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ESG in the Army: why arms SRI exclusions are not sustainable

A contingent of the MINUSMA in Mali - 24 June 2019 © UN Photo/Harandane Dicko

The reflection to which the world has accustomed us in this very difficult 2022 is that peacekeeping is no longer a foregone conclusion. The balance of power and the implications of the conflict sparked by Russia's invasion of Ukraine have brought complex questions back to the table, both about how peace is maintained and how the free world is called upon to meet the challenges of the future. The defence industry has always been a controversial issue for Sustainable Finance in its “sake of good” vest. An old-fashioned ethical vision, considering how relevant the maintainance of peace will be for the next 10 years. The ESG investing universe has always turned a blind eye on Arms trade, usually excluding the industry because of its “controversial nature” [1]. It did exclude many other industries judging them as unfit to drive the transition. Considering the geopolitical weaknesses that excluding arms and energy companies from ESG portfolios could represent in the short term, this approach proved too many loopholes not to be considered at least as outdated. We are on the verge of a tipping point, whereby the Socially Responsible Investment strategy driven by Exclusion of industries such as the energy, oil&gas and the aerospace&defence’ ones is not sustainable at all [2]. If Sustainability is deemed through the standardised UN, EU and OECD principles guiding a better world for future generations then we must all agree how relevant is it for liberal democracies to deploy investments in a better defence ecosystem. A plan is emerging in these last few weeks seeing the Berlaymont rooms chatting about the issuance of an energy and defence bond framework [3]. If then the EU took this path, we would not be taken for wrong.

Nobody agrees that unconventional and chemical weapons are sustainable: conversely, unconventional weaponry is banned from UN Conventions and they will never be ESG compliant. However, excluding companies from ESG funds because their business is related to these “controversies” might result as unproductive and wrong [4]. The Swedish sovereign fund understood it and changed its own sustainability policy accordingly [5]. So, most of us could agree that the free world must invest much more on the peacekeeping industrial demand.The responsible approach to investing in sustainable finance should therefore be criticised. What if asset managers switched to international sustainability principles such as the UN R2P principle [6] to put forward the ESG investment strategies of the future?

Source: Standard Ethics: the Big Picture. Annual Report 2021, pp.42 and subsequent

A final consideration comes from the question we all might have: are defence companies sustainable? The answer is they have potential to be so. In a recent research published by the sustainability rating agency Standard Ethics [7] it emerges that slightly more than 70% of the Aerospace&defence rated companies, compromising the World’s main ones, has a sustainable grade.

In a nutshell, investing in defence companies will become inevitably a priority for sovereign nations in the aftermath of the Ukraine Crisis of 2022. What should be thus addressed by the market is thus how these companies could play an active role for the Planet and future generations.


[1] Eurosif (2022) “Responsible Investment Strategies”. URL:

[2] Pfeifer S. (2022) “Rise of ESG adds to pressure on European defence companies”. Financial Times. URL:

[3] Bahceli Y. (2022) “EU raises over 12 bln euros in debt sale as market watches for potential new borrowing”. URL:

[4] (2022) “SEB Investment Management updates the sustainability policy for investments in the defence industry”. URL:

[5] Karadima S. (2022) “What impact will the Russia-Ukraine conflict have on investment in the defence industry?” URL:

[6] Global Centre for the Responsibility to Protect (2005) “What is the Responsibility to Protect?” URL:,cleansing%20and%20crimes%20against%20humanity.

[7] Standard Ethics Research Office (2022) “Standard Ethics: The Big Picture. Annual Report 2021” pp.42 and subsequent URL:


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