Sustainable investors appear more comfortable with defense stocks [Video]

Russia’s ongoing war in Ukraine has resulted in a profound shift in the way defense stocks are viewed by mission-driven fund managers, according to two European defense giants.

Defense stocks have typically been excluded from portfolios based on environmental, social and governance (ESG) factors due to ethical concerns over their association with warfare.

In recent months, however, ESG fund managers appear to have become increasingly comfortable with holding defense companies — at a time of soaring industry profits and higher defense spending, as governments respond to elevated geopolitical risk.

Nonetheless, the inclusion of defense stocks in sustainably-minded portfolios remains controversial.

Micael Johansson, CEO of the Swedish defense and security company Saab, said Russia’s decisionto launch a full-scale invasion of Ukraine in February 2022 had brought …