Controversial Weapons: Reassessing the Red Lines

• Convention on the Prohibition of the Use, Stockpiling, Production and Transfer of Anti-Personnel Mines and on Their Destruction, also known as the Ottawa Convention (1997)

• Convention on Cluster Munitions (2008)

• Biological Weapons Convention, formally known as “The Convention on the Prohibition of the Development, Production and Stockpiling of Bacteriological (Biological) and Toxin Weapons and on their Destruction” (1972)

• Convention on the Prohibition of Chemical Weapons (1993)
  

_{Source: Morningstar Sustainalytics. For informational purposes only.} 

_{Note: Data as of September 2025 and based on the categories of involvement in controversial weapons.} 

Meanwhile, 193 countries are party to the chemical weapons convention — only Egypt, North Korea, and South Sudan have not signed.⁹ Similarly, 189 countries are party to the Biological Weapons Convention,¹⁰ with African countries such as Namibia, South Sudan, Chad, and Djibouti among the non-signatories. As a result, no company within Sustainalytics’ coverage universe is currently involved in biological or chemical weapons.

Which Weapons are Not Prohibited, but Remain Controversial? 

Beyond the treaties underpinning the EU sustainable finance framework, other international or national policies can further guide investors in distinguishing between defense sector companies that are acceptable to finance and those that are not.  

For instance, Belgium forbids the financing of depleted uranium weapons.¹¹ According to Sustainalytics’ data, only seven companies in our research universe (as of October 2025), including five from the United States, have been identified as directly involved in activities that contribute to the lethality of such weapons. There is no additional international convention on depleted uranium munitions. 

Another relevant treaty is the Convention on Certain Conventional Weapons, under which weapons designed to primarily set fire to objects or harm civilians are prohibited.¹² The use of white phosphorus may violate this treaty when this substance is intentionally used as an incendiary weapon against civilians.¹³ However, white phosphorus has other uses in defense and can also be used for signaling or screening (as a smokescreen). Currently, there is no comprehensive convention or legal framework that explicitly bans or regulates its use. Sustainalytics’ research universe includes 59 companies currently engaged in business activities related to any such use of white phosphorus beyond incendiary weapons. 

Figure 2. Spectrum of Controversial Weapons 

_{Source: Morningstar Sustainalytics. For informational purposes only.} 

The Case for Investing in Nuclear Weapons 

Another type of weapon that can be viewed as controversial but is not prohibited under the EU sustainable finance framework is nuclear weaponry. While nuclear weapons have historically been excluded from many ESG-focused investments, the European Commission’s clarification in its Defense Omnibus Package does not list them as prohibited weapons.¹⁴  

Several international treaties govern the use of nuclear weapons, including the 1968 Treaty on the Non-Proliferation of Nuclear Weapons (NPT). With 191 signatories, the NPT is the most widely adopted international agreement aimed at preventing the spread of nuclear weapons, promoting the peaceful use of nuclear energy, and advancing nuclear disarmament.¹⁵  

Among the countries known to possess nuclear weapons, only five — the United Kingdom, the United States, France, China, and Russia — have signed the NPT, while India and Pakistan are the most prominent nuclear-armed states that have not signed the NPT. Other countries, such as Germany, Italy, and Spain, are non-nuclear weapons state signatories to the NPT, meaning that they have agreed not to manufacture nuclear weapons and related components.¹⁶  

Currently, many asset managers and asset owners are reviewing their strategy on nuclear weapons-related investment vis-à-vis ESG investing. Among the financial market players that have revised their investment strategy are Allianz Global of Germany, the asset management arm of Danske Bank of Denmark, and Belfius of Belgium — each now allows investment in companies aligned with the NPT, excluding only those companies headquartered in non-NATO countries.^17,18,19   

_{Note: Data as of September 2025 and based on the categories of involvement in controversial weapons.} 

According to Sustainalytics’ data, 110 companies in our coverage universe (as of September 2025) are involved in nuclear weapons-related activities, including 82 domiciled in a country that is a signatory to the NPT. Among these, 10 are also involved in one or more of the other controversial weapons. Airbus SE, BAE Systems, BWX Technologies, Leonardo, Thales, Moog, and Boeing are some examples of exchange-listed companies involved in nuclear weapons-related activities that are domiciled in a country that is a signatory to the NPT.

How Can Investors Analyze Exposure to Controversial Weapons? 

From a sustainable investment perspective, investors in the EU are required to exclude any companies involved in prohibited weapons. Beyond this baseline, they may choose to exclude additional weapon types based on their own policies and values.   

When evaluating companies involved in weapons-related activities, the EU encourages investors to apply a case-by-case analysis to inform their investment decisions. In addition to a country’s membership in international treaties, investors can consider other critical inputs to inform their defense investment strategies such as a company’s business activities, its direct or indirect involvement via corporate ownership, and whether its components or services contribute to the lethality of prohibited or controversial weapons.  

Table 1. Different Lenses for Reviewing Involvement in Controversial Weapons  

_{Source: Morningstar Sustainalytics. For informational purposes only.} 

_{Note: Data as of September 2025 and based on the categories of involvement in controversial weapons.} 

As geopolitical tensions escalate and more countries exit international treaties on controversial weapons, we should expect changes to the number of companies involved in these activities and the nature of their involvement, complicating investment decisions further. For now, investors should closely monitor the granular details of investments in any controversial weapon and strengthen their due diligence policies for sustainable investments.  

Learn more about Sustainalytics’ ESG Screening Solutions, which include controversies research and screening tools, norms-based screening, defense research, and sustainable products research and screening.    

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