanica/Augusta Westland, Qinetiq, Smith Group, Rolls Royce, VT Group and DSTL.

The top 10 university/college investors in arms are the Universities Superannuation Scheme (24,785,681 shares), Cambridge (1,608,129 shares), Oxford (1,357,123 shares), Swansea (1,348,710 shares), Liverpool (1,106,803 shares), London (763,527 shares), Exeter (370,715 shares), Manchester (359,000 shares), Leeds (293, 581 shares) and York (189,700 shares).

 

Many univerisities claim that funds from arms companies’ “research collaborations provide substantial funding for university departments”. However, numerous companies and institutions have managed to form ethical investment portfolios through looking for alternatives; the Church of England has an ethical investment portfolio that is one of the most high-performing in the country. Furthermore, the LSE specifically has no scientific research facilities for which arms company funding would seem essentially, and operates at one of the healthiest surpluses for a university in Europe.

What Students Can Do

 

The LSESU has passed policy to ensure that it does not invest in or accept donations from 13 companies that deal in arms, namely BAE Systems, EADS, GKN, Lockheed Martin, Thales Groups, Boeing, Cobham, Finmeccanica/Augusta Westland, Qinetiq, Smiths Group, Rolls Royce, VT Group and DSTL.

Students and SUs should lobby universities and colleges across the country to no longer invest in or accept donations from the named 13 companies. At the same time, students, SUs and the National Union of Students (NUS) should try to stop arms companies from being involved in careers fairs at British universities and colleges.

Ethical issues are close to many students' hearts and this can be shown through the thriving religious societies and active Amnesty International and Stop the War groups that exist on campus.

Many LSE students keep a close eye on current affairs and on numerous occasions have taken a stance on an ethical issue from passing motions at the Union General Meeting condeming, writing to, or boycotting those responsible for unethical actions to direct protest.

When EU Trade Minister Peter Mandelson visited and spoke at the School in 2005, LSE students organised a lecture detailing the EU's failings when it came to its Free Trade policy followed by a loud and visible demonstration close to Mr Mandelson.

In 2004 LSE Director Howard Davies was forced to back down and agree not to take up a directorship with TotalFinaElf, an oil company following a campaign by students concerned about the company's involvement in Burma. Before that, he was criticised by some LSE students for his previous involvement in a company called GKN, which some alleged sold weapons to dubious Governments.

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