FCA clarity on defence investment and green rules welcomed by MPs
MPs have welcomed a move by the financial watchdog, clarifying that defence investments aren’t constrained by green or sustainability rules.
The Financial Conduct Authority (FCA) released a statement on Tuesday morning clarifying their position on sustainability and defence investments.
A spokesperson said: “Our sustainability rules do not prevent investment in or finance for defence companies. The financial sector plays a vital role in supporting all sectors, including defence.
“There is nothing in our rules, including those related to sustainability, that prevents investment or finance for defence companies.
“Our sustainable finance rules apply to firms providing financial products and services as well as some listed companies. They do not require financial institutions to treat defence companies differently because they are in the defence sector.”
It comes after Prime Minister Keir Starmer announced the UK would move from spending 2.3 per cent of GDP on defence to 2.5 per cent from April 2027, with an ambition to reach three per cent in the next parliament.
No10 has framed the move as the biggest investment in defence spending since the Cold War.
It also came as Europe was rocked by the US approach to the future of the conflict in Ukraine, with nations looking to form a ‘coalition of the willing’.
Nothing to stop banks serving defence clients
The FCA statement stressed that there were “no FCA sustainability rules that stop banks from serving defence clients” but that “banks may have their own defence-related policies, which some banks describe as part of their sustainability disclosures” and “rightly, it is up to individual lenders and investors whether they provide the capital defence companies need”.
The move was welcomed by MPs Alex Baker and Luke Charters who have campaigned for the ESG rules to be clarified to promote investment in the UK defence sector, in light of what they called a historic perception among some firms that FCA rules may limit such funding.
They jointly said: “It is an extremely positive and welcome step that the FCA have confirmed their own rules should not prevent investment in defence.
“We hope more financial institutions will now reflect on this much-needed signal from the FCA and review their approach so that our defence industries receive the investment needed to safeguard our national security, support Ukraine and create jobs across the UK.”
They added: “It is great to see that firms like TT International have already taken action and committed to increasing the scope for defence investment in some of their funds.
“We hope others will follow their example and we are grateful to the FCA for their readiness to play their part in supporting this work.”