City minister slams British investors ‘defunding’ UK defence giants like BAE
City minister Andrew Griffith has slammed UK investors’ decision to move away from the country’s top defence firms such as BAE Systems.
According to data from the London Stock Exchange, reported by the Financial Times, fund managers based in the UK have cut their holdings in defence firms, including BAE Systems and Qinetiq, by around nine per cent since the start of last year.
Reacting to the news, Griffith said it was morally wrong for investors to move funds out of these companies.
“Whether it is deliberate or the unthinking application of ‘ESG’ policies, [British] investors defunding defence is the opposite of social responsibility when peace and democracy [are] under threat,” Griffith wrote on X.
Kevin Craven, chief executive of aerospace and defence trade association ADS Group, said ESG policies are having a huge impact on the sector.
“Overcautious or misapplied ESG considerations are drastically impacting the ability of the defence sector to secure financial services vital to delivering UK advantage,” Craven said in an emailed statement.
“These barriers to receiving financial services range from anything related to opening a business bank account, receiving insurance for day-to-day operations, or those fund exclusions that drastically impact their ability to raise the necessary capital,” he added.
However, it is unclear exactly whether ESG policies are to blame for this specific investing trend.
“I don’t think you can blame any single factor, but I do think ESG factors don’t help when it comes to investing into areas of the market that will always be perceived as controversial,” Michael Hewson, chief market analyst at CMC Markets, told Morning Wire
“In the case of BAE Systems, it’s perhaps not surprising that some fund managers have cut their exposure here given the shares are close to record highs and are up over 80 per cent since the beginning of 2022. Locking in gains is a hallmark of good money management,” he said.
However, Hewson said: “There needs to be a case for common sense when it comes to the application of ESG for areas of the market that could be considered essential for national security.”
BAE Systems and Qinetiq were contacted for comment.