The global arms industry is a controversial sector that has long been a focus of scrutiny and debate. A recent report from the Global Alliance for Banking on Values has shed light on the significant investments made by the financial sector in arms companies between 2020 and 2022. The report revealed that nearly $1 trillion was invested globally in the arms sector during this period, with a large portion of these investments coming from major European institutions.
Barclays and Legal & General, two prominent financial institutions, have come under fire for being among the top 10 major European investors in arms companies. Both companies have been investing billions of dollars in the arms sector each year, contributing to the overall funding of the industry. The report highlighted that 69 percent of investments in weapons came through shareholding, with 19 percent from loans and 11 percent from underwriting.
The dominance of American institutions in funding arms companies was also a key finding of the report. The top ten funders globally were all American, collectively providing $464 billion between 2020 and 2022, accounting for almost half of the total estimated investment in the sector. Meanwhile, European investors, including Barclays and Legal & General, collectively contributed $79 billion, or about eight percent of the total invested worldwide.
Martin Rohner, executive director of the Global Alliance for Banking on Values, called on the financial industry to stop fueling the production and trade of weapons and arms. He emphasized the need to shift towards investing in peace rather than war. Despite the lack of specific details on which arms companies were being selected for investment by major banks, the report comes at a time when firms like BAE Systems and Chemring have reported significant profits.
BAE Systems, in particular, has seen a surge in its stock price following Russia’s invasion of Ukraine, with the firm’s order backlog reaching record levels in 2023. Global defense spending has also risen by nine percent to a record $2.2 trillion, further fueling the profitability of arms companies. However, there are differing opinions on the ethics of investing in the arms industry, especially in the wake of geopolitical conflicts.
Some argue that arms companies should be viewed as a less controversial investment given the current global security landscape. Defense secretary Grant Shapps has even suggested that divestment from the weapons industry due to ESG (Environmental, Social, and Governance) investing could threaten industries critical to national security. This viewpoint has reignited the debate on the role of ESG funds in investing in arms companies.
In light of these developments, Barclays and Legal & General have been contacted for comment on their investments in the arms sector. The ongoing discussion surrounding the financial sector’s involvement in funding arms companies underscores the complex ethical considerations at play in the global economy. As stakeholders continue to grapple with these issues, the need for transparency and accountability in financial investments remains paramount.
