Quo vadis sustainable finance: why defensive weapons should never be classified as an ESG investment

Abstract

The Russian invasion of Ukraine has influenced how investors categorize sustainable investments. More precisely, an invasion has been used as an excuse to label investments in companies supplying weapons used in self-defense to fight against Russian aggression as socially sustainable since they are a tool helping democracy to repel the invasion of the non-democratic counterpart. Suddenly, the weapons industry started becoming an entirely acceptable sustainable investment asset. This demonstrated that weapons are not the cause but only the result of flawed sustainable investing thinking, which can sometimes be based on ideas that vary widely in terms of consistency and accuracy. This paper discusses some of the reasons underlining systematic problems in the sustainable finance realm and lists why defensive weapons can never be classified as an acceptable asset to invest in.