British Investors Exiting Defense Sector

The government of the United Kingdom has attributed this trend to environmental, social, and governance principles (ESG).

08/08/2023 - 20:19
Source: Defbrief
Source: Defbrief

British investors are reducing their stakes in leading British defense companies, as reported by with reference to Financial Times.

According to the London Stock Exchange, since the beginning of 2022, British companies have, on average, reduced their stakes in companies by 9%.

The UK government has accused environmental, social, and governance principles (ESG) of hindering investment inflow into this sector.

ESG comprises a set of criteria that investors in the United Kingdom are required to adhere to. These criteria obligate investors to prioritize projects utilizing "green" energy, reducing carbon footprint, or promoting employee equality and inclusivity.

James Cartlidge, Minister for Defense Procurement, warned that the long-term security of the United Kingdom is now under threat.

"Excessive caution or misapplication of ESG criteria sharply impacts the defense sector's ability to access financial services crucial for arming the country. There are individual instances where creditors have withdrawn banking services or denied credit to small and medium-sized companies due to their involvement in the defense industry," stated Kevin Craven, Director of ADS Group, a company representing the defense industry's interests.

As reported by FT, the shareholder base of the British company BAE Systems has been shrinking year after year, shifting towards investors from the United States. Currently, the share of US investors in the company's shares is approximately 42%.

Although ESG investment rules typically prohibit the production of weapons designed to cause indiscriminate harm to civilians, experts believe there are several common exceptions for defense companies.

"The ESG view on defense companies has always been more nuanced than inherently negative," commented Mirza Baig, Global Head of ESG Investments at Aviva Investors.



$ 451.27  489.13  4.87