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A fierce spat on Friday at the White House gave birth to one winner. On Monday morning, European defence stocks, including German Rhinemetal, French Thales and the BAE system, ran down the roof.
Prices have risen due to expectations of government spending. But he believes that war rebranding will support national security, oppressed allies and resilience — has paid dividends for a while. Ethical investors are slowly beginning to throw away the creaks about the sector. At the end of 2023, 1,856 European ESG funds not exposed to the sector reached 1,614 a year later.
In fact, the holdings of funded defense stocks focused on environmental, social and governance had increased to 8 billion euros by the last quarter of 2024, up from 2.7 billion euros in the first quarter of 2022. European aerospace and defense shares have risen 2.5 times since Russia invaded Ukraine in 2022.
Similarly, large national investors are reassessing their disgust. Take the 1.8 tonne sovereign wealth fund, officially known as Norway’s Government Pension Fund Global. Central banker Ida Walden Bash said that those who invest bounty from the country’s natural resources “can change what they consider to be ethically acceptable.”
Technology also abandons historical hostility for military applications. Google Parent Alphabet – coincidentally one of Norwegian SWF’s top 10 holdings – last month, last month opposed the use of artificial intelligence to develop weapons and harmful technologies.
Google caught up with AI peers such as Openai and humanity in providing models to the US defense sector. Facebook’s owner meta platform has stopped sharing the open source llama model with US departments working on defense, explaining that responsible use in this area “promoting global security.”
Again, there is a financial subtext. The defense department, which sowed Silicon Valley, has paid a lucrative contract. Peers of Palantir is a software consultant specializing in using data to make Western military power even more deadly and requires loot.
There are props that go beyond greed and simple arithmetic that promote increased exposure to sustainable fund defense. The government has pledged to spend more on defense, but it hopes to make it easier for private investors to participate. Emphasizing this, the EU and the UK both note that their defenses are not compatible with ESG standards.
Defense companies themselves throw away their most harmful weapons. Thales stopped supply of weapons containing white phosphorus in 2022, even if they did not directly ban directly banned burned Cen weapons. Bae left two years later.
Certainly, weapons never become a cute sector. However, the combination of improved global position and large outperformance means that we will continue to slide towards more ESG funds. After all, there are very few things that spell sustainability like peace and security.
louise.lucas@ft.com
