Cluster munitions are indiscriminate weapons that pose a serious threat to civilian populations during and long after an attack. They work by spreading dozens (or even hundreds) of bomblets, called submunitions, over a large area. Upon impact, cluster munitions can immediately kill or maim; submunitions that initially fail to explode can remain on the ground and harm civilians after a conflict has ended.

Beginning in 2008, states began signing the Convention on Cluster Munitions (CCM), a humanitarian imperative-driven legal instrument which prohibits all use, production, transfer and stockpiling of cluster munitions. CCM entered into force in 2010, and to date 120 states have committed to the goals of the CCM.

The Cluster Munition Coalition (CMC) is a global civil society campaign working to eradicate cluster munitions through changes in the policy and practice of governments and organisations, as well as raising public awareness. CMC promotes full adherence to, and compliance, with CCM. Stop Explosive Investments is a sub-campaign of CMC tackling investment in the production of cluster munitions, of which PAX is a member organisation.

Despite the continued progress and success of CCM, some countries and private companies continue to produce cluster bombs. The report identifies seven producers of cluster munitions, as well as 88 financial institutions that in turn continue to invest in those producers — relegating them to a “hall of shame” and encouraging them to aspire instead to “hall of fame” status through divestment and policy changes. For the purposes of the report, financial institutions include banks, insurance companies, pension funds, sovereign wealth funds and asset managers globally.

Pressure from financial institutions influences the behaviour of producers, both existing and potential new market entrants. The report acknowledges that while divestment is a complex issue, financial institutions should develop policies that exclude all financial links with companies involved in cluster munitions production. These policies should extend to all activities: commercial banking (loans and other forms of credit), investment banking (underwriting share and bond issuances) and asset management (investment in shares and bonds).

1. Cluster munitions are indiscriminate weapons that continue to be produced in some countries that have not yet outlawed them.
2. Companies producing these weapons are funded in part by financial institutions, either directly or indirectly, through the extension of credit, the creation of securities (shares and bonds) and the ownership of those securities.
3. Financing and investing are active choices, based on a clear assessment of a company and its plans.
4. Investing in a cluster munitions producer therefore, is a choice to support the production of these indiscriminate weapons.
5. Financial institutions should develop policies that exclude all financial links with companies involved in production of (or key components of) cluster munitions.
6. Financial institutions should inform producers of their decision to end investment because of the company’s involvement with cluster munitions.
7. Financial institutions can set clear deadlines with a limited timeframe, within which a company must cease production of cluster munitions, if it wishes the disinvestment decision to be reversed.
8. When a company persists in producing cluster munitions after the deadline, the financial institution will disinvest, and new investment will cease.