Should Australian savings be funneled to cluster bomb manufacture?

If you bank with ANZ, you'll probably be surprised to learn that ANZ says its use of your savings to finance companies that manufacture cluster bombs is "ethical."

ANZ doesn't define 'ethical' in its corporate Defence Policy, but at least two funding decisions the bank deems permissible under that policy call into question whether its definition aligns with that of most Australians – particularly as Australia has signed an international treaty categorically banning the activities ANZ is financing.

Australia, along with 107 other countries, is signatory to the Convention on Cluster Munitions (CCM), which expressly prohibits the use, production, stockpiling and transfer of cluster munitions. Further, all signatories undertake "never under any circumstances to assist, encourage or induce anyone to engage in any activity" prohibited by the CCM. Most people would agree that providing finance to a manufacturer of cluster bombs qualifies as providing that manufacturer with 'assistance.' Most people, that is, except ANZ senior management.

Cluster bombs are indiscriminate weapons. They break open in midair, scattering hundreds of smaller bombs (submunitions) over a large area, often as far as a kilometre away. Many of the submunitions do not explode on impact. Children are at high risk of death or maiming from the unexploded munitions because they are attracted by their toy-like shape.

The Uniting Church, through its Justice and International Mission (JIM), is currently running a campaign against ANZ's funding of cluster bomb manufacturers. Director of JIM, Dr Mark Zirnsak, says that as part of the campaign he has printed fifteen thousand protest postcards addressed to ANZ CEO, Michael Smith. Under the heading 'Don't profit from this', the cards feature a photograph of a small Iraqi boy with large scars across his abdomen and also missing his left arm above the elbow – the victim of an unexploded submunition dropped in Basra in 2003.

Lyn Allison, former senator for Victoria (1996-2008) and former leader of the Australian Democrats (2004-2008), visited Lebanon soon after the Israeli armed forces had dropped as many as four million submunitions on southern Lebanon during the 2006 war involving Hezbollah. (Reports suggest that Hezbollah also used cluster munitions against Israel.) Allison said that the submunitions dropped in Lebanon "looked like tennis balls, butterflies and torch batteries with ribbons attached to them." Any wonder then that in its landmark 2006 report Fatal Footprint, Handicap International found that civilians comprise ninety-eight per cent of all casualties from unexploded submunitions, almost a third of those being children.

Despite growing disquiet over its funding decisions, ANZ is unrepentant that it is openly flouting Australian government policy, Australian obligations under international law, and the growing international condemnation of such blinkered business decisions.

In its standard letter response to JIM's protest card, Mr Gerard Brown, Group General Manager – Corporate Affairs admits that ANZ is "aware of concerns that some defence companies, including some of our clients, are involved in the manufacture of components for controversial weapons such as cluster munitions." Yet Brown goes on to say that ANZ believes its defence policy "strikes an appropriate balance between support for an important industry and the need to avoid direct involvement in the production of cluster munitions or anti-personnel land mines."

In disclaiming "direct involvement" in cluster bomb production, ANZ spotlights the loophole that it, along with scores of other banks worldwide, is exploiting. Avoiding direct involvement means ANZ won't approve loans to entities who say they'll use the money to make cluster bombs. Indirect financing, however, gets a green light. That's when a known manufacturer of cluster bombs asks for a loan for, say, 'general corporate purposes.' Same company, same loan size, different wording. But, to ANZ, this is sufficiently removed from direct involvement to elevate the transaction into the realms of the "responsible and ethical." Fair call? Or blatant sidestep enabling ANZ to spout ethics at the front door while funnelling funds out the back door into the accounts of cluster bomb manufacturers – to the tune of US$136.5 million so far.

"International experts on the arms trade say that a company manufacturing cluster munitions would never approach any bank to finance such activities directly," says Zirnsak. So indirect financing is the only type of cluster bomb financing available. "Making the ANZ policy fairly meaningless in practice," says Zirnsak. Indeed. Nevertheless, ANZ continues to state it has "a clear policy to ensure our involvement in the defence sector is consistent with our commitment to responsible and ethical business practices and decisions."

In the absence of legislation explicitly forbidding such investment, it rests with us as Australian consumers of banking services to judge whether the decisions of our banks coincide with our personal standards of responsible and ethical behaviour.