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PM says investments in weapons companies meet ethical criteria

Rishi Sunak said the Government will seek to incentivise private sector investment by stating that defence investment counts towards ESG assessments.

Rebecca Speare-Cole
Tuesday 23 April 2024 11:31 EDT
Prime Minister Rishi Sunak arrives at Warsaw Chopin Airport during a visit to Poland and Germany (Henry Nicholls/PA)
Prime Minister Rishi Sunak arrives at Warsaw Chopin Airport during a visit to Poland and Germany (Henry Nicholls/PA) (PA Wire)

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Private sector investment in weapons companies counts towards ā€œethicalā€ environmental, social and governance (ESG) criteria, Rishi Sunak has said.

The Prime Minister said the world is ā€œthe most dangerous it has beenā€ since the end of the Cold War as he promised an extra Ā£75 billion in defence spending by 2030.

During a speech at a military base in Warsaw, Poland, he promised a further Ā£10 billion over the next 10 years to ensure the military does not run out of ammunition and missiles as the UK draws lessons from the war in Ukraine.

There is nothing more ethical than defending our way of life from those who threaten it

Prime Minister Rishi Sunak

But Mr Sunak said the Government will also seek to incentivise companies to invest in weapons by stating that it counts towards ESG criteria ā€“ which involves considerations around how a firm manages its impact on people and the planet.

The Prime Minister said: ā€œTo encourage private sector investment into defence production, I can also announce today that weā€™re going to put beyond doubt that defence investment does count towards environment, social and governance assessments.

ā€œThere is nothing more ethical than defending our way of life from those who threaten it.

ā€œNow all of this will put us at the forefront of the global defence industry, allow us to hugely ramp up defence production and give our armed forces the capability they need to keep us safe.ā€

The comments coincided with a joint statement from the Treasury and the Investment Association, the trade body that represents UK investment managers, declaring that defence investment is ā€œcompatible with ESG considerationsā€.

ā€œInvesting in defence companies contributes to our national security, defends the civil liberties we all enjoy, while delivering long-term returns for pensions funds and retail investors,ā€ the online statement said.

Investing in good, high-quality, well-run defence companies is compatible with ESG considerations as long-term sustainable investment is about helping all sectors and all companies in the economy succeed

Treasury and Investment Association statement

ā€œThat is why the UKā€™s world leading investment management industry supports our defence sector, with the Investment Associationā€™s members having invested Ā£35 billion in UK defence companies.

ā€œInvesting in good, high-quality, well-run defence companies is compatible with ESG considerations as long-term sustainable investment is about helping all sectors and all companies in the economy succeed.ā€

In recent months, ministers have repeatedly expressed concern over defence firms being excluded from access to capital due to ESG criteria.

Defence Secretary Grant Shapps has spoken out against an investment culture guided by ESG policies that exclude the sector.

In a post on X, formerly Twitter, last year, Mr Shapps said: ā€œIt is very wrong for woke fund managers to imagine theyā€™re being principled by de-funding our defence sector due to so-called ethical investment rules.

ā€œIn fact, we have a moral imperative to invest in defence because failing to do so would surrender our nationā€™s protection.ā€

In September, defence minister Baroness Goldie also said defence firmsā€™ exclusion from access to debt and equity capital ā€œthreatens an important part of the economyā€ and ā€œthreatens to increase the cost of procurement, diverting taxpayersā€™ money away from other defence spending and from public servicesā€.

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