Babcock’s aircraft carrier at the Rosyth shipyard
Last year the Financial Times reported that defence contractors were becoming increasingly concerned that the ‘sweeping trend’ for ethical investment (ESG) would lead to their shares being shunned by institutional investors.
David Lockwood (left), CEO of Babcock International – Britain’s second-biggest defence contractor – warned the Financial Times that anti-defence lobbyists are trying to hijack the ethical investment agenda for their own aims
Lockwood’s comments echoed those of Rupert Soames, chief executive of UK outsourcer Serco, who recently warned of “unintended consequences” from the rise in ESG standards that could force some public companies to go private.
Sir Roger Carr, chair of BAE Systems, Britain’s biggest defence group, spoke recently of the risk of some sectors being “blackballed.
The Norwegian investment fund KLP sold out of Rolls-Royce, the FTSE 100 aerospace company, because Rolls-Royce makes the nuclear reactors that power the Royal Navy’s Trident-missile submarines.
Canbriam, a New York based a global multi-specialist asset manager, ‘a recognized pioneer and leader in sustainable investment’ explains:
For many years, and with the gradual rise of ESG investing, investors have been excluding the defence sector from their investments due to the adverse nature of armaments which have often served to infringe human rights and led to devastating effects on human lives and the overall well-being of society . . . we have a fiduciary responsibility to invest on behalf of our clients in the most sustainable manner. Our clients trust us for our convictions and our ability to invest in a truly sustainable fashion, without wavering from the principles of sustainability due to global political events.
Its heading is uncompromising:
However, as investors bet on the promises of increased military spending by western governments to help Ukraine’s war effort against Russia, in recent months shares in defence companies have surged, rallylng 30% since October and eclipsing gains for wider stock markets (Financial Times).
And since US president Joe Biden underlined his support for Ukraine in February with a surprise visit to Kyiv, defence contractors have been waiting for governments to follow through and place new orders.
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