Russia’s war prompts a pitch for ‘socially responsible’ military stock
They acknowledge that ESG investing has become a big deal in the United States and even more so in Europe. And they say stocks identified as ESG or green — those of companies with relatively low carbon emissions — are trading at a premium. He was unavailable for an interview, but in a series of research notes and in a conference call with clients from February 1, he noted that with the rise of the ESG movement, military contractors have fallen out of favor with many investors, especially in Europe.
They want to change that through a technical measure: by labeling military contractors as ESG compliant in the EU’s so-called taxonomy rules, which aim to be “a gold standard” in guiding private and public investors. Those rules have already been the subject of fierce debate due to the decision to label some nuclear power and natural gas plants as “transitional” green investments.
boon for military stocks
Analysts argue that arms companies will be included as acceptable socially responsible investments if the tide continues to turn. In a note on March 2, he said that Russia’s attack on Ukraine has accelerated geopolitical changes that are making military spending more popular among NATO countries, both with the people and the government elite. The conflict in Eastern Europe is leading to increased military spending by NATO countries, and that bodes well for military contractors and their stocks, he says.
Germany, France, Britain and other countries are likely to exceed the long-postponed target of spending at least 2 percent of their GDP on the military, analysts said, creating great opportunities for military contractors.
The shares of military stocks have already increased significantly before the invasion of Russia. The Fidelity Select Defense & Aerospace Portfolio, which tracks the industry, jumped 8.1 percent from the date of the February 24 attack, through Thursday, compared to a 3.3 percent gain for the S&P 500 stock index, including dividends. The German DAX index fell 6.4 percent in the same period.
Fidelity Fund includes Boeing, Northrop Grumman, Raytheon Technologies, Airbus and Lockheed Martin.
Analysts said that without strong military forces, “rising tensions, especially in Eastern Europe, are likely to remind investors that a safe and free society is not to be taken lightly. We believe That defense can be seen as a necessity that facilitates the ESG as an enterprise, while simultaneously maintaining peace, stability and other social goods.”
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