Considering the source (Bloomberg), this is a remarkable (and praiseworthy) admission:
The S&P Global Clean Energy Index has lost about 40% of its value since Russia invaded Ukraine in February 2022. The S&P Global 1200 Aerospace & Defense Index climbed 64% in the same period.
And yet we continue to be told by inhabitants in the ESG ecosystem that clean energy is what attracts investors. Odd. It’s almost as if ESG’s advocates were more interested in ideology and fees than in generating return for their investors.
One argument used by promoters of ESG (an investment “discipline” which includes a strong focus on environmental, social, and governance factors) to sell their snake oil was the assertion that it was a way of doing well by doing good, a claim that has required rather elastic definitions of “well” and “good.” That hasn’t worked out, thus the switch to a more defensive justification — particularly after the brief green bubble burst — that ESG was a way of reducing risk. Hmm.
The supposed difficulty in reconciling ESG with investment in defense stocks has been a point of contention for some years, particularly since the full-scale invasion of Ukraine, and sentiment has been changing. ESG funds have been increasing their exposure to the defense sector.
Louise Lucas, for the Financial Times (March 3):
War’s rebranding — think national security, supporting downtrodden allies and resilience — has been paying dividends for a while. Ethical investors are slowly starting to shed their squeamishness about the sector: the 1,856 European ESG funds with no exposure to the sector at end-2023 had been whittled down to 1,614 a year later. . . .
Governments are pledging to spend more on defence, but they want to make it easier for private investors to join in too. Highlighting this, the EU and UK have both noted that defence is not incompatible with ESG standards. . . .
Sure, weaponry will never be a cuddly sector. But a combination of improved standing in the world and huge outperformance mean it will keep sliding into more ESG funds. After all, few things spell out sustainability like peace and security.
As was the case long before the war in Ukraine.