Since the Russian invasion of Ukraine, European sustainable development funds’ investments in defense companies have increased by more than 100%, which relates to political demands to strengthen the defense industrial base.
According to the FT, about a third of ESG-oriented (environmental, social, and governance) funds in Europe and the UK have invested €7.7B in the sector, up from €3.2B in the first quarter of 2022. The increase is due in part to a rise in the share prices for defense companies after Moscow invaded Ukraine in 2022.
However, many investors also agreed with governments’ argument that supporting defense manufacturers carries positive social effects, not just risks. In the US, ESG fund investments in the defense sector have also increased – up to €1.2B in the second quarter of 2024. Overall, interest in defense stocks is growing as investors rethink their strategies in light of current geopolitical realities.