It’s Time to Engage Investors

Financial research analyst and N Square fellow David Epstein has a message for sustainable investors: the risk they’re not talking about might be the biggest of all.

Jenny Johnston / September 1, 2020

Financial investors don’t toss around phrases like “nonproliferation” and “nuclear detonation” very often—and almost none are factoring nuclear weapons or potential nuclear conflict into their decision-making. But David Epstein hopes to change that. Epstein spent 20 years as a research analyst on Wall Street, scrutinizing corporate fundamentals and advising investors on financial risk. But it was the risk they weren’t talking about that increasingly drew his focus. He spent thousands of hours studying nuclear risk, eventually turning his growing alarm into a plan to get investors—specifically, sustainable investors, who are eager to align their money with their values and make a positive societal impact—engaged on nuclear issues. “There are people who know more about nukes and there are people who know more about sustainable investing,” explains Epstein. “But there’s almost nobody focused on combining these two issues in a comprehensive way.”

In the last few years, Epstein has published articles and op-eds in everything from Barron’s online to the Bulletin of the Atomic Scientists, making the case that investors have a role to play in reducing the threat of nuclear weapons. But it’s his new 74-page report, “Preventing Nuclear Catastrophe,” synthesizing much of his thinking on how to jumpstart investor engagement, that is creating a real buzz. Multiple leading financial publications focused on sustainable investing have picked up the report, and Inkstick also ran an article. Epstein finished the report soon after completing his N Square Innovators Network fellowship, an experience that helped inspire and further its core research. (The report was funded in part by N Square.)

Epstein has good timing. Growing numbers of sustainable investors aim to mitigate existential threats like climate change and conservation through their investments. And right now, like the rest of us, they are experiencing firsthand the limits of relying on government alone to anticipate and address societal threats like the COVID-19 pandemic. That makes this an almost ideal moment to get nuclear threats on their radar, reasons Epstein. “My goal is to get them to worry about not just the ability of nuclear weapons to kill millions but also their ability to bring down economies, debilitate markets, and wipe out sources of income and lifetimes of work.” And nobody knows how Wall Street might respond to a nuclear catastrophe, he says. “It would likely be unprecedented.”

Epstein’s report speaks to a range of sustainable investors but homes in on a few in particular. ESG investors—so called because of their concern for environmental, social, and governance issues—are a rapidly growing class of investors involved in the publicly traded equity markets. These investors are pushing companies to disclose information and create transparency on factors that matter to them and/or pose risks to their portfolios—everything from a company’s CO2 emissions per unit of production to whether they have an anti-bribery ethics policy in place or a demonstrated commitment to board diversity. Companies that fare poorly by these “screens” are either avoided by these investors or compelled to change their practices.

But beyond divestment campaigns, there hasn’t been a concerted effort to get ESG investors to screen widely for nuclear weapons and proliferation risk. “Nukes threaten every one of the United Nations’ sustainable development goals, which many sustainable investors hold as something of a ‘north star,’” Epstein says. “But they’re just not factored in by ESG investors, particularly in the U.S.”


It’s time for that to change, he says—and not just when the potential investments are in aerospace and defense companies. Lots of industries can wittingly, or unwittingly, contribute to the nuclear supply chain or the possibility of nuclear conflict, Epstein says. What if these investors required banks to have stronger counter-proliferation financing policies? Or compelled social media companies to enact better protections against disinformation and hacking that might lead to a nuclear confrontation? Epstein also lays out an argument for why engaging companies to improve their performance and disclosures might be a better alternative to blanket divestment. “You can effect more change if you say, ‘Look, there are conflicts of interest in your lobbying activities and your cybersecurity measures are inadequate. We strongly encourage you to change your practices.’”

Epstein’s report also targets impact investors, who put their money in for-profit companies that promise to generate positive environmental or societal impact alongside a financial return. Impact investors have long ignored nuclear issues, but with good reason: the nuclear risk reduction field is dominated by nonprofits and government entities, not revenue-producing enterprises. But Epstein devotes a chunk of his report to explaining how the field can build a pipeline of for-profit projects and startups capable of attracting impact investors and their considerable capital ($719 billion in 2019). These include film and media projects featuring nuclear storylines and projects in technology, AI, cybersecurity, and blockchain that play a role in reducing nuclear risk and have broader commercial application. Epstein also ticks through a host of novel funding mechanisms—from combined nonprofit/for-profit entities to idea accelerators to blended finance models where philanthropic funders offer grants to develop an idea to the point where it attracts investment—that could fuel new entrepreneurial and investment activity. 

But these investors won’t come without prompting, Epstein warns. “Nuclear experts need to educate the financial community,” he says. “They need to get out into the financial and business media and tell investors, ‘Just as with COVID-19 and climate change, this is your problem too and you need to help solve it.’” Nuclear experts also need to help set standards for what sorts of nuclear risk sustainable investors should begin factoring into their screening tools, and to lay out all the issues that are potential pathways to conflict for entrepreneurs and investors so that they can help drive solutions. 

Luckily, Epstein will be on hand to advise them. He recently launched the Cross Capital Initiative, which he hopes will become a platform for pursuing the kinds of work detailed in his report. “My goal is not a personal goal,” Epstein says. “I just want to help the financial world see that nuclear is an investable issue.”

→ Read “Preventing Nuclear Catastrophe.”