Amsterdam, Netherlands. 22 July 2025. A coalition of 12 financial institutions has issued a position paper calling on the European legislator to clarify the definition of “controversial weapons” used in European Union (EU) sustainable finance regulation, and broaden it to protect investors, civilians, and sustainable finance integrity.
These organisations are longstanding leaders in ethical, social, and green banking in Germany, including four members of the Global Alliance for Banking on Values (GABV): GLS Bank, SozialBank, Triodos Bank, and UmweltBank.
The Global Alliance for Banking on Values (GABV), a network of the world’s leading sustainable banks, backs the appeal. It aligns with its own Milan Peace Declaration, issued in 2024, which states that values-based banks exclude all forms of weapons financing and understand that financing weapons used in conflict is incompatible with sustainable development.
Scope too narrow
Under the European Securities and Markets Authority (ESMA) Guidelines on funds’ names using ESG or sustainability-related terms, investment funds that reference sustainability must exclude companies involved with “controversial weapons.” However, ESMA’s current interpretation defines excluded arms too narrowly according to the paper’s authors, allowing ESG funds to invest in arms that many would consider controversial.
Weapons listed as controversial only include anti-personnel mines, cluster munitions, and chemical/biological weapons. It leaves significant gaps, including nuclear weapons; ammunition containing depleted uranium; incendiary weapons (e.g., white phosphorus); blinding laser weapons; and undetectable fragmentation munitions.
The coalition argues that this scope is too narrow compared with international humanitarian standards and common industry practices. Allowing weapons used in conflicts to be included in ESG and sustainable funds self-evidently undermines the credibility of sustainable finance. They invite EU policymakers, supervisory authorities, and industry stakeholders to develop a robust and consistent definition of controversial weapons across all relevant regulations, including the Sustainable Finance Disclosure Regulation (SFDR) fund labelling guidelines.
Recommendations for minimum criteria
The signatory banks argue that weapons should be considered “controversial” when they cause disproportionate and indiscriminate harm to civilians, generate excessive suffering, and/or leave long-lasting effects long after conflicts end—criteria rooted in international humanitarian law and decades of ethical investment practice.
They therefore urge the EU to adopt a comprehensive legal definition of controversial weapons that, at a minimum, incorporates the weapon categories addressed in the following international treaties:
- Chemical Weapons Convention (CWC)
- Biological Weapons Convention (BWC)
- Convention on Cluster Munitions (CCM)
- Anti-Personnel Mine Ban Convention (Ottawa Treaty)
- Treaty on the Prohibition of Nuclear Weapons (TPNW)
- Convention on Certain Conventional Weapons (CCW) and its Protocols
GABV’s Statement for Peace
While the coalition’s appeal focuses on closing regulatory gaps, the GABV’s position is broader. The Milan Declaration: A Statement for Peace, urges financial institutions to divest from the arms industry, rejecting the notion that financing of arms and armaments meets any definition of sustainable finance.
Values-based banks exist to use finance as a force for good. Investments that enable or profit from weapons known to inflict indiscriminate or long-lasting harm are fundamentally at odds with a banking model that serves the real economy and advances human dignity, social inclusion, and ecological regeneration. The signatories’ call echoes long-held GABV principles: transparency about how money is used; clear exclusion of activities that undermine peace and community wellbeing; and public policy that supports rather than dilutes those commitments.
Read the full Position Paper on Controversial Weapons
