Britain’s long-term security has been put at risk by the City shunning defence companies over misplaced ethical concerns, ministers have warned.
Andrew Griffith, the City minister, and James Cartlidge, the defence minister, argued it was “perverse” for investors to be either deliberately discriminating against defence and security companies, or adopting a “broad-brush” approach to ethical investing, at a time when British aid has been crucial in Ukraine.
Writing in the Mail on Sunday, the ministers said: “Peace needs defence, and defence needs an industrial base.”
They added: “There is a troubling misunderstanding within investor preferences and the defence sector – which includes firms such as BAE Systems, Babcock and QinetiQ – that risks starving the industry of capital at competitive valuations.”
BAE Systems, for example, makes tanks and ammunition which have been vital in the war against Russia.
However, a recent survey revealed almost two thirds of institutional investors had already sold their stakes in security and defence companies over Environmental, Social and Governance (ESG) concerns, or were considering divesting from those firms.
The ministers wrote: “It is blindly apparent that all businesses rely on the peace and stability delivered by the Armed Forces and the industrial base which supports them… There could hardly be a bigger or more positive social responsibility than investing in peace.
“If Russian tanks roll further into Europe, the freedom we all take for granted would go out the window. The quicker investors realise this and come on board the better.”
The comments come amid growing concern over how ESG policies at banks and investment firms are enforced.
The Telegraph earlier this month revealed that NatWest-owned Coutts closed down Nigel Farage’s bank accounts after deciding his views “do not align with our values”.
A 40-page dossier from Coutts, first published by the Telegraph, detailed why its ESG policies meant it should no longer provide services to Mr Farage, saying the view was not political but one “centred around inclusivity and purpose”.
The row led to the resignation of Peter Flavel, the Coutts boss, and Dame Alison Rose, NatWest’s chief executive. Dame Alison quit after it emerged she had leaked inaccurate information on the account closure to the BBC.
Former Cabinet minister David Davis criticised the fashion for “grandstanding and virtue signalling” by companies, saying the co-called woke capitalism was “going to be a passing mad phase”.
Mr Griffith last week announced a crackdown on lenders who block accounts because of customers’ personal views. The Telegraph revealed this weekend it was also considering extending this to include businesses.