Major arms manufacturers such as BAE Systems, Boeing, Caterpillar, and Lockheed Martin have achieved record profits and climbing stock prices amid Israel’s war on Gaza. However, these companies alongside global investors, are now the subject of warnings about complicity in crimes against humanity in Gaza.

This should perhaps come as little surprise. Companies turning a profit amid conditions that are now acknowledged as ‘catastrophic’ in Gaza have a heightened obligation to ensure that the cash is not the consequence of contributing to human rights abuses.

Where this isn’t fulfilled, the scale of corporate risk is immense – and this is perhaps nowhere more apparent than for the firms providing arms to Israel to execute its war. But our latest corporate human rights abuse tracking suggests this remains unrecognised by the majority of, but not all, arms exporters and their investors.

A recent statement by UN human rights experts put it bluntly. “These companies, by sending weapons……to Israeli forces, risk being complicit in serious violations of international human rights and international humanitarian laws”. The International Court of Justice (ICJ) recognised a plausible risk of genocide, and the Prosecutor of the International Criminal Court seeks arrest warrants for Israeli leaders for alleged war crimes. In this context, continuing arms transfers may be seen as “knowingly providing assistance for operations that contravene international human rights and international humanitarian laws and may result in profit from such assistance.”

We approached the 11 companies and 21 investors named in the UN Statement and 4 arms companies with direct allegations against them, for details on their efforts to meet the basic international business standard of ‘heightened human rights due diligence’ in such high-risk contexts. A mere 20% responded.

This points to alarming opacity, or a terrifying lack of risk management, coupled with a sense of impunity by most arms exporters and their investors. In confronting the reality of conditions in Gaza the UN calls ‘apocalyptic’, companies and investors should be stretching every sinew to prevent their products being used in attacks on civilians, and their infrastructure.

But if the humanitarian suffering is not enough to give these companies pause, then the scale of corporate legal risk should be.

Across the world, cases that seek to hold corporations and their leadership accountable for their actions in the context of conflict are mounting. In October 2022, Lafarge paid $778 million in penalties for “conspiring to provide material support to a foreign terrorist organization” for “security payments” to Al Nusra Front and ISIS to keep its cement factory running. In 2014, BNP Paribas paid $8.9 billion in penalties for sanctions evasion in Sudan and elsewhere. Multiple, recent cases suggest an increasing focus on corporate complicity in war crimes: a trial underway in Sweden against Lundin Energy leadership for their roles in the civil war in Sudan; a 2022 lawsuit in France against Thales, Dassault Aviation and MBDA France for selling weapons used against Yemeni civilians; and a 2023 complaint in France against TotalEnergies for its alleged role in Russia’s war crimes against Ukraine.

For arms companies, the legal risk in the context of Gaza should be equally palpable. Indeed, the Japanese company Itochu decided to end cooperation with Israeli defence company Elbit due to the 2023 ICJ decision ordering Israel to prevent a genocide. And Norwegian pension fund, KLP, has divested from Caterpillar for its role in the construction of illegal settlements.

But in response to our invitation to share information on their human rights due diligence practices, only one company, Maersk, responded that it carries out human rights due diligence when operating in conflict-affected areas. BAE System, Rolls Royce, and thyssenkrupp stated they comply with all applicable defense export controls and sanctions, subject to ongoing assessment. Tellingly, however, the Human Rights Council and UN experts state that arms manufacturers supplying Israel should also end arms transfers even if they are executed under existing export licenses.

In contrast to the 18 investors who did not respond to our invitation, three provided robust reflection: Amundi Asset Management, NBIM and Union Investment. Critically, all highlighted the importance of heightened human rights due diligence for investee companies. They also noted that exclusion of such companies from their portfolios is a possibility, with Union Investment noting that from an ESG perspective, “the damage and suffering that can be caused by weapons” makes securities of arms manufacturers ineligible for direct investment.

Amundi also engages with stakeholders and experts to develop recommendations for companies exposed to conflict-related risks. Norway’s NBIM has recently updated its expectations towards companies in conflicts. And beyond NBIM’s ownership activities, its independent Council on Ethics for the Government Pension Fund Global also evaluates the NBIM’s investments, sometimes leading to exclusions and observations of companies involved in serious violations.

The UN experts said that "arms companies must systematically and periodically conduct enhanced human rights due diligence to ensure that their products are not used in ways that violate international human rights and international humanitarian laws". Where this is not possible, or where it is not possible to avoid risk of contributing or causing harm, companies must move to responsible exit from exports. Given the UN’s assessment in their latest report, the sustained scale of humanitarian suffering, and rising litigation risks, it is hard to see how these arms companies might justify exports to the Israeli military, and how investors could sustain their financial backing of companies involved in these weapons transfers.

The UN human rights experts could hardly be clearer about both the human consequences and the corporate legal risks of sustained supply of weapons to Israel at this time. The results in our report, however, highlight a stark divide between the minority that see ethical and business reasons to abide by international standards regarding Israel and Hamas, and the majority that appear not to. These latter companies may feel well-protected by their home-states, or unconcerned by international humanitarian law. Nevertheless, as Israel’s war continues to generate enormous humanitarian suffering, and hostages remain, others will be looking to a growing body of legal precedent on corporate accountability in conflict. Those in the boardrooms of arms companies - and their investors - should too.

Written by Phil Bloomer, Executive Director, Business & Human Rights Resource Centre

This blog was modified on 16 August 2024.