On Feb 28, the U.S. launched a surprise attack on Iran. Within minutes, over 100 children had been killed by a missile attack on an Iranian school in Minab. Multiple independent investigations have concluded that the U.S. was responsible for the strike.
If those investigations are true, it means the weapons that killed those children were produced by U.S. companies. They were built by U.S. workers, in U.S. factories.
If you are an American of conscience, that should be sickening. But it gets worse: If you have a 401(k) retirement plan with your employer, it’s probably investing your money in the companies that manufactured the weapons connected to this attack.
Weapons of war in your portfolio
Defense contractors like Lockheed Martin, Northrop Grumman, RTX Corp (formerly Raytheon), General Dynamics, and Boeing are among the most widely held stocks in the U.S. market. As publicly traded companies, they issue stocks and bonds that fund managers purchase for the portfolios that make up your 401(k).
Owning their stocks effectively make you a part owner of the companies building the Tomahawk missiles, F-35s, and other bombs and weapons used in the attack on Iran. If your 401(k) owns their bonds, you’re effectively lending these companies money to expand production lines, fulfill new Pentagon contracts, and ramp up manufacturing of more weapons.
Fund managers are making these investment decisions for you
The funds offered in your 401(k) plan are being made by major fund managers like Vanguard, BlackRock, State Street, and Fidelity. Much of this is happening passively, through index funds that deliberately decline to consider the ethical concerns or the human costs of the industries they invest in. The Vanguard Target Retirement Fund, which is one of the most common default options in 401(k) plans across the country, holds significant positions in all the major publicly-traded U.S. military contractors. This fund, which was designed to grow workers’ wealth over a lifetime of labor, is simultaneously financing destruction in the Middle East that will take generations to recover from.
Human rights risk and international humanitarian law
The attack that killed over 100 children in Minab was likely a violation of international humanitarian law, even if those responsible only behaved recklessly and without intent to target civilians. Human rights risk is a significant investment risk, especially for long-term investors like 401(k) savers. Weapon companies connected to violations of international humanitarian law face reputational damage, litigation, export restrictions, and in some cases outright bans. All of this translates directly into stock volatility.
While defense stocks surged in the immediate aftermath of the conflict’s outbreak, history shows these gains are volatile. Defense stocks are highly dependent on government contract cycles and are vulnerable to sharp reversals when conflicts de-escalate.
The financial impacts of the war on Iran are not limited to weapon companies. Supply constraints stemming from the ongoing conflict are threatening to push the global economy into recession. The long-term effects on our 401(k) mutual funds is unpredictable, but the net effect of inflation spikes and recession-driven job losses is to erode the savings of U.S. workers.
We can all invest in a peaceful future
The good news is that weapon-free alternatives aren’t hard to find. If your employer-offered 401(k) plan already includes a socially responsible fund, you can use Weapon Free Funds to find out if it truly screens out weapons manufacturers. Some funds avoid fossil fuels or private prisons but still hold major defense contractors. It’s important to have full transparency on what’s actually inside your 401(k) funds.
If your 401(k) doesn’t yet offer a weapon-free option, don’t give up. You can use our action toolkit to learn how to work with your colleagues to ask your plan administrators to offer investment options that avoid the weapons industry.
By investing weapon-free, we all can invest in a peaceful future.
