There are no rules stopping U.K. investors with ESG mandates from investing in defense assets, according to the country’s financial regulator.
“The financial sector plays a vital role in supporting all sectors, including defense,” the Financial Conduct Authority said in a statement on March 11. “There is nothing in our rules, including those related to sustainability, that prevents investment of finance for defense companies.”
The comments come as Europe races to build up its defense industry, against a backdrop of an increasingly aggressive Russian military campaign in Ukraine and souring ties with the administration of U.S. President Donald Trump.
Investors in Europe have voiced concerns that holding defense assets might clash with environmental, social and governance principles, with Morningstar DBRS recently noting that the European Union’s Taxonomy Regulation poses obstacles. However, the FCA said its rules don’t require financial institutions to treat defense companies differently from other sectors.
The FCA said its rules are designed to ensure information about investments, claiming to be sustainable, can be trusted and readily understood, and to improve the quality of sustainability-related information in the market.
“These rules shouldn’t be confused with financial institutions’ own policies relating to the type of businesses they wish to support and their own risk appetite,” the FCA said.
