Why the Gravest Human Rights Abuses Do Not Show Up in Esg Scores

By Mike Head, Senior Adviser to The Justice Company

When a fund explicitly includes ESG in its name, it is reasonable to assume that environmental, social and governance considerations are the starting point. You would expect the social umbrella to cover the gravest social concerns and treat them as non-negotiables. 

That expectation is not unreasonable. It is, in fact, the minimum that the label implies. Yet, the world’s most serious human rights abuses — genocide, apartheid, occupation — consistently fail to count as obstacles in many ESG scores. A company can score highly on ESG because it is well run, even while remaining materially connected to activities that many investors would consider a fundamental red line.

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New Research Shows 59% of Article 8 ETFs Hold Weapons Manufacturers and Most Still Invest in Fossil Fuels

Analysis of 100 'sustainable' UCITS equity ETFs finds that ESG branding obscures persistent exposure to fossil fuels, mining and conventional arms producers

New research analysing 100 of the top Article 8 UCITS equity ETFs finds that 59 of them retain exposure to conventional weapons manufacturers, while the majority also hold meaningful positions in fossil fuel and extractive industries — despite being classified as environmentally and socially responsible investments.

The research, conducted by The Justice Company, which applies a rules-based human rights investment framework to global equity markets, examined sector allocations and weapons screening policies for 100 of the leading SFDR Article 8 equity ETFs. The findings challenge the assumption that the Article 8 designation — the European Union's framework for funds that "promote environmental or social characteristics" — provides any meaningful guarantee of ethical screening.

E, M, U sector exposures leave ESG investors with their heads in the sand

The analysis found that Article 8 UCITS equity ETFs carry an average of 1.63% in Energy stocks, 57% below the MSCI World benchmark weight of 3.78%. While this represents a material reduction versus the market index, 15 of the funds analysed exceed the MSCI World Energy benchmark weight, carrying the same or greater exposure to oil and gas companies as an unscreened global equity index.

Materials exposure, which includes mining, metals and chemicals companies, averages 3.67% across the 100-fund universe, above the MSCI World benchmark of 3.40%. Nearly half — 47 out of 100 — of the Article 8 funds exceed the benchmark weight in Materials. Some ESG ETFs hold as much as 9.90% in mining and chemicals, driven by their heavy weighting toward commodity companies that earn high ESG scores through reporting compliance and governance ratings, regardless of their core extraction activities.

Utilities exposure across the analysed funds is broadly in line with the market benchmark with an average of 2.55% vs 2.48% for MSCI World. Some European Article 8 funds hold significantly more than the benchmark, up to nearly 10%, reflecting the ESG preference for European renewable energy utilities such as Iberdrola, Enel and National Grid. This is a genuine green tilt, but it does not change the overall picture. The EMU sectors taken together (Energy + Materials + Utilities) average 7.85% across the Article 8 universe, a figure that sits at odds with what the "ESG" label implies.

The Defence Blind Spot

The research's most significant finding concerns weapons screening. Well over half (59%) of the funds examined retain full exposure to conventional weapons manufacturers such as Rheinmetall, BAE Systems, Leonardo, MBDA and Lockheed Martin. These companies produce artillery, armoured vehicles, missiles, fighter aircraft and naval weapons systems. They are not automatically excluded from portfolios carrying Article 8 ESG designations.

Rheinmetall AG, one of Europe's largest manufacturers of artillery shells and armoured vehicles, appears in the top twenty holdings of at least one major Article 8 ESG ETF which is positioned as “Enhanced ESG” and aligned with environmental and climate goals. Its inclusion in the fund is the direct, intended consequence of using an index methodology that excludes only "controversial" weapons (cluster munitions, anti-personnel landmines, biological and chemical weapons) while placing no restriction on producers of conventional military equipment. All 100 Article 8 funds analysed exclude controversial weapons, as required under the SFDR framework and the index methodologies that underpin them. 

The Paris Paradox

Paris-Aligned Benchmark (PAB) funds present a specific version of this problem. Because PAB indices mandate a 50%+ reduction in carbon intensity and a 7% annual decarbonisation trajectory, they reliably exclude fossil fuel extraction companies, driving their Energy exposure to zero. But PAB regulation contains no requirement for weapons screening beyond the controversial weapons baseline.

The result is a fund that can credibly claim zero exposure to Exxon or Shell, while simultaneously holding Northrop Grumman or Raytheon, companies that manufacture intercontinental ballistic missiles. An investor who buys a PAB fund on ethical grounds, believing they have aligned their capital with responsible values, may be entirely unaware of this gap.

“Investors who choose Article 8 funds believe they are making a responsible choice, which they are, but only on the narrow criteria the funds are actually designed to meet.” Jonny White, Senior Adviser, The Justice Company.

“The problem is that leaves out an enormous amount. The question we should be asking is not whether a fund excludes cluster munitions. Of course it does. The question is whether it excludes the companies that manufacture the weapons systems currently being used in active conflicts, the companies that profit from occupation, from mass displacement, from the systematic denial of civilian rights. On those questions, the Article 8 universe is largely silent. That silence is not neutral, it is a choice."

The Article 8 ETFs examined apply human rights screening via the UN Global Compact (UNGC), the market standard for ESG indices. However, UNGC screening is reactive by design. Companies are excluded only once ESG data providers have assessed a controversy as sufficiently severe. Corporate involvement in conflict zones or thresholds derived from international humanitarian law are not actively screened for across the sampled funds.

Supporting Gaza's Most Vulnerable Children: The NOOR Orphan Care Programme

At The Justice Company, our work is rooted in a belief that human rights, dignity and opportunity should not be abstract principles. Alongside the development of transparent, rules-based methodologies designed to help investors avoid companies materially involved in genocide, war crimes and other serious human rights violations, we are equally committed to supporting the people whose lives have been shaped by those abuses.

That commitment is reflected in the work of The Justice Company Humanitarian Foundation. Through it, we are proud to support carefully selected charitable initiatives that help expand opportunity, strengthen resilience and improve outcomes for vulnerable individuals and communities around the world.

One such initiative is the NOOR Orphan Care Programme, delivered by Taawon (Welfare Association), a non-profit organisation registered in Geneva and operating across Gaza, the West Bank, and East Jerusalem. It provides care and stability for children who have lost one or both parents during the conflict in Gaza.

The Scale of the Crisis

According to the UN Independent International Commission of Inquiry, more than 58,000 Palestinian children lost one or both parents between October 2023 and October 2025.

The loss of a parent is devastating in any circumstances, but in Gaza, it is compounded by the near-total collapse of child protection infrastructure. With orphanages either destroyed, damaged or repurposed into shelters, virtually all children now rely on humanitarian assistance for survival. The formal systems that exist to protect children – social services, schools, healthcare facilities – can no longer serve their purpose. Meanwhile, the informal care structures in Palestinian society, such as extended families and community support, are displaced and struggling to meet their own most basic needs. Over 40% of families in Gaza are reportedly taking care of non-biological children, even as over 90% of residents have been displaced and over 80% of homes have been damaged or destroyed.

The result is a generation of children at risk of falling into a void where neither formal institutions nor family networks can care for them.

The NOOR Programme

Taawon's NOOR programme was designed to address this void, not simply as emergency relief, but as a framework for rebuilding systems around Gaza's orphaned children for the long term.

NOOR operates across five pillars: a unified child registry to ensure every child is visible; support for family-based care; comprehensive services integrating financial, educational, health, and psychosocial support; coordinated delivery across implementing partners; and sustainable financing to replace short-term, small-scale projects.

What the Programme achieved in 2025

In 2025, the programme supported 20,923 orphaned children across 7,513 families, including 239 children who became the sole survivors of their immediate family and 904 who lost both parents. Here are some of the life-changing services delivered across several dimensions of the programme:

• 110,000 food parcels were distributed to orphans, ensuring access to essential nutrition during the crisis

• 40,000 clothing kits were provided across two seasons, helping orphans meet their basic needs throughout the year

• 16,500 orphaned children received comprehensive medical check-ups, with identification of interventions for those requiring further care

• 1,508 orphaned children with disabilities or special needs received tailored support, alongside 31,000 rehabilitation sessions covering physiotherapy and occupational therapy

• 14,500 children received Psychological First Aid, with 13,000 counselling sessions – both group and individual – delivered to those experiencing trauma

• 3,000 children were reached through emergency education services, with lessons learned informing a scale-up in 2026

• Launch of the NOOR Digital Platform, enabling real-time tracking of programme progress. This is an important step towards the coordinated, data-driven model that sustainable child protection in Gaza ultimately needs.

Investing in dignity and recovery

The NOOR programme is an extraordinary example of what determined civil society organisations can achieve in the most desperate of situations. Implemented by Taawon and 11 local partner organisations across Gaza, each subject to rigorous due diligence, the programme delivers measurable, life-saving impact while laying the groundwork for long-term recovery.

The Justice Company Humanitarian Foundation seeks to support initiatives that combine immediate humanitarian assistance with locally led solutions. Taawon’s NOOR programme exemplifies this approach and we are proud to support its work in ensuring that Gaza's orphaned children are not only seen, but given the care, stability and opportunity they deserve.

Beyond the Index: Supporting Access to Education for Displaced Students

By Mike Head & Jonny White, Senior Advisers to The Justice Company

At The Justice Company, our work is rooted in a belief that respect for human rights, dignity and opportunity should not be abstract principles. While our primary focus is the development of transparent, rules-based methodologies that help investors better understand corporate conduct, we are equally committed to supporting initiatives that deliver tangible social impact.

Through The Justice Company Humanitarian Foundation, a portion of the platform’s fees is directed towards charitable causes that align with our mission and values. We are proud to support organisations and programmes that help expand opportunity, strengthen resilience and improve outcomes for individuals and communities facing significant challenges.

One such initiative is University College London’s (UCL) Global Engagement Scholars programme. 

In the 2025/26 academic year, the Foundation contributed £178,000 to support six postgraduate students from Gaza who were able to continue their studies at UCL through the UK Government’s facilitated departure programme for fully funded university scholars.

The funding covered each student’s tuition fees, accommodation and living costs, removing financial barriers that might otherwise have prevented them from accessing higher education. For students whose academic journeys and future aspirations had been profoundly disrupted by conflict and displacement, the scholarships provided far more than financial support. They offered stability, possibility and the opportunity to continue building towards their professional ambitions.

The six scholars are pursuing postgraduate studies across a range of disciplines, including Child Health, Translation and Technology, Business Analytics and Teaching English to Speakers of Other Languages (TESOL). Despite the challenges they have faced, each student has demonstrated remarkable resilience and determination in embracing the opportunities available to them.

The impact of the programme is already becoming clear. Two of the scholars, both qualified medical doctors, are preparing for General Medical Council examinations with the aim of practising within the NHS. Other students have made significant academic progress, with UCL encouraging dissertation research to be developed further into potential doctoral study due to its originality and academic merit. One scholar has already secured an internship opportunity within the field of Business Analytics, while another is exploring additional teaching qualifications to complement their degree.

Beyond academic achievement, the programme has helped students establish a sense of belonging and community. Through their studies and wider university life, they have been able to build new networks, develop friendships and begin rebuilding pathways towards their futures.

As part of its commitment to becoming a University of Sanctuary, UCL works to remove barriers that prevent displaced students from accessing and completing higher education. The Justice Company Humanitarian Foundation’s support has contributed directly to that effort, helping ensure that talented individuals are able not only to continue their studies, but to flourish within them. 

We are grateful to UCL for its partnership and proud to support a programme that demonstrates the transformative power of education. By investing in access to learning and opportunity, we hope to help create pathways for talented individuals to realise their potential, regardless of the circumstances they have faced.

Creating the Framework for a New Type of Investment Approach

By Mike Head & Jonny White, Senior Advisers to The Justice Company

Since 1997, Ethical Screening has worked with investors who want their portfolio to reflect more than just financial returns. But the work we’ve done with the cornerstone investors of The Justice Company began, as many good ideas do, with a problem that no-one else had seemed to have solved.

The founders of The Justice Company had set out to find an investment framework that would allow investors to participate in markets without exposure to the most serious human rights abuses such as genocide, apartheid, occupation and related violations. It’s a simple enough idea to grasp, but when they started to look for a solution, they found none existed.

They explored existing ESG frameworks and data providers, but none addressed the core issue of how to define, identify and consistently exclude companies materially involved in these severe human rights abuses in a credible, systematic and defensible way.

And that’s what led them to us.

At first glance, it seems a straightforward enough proposition. An investment approach like this should exist. The vision is easy to understand. In practice though, it’s anything but. Take a seemingly neutral company - one that makes components for something as innocuous as elevators for example. On the surface it appears uncontroversial. But is there exposure in its supply chains? Where are those components used? What projects are they part of? What regions does it operate in? How are the end components used?

Answering these questions for a single company can take hours, and even days. Multiply that work across a universe of potential companies and institutions, great and small, and you begin to see why this is such a difficult bar to clear for most investment vehicles, despite the clarity of the vision.

It’s not that the data isn’t available - it generally is - but in our experience, it’s fragmented, inconsistently reported or difficult to access or interpret. There are no easy shortcuts, requiring manual work by skilled researchers who are prepared to find the evidence, which may span across different sources and jurisdictions.

It took months of research before we could even begin to build the screening model at the core of The Justice Company’s framework.

Exclusion With No Exceptions

We started by establishing a non-negotiable boundary: no exposure to companies that profit from genocide, occupation, apartheid, and human rights violations of a similar magnitude. We then had to decide: What “counts”? When does a company materially benefit from human rights abuses? Are there differences in degree? Should there be a difference between long-standing disputes in sovereignty, and active and ongoing apartheid? Which observers and bodies of authority can be trusted to have an accurate read on the situation?

We began by identifying the areas where the underlying facts are not in dispute. The Geneva Conventions, the UN Guiding Principles on Business and Human Rights, and related international frameworks already define categories of conduct that are widely understood and documented.

We supplemented this with insights from independent organisations like Amnesty International and Freedom House.[1]  We also worked with regional experts to understand how these issues manifest in different parts of the world, and to better understand the reliability of the data we uncover in our screening efforts 

Equipped with a variety of authoritative perspectives, we set to work building a screening model that starts from a basis of exclusion, rather than scoring. There are categories of conduct that should disqualify a company wherever they occur, which is what the framework seeks to address. Incremental progress is not sufficient. A company is either materially involved in serious human rights abuses, or it’s not.

This stands in contrast to much of the ESG industry, where relative improvement and broad inclusion is commonplace. It’s an approach that has its place, but it doesn’t address the need that this platform was designed to meet.

Meeting the moment

For us, this project represents the natural extension of the work we’ve been doing for decades; applying detailed, evidence-based research to help investors align their capital with their convictions. The clarity of the objective and the level of precision required to deliver it, set this project apart. 

The Justice Company’s investment approach is built on that foundation, and provides investors access to developed market equities while applying a consistent and defensible human rights screen. And it arrives at a time when the abuses it seeks to exclude have never been more deeply woven into the products and services used in everyday life. There is an undeniable demand from investors who wish to grow their wealth without rewarding the companies that seek to profit from displacement, ethnic cleansing, and other human rights violations.

It is our hope that Ethical Screening’s foundational work in developing the framework that underpins The Justice Company’s approach will resonate with other investors who demand a fundamental standard of sanity and accountability for human rights. We truly believe The Justice Company can create accountability and change for the better in a world sorely in need of both.