Ang mga kumpanya ng pagtatanggol ay nag-rampa up ng pitch upang makaalis sa kagubatan ng pagpapanati

Isang asset manager ang nag-anunsyo noong nakaraang linggo na muli nitong pahihintulutan ang pamumuhunan sa depensa, isang senyales na umuusbong ang mga bitak sa malawakang pagsalungat sa pagmamay-ari ng mga kumpanya ng pagtatanggol mula sa mga napapanatiling mamumuhunan sa Europa.

Inaasahan ng mga analyst na marami pang susunod. Ngunit para sa marami na may napapanatiling pagkiling - tinukoy ng ilan bilang pamumuhunan sa mga kumpanya na naglalayong magkaroon ng positibong epekto sa mundo - ito ay magpapatunay ng isang mahirap na tanong.

Sina Rolls Royce, Thales at Airbus ay sumali sa isang koro ng mga kumpanya sa nakalipas na dalawang linggo na nananawagan sa mga mamumuhunan na tratuhin ang sektor nang mas paborable, ang pagtatalo ng seguridad at katatagan ay susi sa pagpapanatili.

Dumating iyon pagkatapos ng isang taon ng industriya na naglo-lobby sa mga awtoridad sa Europa na huwag ibukod ang depensa mula sa isang paparating na balangkas o “taxonomy” sa mga pamumuhunan na mahusay sa lipunan.

Kasunod din ito ng mga taon kung saan iniiwasan ng mga mamumuhunan sa buong Europe ang sektor na pabor sa mga kumpanyang may mas matibay na mga profile sa kapaligiran, panlipunan at pamamahala (ESG), nakakasakit sa mga bahagi ng depensa at nagtataas ng mga gastos sa financing.

Karamihan sa mga pondo ay nakatuon sa sustainability na sinabi ng Reuters na mananatiling malamig sa depensa. Ngunit ang ilan ay tumitingin sa mga pagbabalik na inaalok mula sa pagtulak ng rehiyon na itaas ang paggasta sa seguridad.

Inanunsyo ng SEB Investment Management ng Sweden noong nakaraang linggo na binawi nito ang malawakang pagbabawal sa anumang kumpanyang kumukuha ng higit sa 5% ng kita nito mula sa depensa para sa anim na pondo nito, bagama't ang karamihan sa hanay ng produkto nito ay hindi nagbabago, kabilang ang mga napapanatiling pondo.

Iniuugnay ng SEB ang pagbabago sa panggigipit mula sa mga customer para sa pagkakalantad sa depensa habang ang mga tropang Ruso ay nagtipon sa hangganan ng Ukraine, na binibigyang-diin na ang mga fund house ay dapat sumagot sa mga kliyente pati na rin ang kanilang sariling mga pangako sa pagpapanatili.

“We are seeing evidence that a number of large European asset managers are re-evaluating the sector,” said Luke Sussams, head of ESG in Europe, the Middle East and Africa for investment bank Jefferies. “The Ukraine-Russia conflict has been a real wake-up call for ESG investors in general.”

Yet others say the sudden redrawing of Europes security architecture does not mean makers of fighters, missiles and tanks are suddenly sustainable.

“Sustainable investments must fulfil the criterion ”Do no significant harm“ – this is not the case with armaments,” said Henrik Pontzen, head of ESG at Union Investment. It is sticking to excluding from its sustainable funds any company that earns more than 5% of revenue from arms.

Sasja Beslik, head of sustainability at Danish pension fund PFA, said investors were wrong if they believed they could ensure that any investment in defence went solely towards defending borders.

“What are we going to include tomorrow？ Let‘s include chemical companies that are polluting certain parts of the world, but not the rest. Come on, it’s ridiculous,” he told Reuters.

While funds with a specific sustainable or ethical mandate may find it hard to change tack, others with a looser requirement to “integrate ESG risks” have more flexibility.

Sustainable managers typically avoid businesses that earn 5%-plus of revenue from defence, while the vast majority of risk-focused funds just ban those involved with unconventional weapons such as cluster munitions.

UBS analysts noted that rather than outright exclusions some ESG managers prefer engagement.

According to Morningstar, sustainable funds have a 0.2% weighting to aerospace and defence against the Vanguard Total World Stock ETFs 1.1%. In Europe the underweighting is starker — 0.2% against 1.6%.

SOCIALLY GOOD OR BAD？

Still, defence lobbyists believe they are now winning the argument, especially after a strong indication that Europes drive to help funnel investment to socially and environmentally friendly activities would not exclude their industry.

A report prepared for the European Commission on its ‘Social Taxonomy’ last month omitted an earlier reference of defence as socially harmful. Lobbyists had feared it would lead to widespread fund exclusions.

With Germany, Sweden and others announcing bigger defence spending since the war in Ukraine, analysts have rushed to upgrade forecasts and share prices have soared.

Calling ESG concerns “spurious and morally weak”, Agency Partners said in a note that the EU taxonomy debate had clouded the investability and valuations of defence stocks.

And French warplane manufacturer Dassault Aviation hit out at a “schizophrenic” situation that saw European defence spending rising only for U.S. rivals to benefit, because European suppliers were being harmed by the EU taxonomy drive.

“Taxonomy is not an effective weapon against current threats,” CEO Eric Trappier, who also represents the French defence industry, told reporters. “It is a weapon used against us, the defence industry, and the proof is that… its small suppliers are starting to have problems with their banks.”

FIGHTBACK

The defence industrys fight is far from over, however.

Including defence in the EU social‘s taxonomy would “fly in the face of the ’Do No Significant Harm principle'”, said Hortense Bioy, sustainable research director at Morningstar.

European technical advisers are also backing a 5% revenue threshold to exclude defence companies from the bloc‘s planned ’EU Ecolabel, which is designed to help consumers identify more environmentally friendly and socially good products.

A spokesperson said the Commission would “carefully reflect on all the implications of those exclusions for defence-related activities”, but stressed no final decision had been made.

For a fragmented industry that can struggle to compete against rivals in the United States where ESG concerns are less commonplace, winning hearts and minds of investors is crucial.

“Even if some banks and investors are coming back to defence, it doesnt mean they all are,” said Jan Pie, secretary general of European defence industry lobby ASD, arguing that longer term, defence needed more reliable financial backers.

“It shouldnt be public opinion that decides whether to finance the defence industry.”