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Wall Street ignores own rules while investing in arms bound for Israel

Wall Street ignores own rules while investing in arms bound for Israel

Transparency around the weapons industry could reveal some uncomfortable truths

Reporting | Military Industrial Complex

During RTX’s May 2 annual meeting, the company board and its financiers voted on a shareholder resolution proposing a report that would detail the human rights impact of the defense conglomerate.

In a recorded message, Sister Ann Scholz of the School Sisters of Notre Dame Cooperative fund urged shareholders to vote in favor of the proposal. “The intent is to help RTX ensure that its business practices are aligned with its human rights commitments and obligations as articulated in the U.N. Guiding Principles on Business and Human Rights,” said Sholz.

The resolution, which would be non-binding if adopted, only received 5.41% of votes, according to preliminary results. A similar proposal at Lockheed Martin failed.

Transparency around the defense industry could reveal uncomfortable truths for Wall Street. Many of the investors in the defense industry claim to adhere to internationally- agreed-upon frameworks such as the Universal Declaration of Human Rights and the U.N. Guiding Principles, which states that businesses should “avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved.”

For example, State Street is the largest investor in Lockheed Martin with over $16 billion worth of shares. According to its human rights policy, the company “supports fundamental principles of human rights, such as those adopted in the United Nations Universal Declaration of Human Rights.” State Street says its policies are “designed to prevent the illegal use of our products and services, including those that may result in human rights violations.”

Capital Group, which holds at least $13 billion in shares of RTX through different divisions, also endorses the U.N. Declaration of Human Rights and claims to have a “higher level of scrutiny” for businesses that violate the U.N. Global Impact and OECD Guidelines. “We believe that it is important for our portfolio holdings to uphold these fundamental standards in their own operations and throughout their supply chains to maintain their license to operate,” its policy states.

However, the defense companies that these financiers invest in have helped enable Israel’s campaign in Gaza, which the International Court of Justice has suggested could be a genocide. RTX supplies the Israeli military with air-to-surface missiles and cluster bombs, and manufactures engines for the F-15 and F-16 fighter jets that have been used to bomb Gaza. Lockheed Martin provides Israel with hellfire missiles and F-16 and F-35 fighter jets used to bomb Gaza. Missiles manufactured by Lockheed Martin were confirmed to have been used to strike journalists near Shifa Hospital in Gaza City on November 9 of last year. At Lockheed Martin’s annual meeting, also held on May 2nd, CEO Jaimes Taiclet said that the company is planning to deliver 20 F-16s and at least 75 F-35s this year.

Human Rights Watch and Oxfam have documented that “Israeli authorities have carried out indiscriminate and disproportionate attacks in violation of international humanitarian law following the Hamas-led October 7 attacks in Israel,” including collective punishments and depriving civilians of basic necessities. All of this is public knowledge, yet companies like State Street and Capital Group continue to invest.

"What we do know is that banks' human rights statements are misaligned with their actions. Investors don't have clear evidence that they're actually being implemented,” added Jilianne Lyon, who leads shareholder advocacy campaigns at Investor Advocates for Social Justice and worked on the shareholder resolution proposal at RTX.

Shareholders have significant leverage to change company behavior through asset allocation, voting, engagement, and divesting, yet they rarely exercise this influence. Felix Nagrawala, Senior Research Manager at ShareAction, told Responsible Statecraft that financiers often “make high-level public promises to follow international law, only to invest in weapons companies and block shareholder resolutions seeking to mandate reports from those companies on how weapons are used and their human rights impact.”

Indeed, during RTX’s earnings call on April 23, no investors asked about potential human rights violations or how these weapons are being used, even though the State Department published its country report on Israel just a day earlier that detailed “arbitrary or unlawful killings” by government agents.

Instead, investors wanted to talk about the $90 billion aid package to Ukraine, Israel, and Taiwan. “Could you speak a little bit to the supplemental that got through the House and how that plays out for your defense business. What goodies are in there for you guys?” asked Ron Epstein, an analyst from Bank of America.

“Think GEM-T, NASAMS, Patriot, AMRAAM, AIM9X, Israel, we kind of handicapped that as about 30% addressable, stockpile replenishment, Iron Dome, David's Sling procurements,” said Chris Calio, who became RTX’s new CEO at the shareholder meeting. “We think our product portfolio is pretty well positioned to address the needs in each of those theaters,” Calio continued. Many of these weapons have been used in Israel’s offensive in Gaza.

Bank of America holds over $1.7 billion worth of shares in RTX and endorses the United Nations Declaration of Human Rights, the International Labor Organization’s Fundamental Conventions, and the U.N. Guiding Principles. According to their human rights policy, the bank seeks to mitigate adverse human rights impacts “directly linked to us through strong client selection procedures which are core to our responsible growth strategy.”

William Haldin, a spokesperson for Bank of America, told Responsible Statecraft that “The shares you’re referencing would be owned by clients and held in their accounts at Bank of America (or Merrill Lynch) not shares actually owned by the bank. Unfortunately, some advocacy groups are mistaken when they make reports and wrongly attribute ownership to us. It’s unfortunate.”

Capital Group and State Street did not respond to requests for comment.

Joe Herbert, a Senior Research Officer at ShareAction, told Responsible Statecraft that the daylight between Wall Street and the defense companies they support creates room for plausible deniability. “It is difficult for arms companies to claim that they are abiding by the UN Guiding Principles, but for an investor there is another degree of separation," said Herbert.

Why even have human rights policies if these companies won’t act on them? In short, because of the cover the U.S. government provides Israel which in turn shields defense companies and their shareholders from criticism. For example, at a press briefing in March, State Department spokesperson Matthew Miller said “We have not found them [Israel] to be in violation of international humanitarian law, either when it comes to the conduct of war or when it comes to the provision of humanitarian assistance.”

Even though the U.N. Guiding Principles exist “independently of States’ abilities and/or willingness to fulfill their own human rights obligations,” Wall Street pays little attention. Instead, it appears they are more interested in the “goodies.”

Marcio Jose Bastos Silva /

Reporting | Military Industrial Complex
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