Sustainable Investors Show Renewed Confidence in Defense Stocks: A Surprising Eco-Friendly Shift
In light of Russia’s ongoing war in Ukraine, the perception of defense stocks amongst ESG-focused fund managers is shifting. Historically, defense stocks have been excluded from ESG portfolios due to ethical concerns. Yet, with heightened geopolitical risks and surging industry profits, some ESG managers now show a growing willingness to include these stocks. Nevertheless, this remains a divisive issue.
Micael Johansson, CEO of Swedish defense firm Saab, remarked on the “dramatic” change in ESG discussions since Russia’s invasion of Ukraine in February 2022. Saab’s shareholder base has soared from 45,000-50,000 to beyond 175,000. Johansson emphasized the critical role defense companies play in protecting free societies, though some investors, like certain pension funds, still hesitate to consider defense stocks sustainable.
Shares of Saab, which manufactures missiles, submarines, and fighter jets, have skyrocketed by around 330% from February 2022 to August 2024. Despite this growth, ethical concerns linger. Ida Kassa Johannesen of Saxo Bank pointed out that retail investors typically avoid associating with companies that produce weapons, due to their involvement in global conflicts.
Questioned about the reputation of defense companies, Johansson defended Saab’s mission, expressing confidence in the firm’s contributions to resilience and capabilities in defense. He stressed the necessity of professional and committed companies in delivering resources to defense forces.
BAE Systems’ CFO Brad Greve noted a significant shift in attitudes post-Ukraine invasion, allowing for increased dialogue about the positive societal roles defense companies can play. BAE Systems’ shares have increased by roughly 130% over the same period.
While the debate around ESG and defense stocks continues, Johannesen advised cautious consideration, acknowledging that not all defense companies should be uniformly judged. This nuanced view highlights the ongoing complexity in reconciling ethical investment with geopolitical realities.
Original Story https://www.cnbc.com/2024/09/02/esg-sustainable-investors-appear-more-comfortable-with-defense-stocks.html
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