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sustainable investment nuclear threats

Calling All Sustainable Investors

Yes, preventing nuclear catastrophe is within your purview.

Words: David Epstein
Pictures: Chronis Yan

Today, someone will learn they have cancer. Someone will be surprised to catch a cheating spouse. Somewhere, many places, a child will be abducted. A community, somewhere in the world, will experience a natural disaster. The unimaginable does happen, every day, to at least a few of us.

The difference with nuclear weapons, though, is that if and when a malicious detonation of a nuclear weapon occurs… anywhere… it could deeply affect us all, even if the incident itself kills or injures just a tiny fraction of the global population. A single detonation could shock global capital markets and economies, our jobs and way of life and, ultimately, our personal health. The health of the planet would also be jeopardized.

I have spent considerable time over the last twenty years, including currently taking a hiatus from a traditional career on Wall Street, trying to warn the investment community about a potential catastrophe. I believed this catastrophe could create an incredible loss of life and untold human suffering while bringing down capital markets and the economy. Unfortunately, my focus had been on this — nuclear conflict — rather than a pandemic. Fortunately, COVID-19, despite all the pain it has wrought and systemic issues it has caused, is likely not nearly as bad as a nuclear conflict could be.

It was a mistake for global leaders to ignore warnings over the last several years about a pandemic, with that resistance continuing even after the pandemic had begun. Similarly, it is a mistake to assume our 75-year run of luck in avoiding nuclear conflict will not run out. That luck could eventually end on the Korean Peninsula, in Iran, by way of terrorism in some major Western city, or in terms of one of the various adversarial relationships among the US, Russia, China, India, and Pakistan.

Where that luck ultimately runs out is anyone guess. But clearly governments are not doing everything they can to head off a nuclear conflict in the not too distant future. And as COVID-19 should also make abundantly clear, investors and the broader financial and business communities, along with academia and all corners of civil society, must not rely on governments alone to head off major potential catastrophes like pandemics, nuclear conflict, and climate change.

With that in mind, I recently launched The Cross Capital Initiative, with my inaugural report “Preventing Nuclear Catastrophe. The report calls upon investors and the broader financial and business communities to leverage their vast resources, capacity for innovation, and influence in order to help prevent a nuclear conflict. Getting involved is in companies’ and their investors’ own self-interest, because if economies and capital markets get hurt, these investors probably also get hurt.

Equally or more importantly, it is the right thing to do from a corporate social responsibility/stakeholder capitalism perspective. The trend both for US and non-US companies is in the same direction — greater focus on sustainability and the needs not only of shareholders but other stakeholders as well, including employees, customers, and communities. That trend picked up last year with the Business Roundtable’s “Statement on the Purpose of a Corporation,” then further accelerated after Davos 2020’s focus on stakeholder capitalism, the Blackrock CEO’s letter to CEO’s regarding “A Fundamental Reshaping of Finance,” the vast suffering caused by COVID-19, and the protests over inequality in the wake of George Floyd’s death.

If companies put increased focus on how their actions, in any way, contribute to the risks of nuclear conflict, it will translate to an improved perception of that company among potential customers, employees, and investors. That, in turn, will make it a more desirable place to patronize, work at, and invest in, respectively. 


The coronavirus story is still being written, but the magnitude of disruption to the capital markets and global economy has clearly been incredibly severe, with most major stock markets down 30 — 40% at the most recent bottoms in March 2020. Many publicly-traded industry groups like airlines and the cruise ships were hit even much harder than that. The performance of public equity markets has also not been nearly as bad as the economic pain felt by small private businesses, with so many completely wiped out.

Nuclear professionals need to educate investors and entrepreneurs about the various paths to nuclear conflict and the solutions that are needed — this will help them conceive of project ideas.

Talking about capital markets and economies in the wake of disaster may seem crude, but death is not the only relevant statistic. Bankruptcies, loss of jobs, and decimation of investors savings accounts can all cause incredible suffering, including on physical and mental health.

While the impacts on market and real economies in the wake of an act of nuclear aggression would undoubtedly be different than in the wake of COVID-19, I think they could be even more severe, even if only a single nuclear weapon was detonated.

Remember, that as monumental as COVID-19 has been, the vast majority of people will survive, treatments are being developed, and there is hope that there might be a vaccine widely available by 2021. Rescue efforts from treasuries and central banks around the world were also generally able to be robust, because COVID-19 occurred against a backdrop of a healthy global economy. If and when a nuclear incident occurs, the global economy may not be as strong. It certainly is not right now.


ESG Funds

First, sustainable investors must engage in a dialogue on how to move beyond the current state of affairs with respect to the risks of nuclear weapons and nuclear conflict.

In doing so, it’s worth mentioning the role ESG funds, where the fund manager screens potential investments based on the company’s performance and risk with respect to a range of Environmental, Social (e.g. racial and gender diversity), and Governance (independence of board members) factors. These investments are usually into larger, publicly-traded companies — the household names that trade on stock exchanges.

Currently, ESG funds’ focus on the risks of nuclear weapons when making investments in stocks is usually limited to making a decision whether to divest or not manufacturers of nuclear weapons and/or “controversial weapons.” However, investors also need to consider engagement of companies, not just divestment, including how to encourage companies and the collective marketplace to take steps to reduce the risks of nuclear conflict.

And while weapons manufacturers may be the most obvious companies to screen for nuclear weapons risks, other industries relevant in some fashion to the nuclear supply chain or the possibility of eventual conflict include industrial companies, utilities, banks, insurers, port operators, media and entertainment companies, and tech and social media companies.

The sustainable investing community can also not do this alone. Nuclear professionals have a big role to play in helping set standards for what risks these sustainable investors factor into their screening tools.

Depending on the industry, these companies should be screened for everything from conflicts of interest in their lobbying activities to their policies for remaining compliant with sanctions and export controls to how, in the case of social media companies, they might be contributing to the dissemination of disinformation.

The recent hack of high-profile Twitter users could, of course, have been much more consequential. What if current world leaders, including those who tend to govern through Twitter, were hacked and the hackers had more nefarious intentions than stealing some bitcoin? This is just one example where companies could be doing more to increase security and thinking about how their business might inadvertently play a role in state actors intentionally, or by blunder, entering into nuclear conflict.

Impact Funds

Entrepreneurs, nuclear professionals, and others need to increase the pipeline of for-profit startups — i.e. small and private projects/companies — that Impact investors might fund targeting nuclear risk reduction. Impact investors, another type of sustainable investor, are those that are seeking a positive social outcome in their investments along with a financial return.

There is no doubt that nuclear non-proliferation efforts will remain dominated by government and various non-profit initiatives. That said, targeting for-profit projects and for-profit investors is so important because the for-profit pool of capital is so vast relative to what is available for non-profit initiatives.

It is clearly no layup to devise startup projects targeting nuclear risk reduction that would also potentially be profitable, but the potential range of for-profit projects can be significant if thought about creatively. For instance, there are most certainly some dual-use technologies waiting to be invented, or adapted from existing technologies, that would play a potential role in reducing the risks of nuclear conflict while also having a broader commercial application. AI, cybersecurity, various detection technologies, and blockchain are just a few of the areas ripe for further exploration beyond what has already been done. And those projects that could potentially be profitable, particularly those with a technology bent, could also look beyond attracting impact funds to also targeting traditional venture capitalists and angel investors.

The range of possible for-profit projects grows further if one expands the traditionally-defined problem sets of verification, monitoring, and the like to broader root causes of potentially nuclear conflict — e.g. relations between nations. Focusing on improving relations between adversaries (for example India and Pakistan) vastly increases the range of nuclear risk reduction projects to include everything from media-related projects (e.g. movies and concerts) to camps for teenagers from both sides of a conflict (as is done by Seeds of Peace) to business collaborations between those adversaries.

Nuclear professionals need to educate investors and entrepreneurs about the various paths to nuclear conflict and the solutions that are needed — this will help them conceive of project ideas.


As stated on the UN SDGs (sustainable development goals) website:

The 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into the future. At its heart are the 17 Sustainable Development Goals (SDGs), which are an urgent call for action by all countries – developed and developing – in a global partnership. They recognize that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth — all while tackling climate change and working to preserve our oceans and forests.

As the SDGs are something of a North Star to so many in sustainable finance — something they want to facilitate with their investments — it’s important to highlight that nukes are quite relevant to the SDGs. While nuclear weapons risks are not explicitly discussed in the SDGs, lowering such risk appears implicit in SDG #16 “Peace, Justice and Strong Institutions” and in one or more of #16’s underlying targets.

Similarly, I believe that lowering the risk of nuclear weapons is quite consistent with achieving most of the other sixteen SDGs. A nuclear weapons exchange could quite directly affect climate change in terms of creating a nuclear autumn or winter, could decrease access to clean drinking water and increase poverty, plus have so many other direct effects.  Further, the knock-on global economic and political effects could mean a lack of funding or global appetite for battling CO2 emissions or taking on the challenges necessary to achieve any of the other SDGs.


There is also the need for creativity in financing methods, including taking a blended finance approach to some riskier startup ideas. Blended financing starts with the use of concessionary capital — for example, with a philanthropic funder providing a grant to a project in order to get the project to a more investable stage, at which it might have further developed its technology or otherwise shown proof of concept. This concessionary capital can then help to catalyze another capital provider, such as an impact fund or VC or angel investor, to make an investment once the project is at a stage where earning a financial return is more likely.

The report also tries to get the dialogue started on how some potential novel financing concepts and market-based solutions from the climate and conservation spaces — whether that be green bonds or rhino bonds or carbon offset and cap and trade markets — could be adapted and applied towards reducing nuclear risks. It may very well be an economist or game theorist, not someone currently working on nuclear policy, that can conceive of a workable mechanism of sticks and carrots that ultimately convinces Kim Jong Un to denuclearize despite his knowledge of what befell Qaddafi after Qaddafi swore off attaining nukes. Or maybe it’s just a savvy insurance negotiator that is needed (if you saw “Bridge of Spies,” you’ll know what I’m talking about). The point is that we need to look beyond just the government and some of the larger NGOs for new approaches to our geopolitical impasses.


The nuclear non-proliferation community needs to build bridges to all of these groups — sustainable and traditional investors, corporations, and academics from other domains. Few in these groups are going to come calling to the non-proliferation world by their own volition. In order to do this, leading nuclear experts should start by getting their voices heard in the sustainable finance and general financial and business media. The message should be that investors and private sector need to get involved with and speak up on nuclear issues. Just as with COVID-19 and climate change, this is their problem too and they need to help solve it.

David Epstein has been an Innovation Fellow for the N Square Innovators Network and recently formed the Cross Capital Initiative. This followed nearly 20 years as a research analyst on Wall Street. He is a chartered financial analyst and holds an MBA in finance from UCLA and BA in psychology from Johns Hopkins.

David Epstein

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