European ESG (environmental, social, governance) investments are flowing into the nuclear weapons industry. Following Russia's invasion of Ukraine, geopolitical instability has escalated, prompting European asset management firms and investors to draw 'security' as a new core value of ESG.
On the 24th (local time), Bloomberg reported that stock-type ESG funds investing in corporations that manufacture, transport, and supply components for nuclear weapons have increased by over 50% since 2022, surpassing 2,000. This means that half of European stock-type ESG funds are investing directly or indirectly in corporations related to nuclear weapons. The total fund size is approximately $20 billion (about 27 trillion won), which represents about 1.2% of the combined market capitalization of related corporations.
Large asset management firms are already moving quickly. The German investment firm Allianz Global Investors has included nuclear manufacturing corporations for the first time in stock-type ESG funds, while the Danish pension fund AkademikerPension has lifted its exclusion on investments in European defense companies such as ▲Airbus ▲Safran ▲Thales. France's largest asset management company Amundi has created a defense-themed ETF, describing it as a 'change in response to escalating geopolitical conflicts.'
These changes signify an expansion of the ESG investment concept. Originally, ESG investments referred to clean energy investments like wind and solar power, but now nuclear deterrence to counter Russia's military threat has also emerged as an ESG investment target. Stéphane Bouznan, CEO of Euronext, Europe's largest electronic securities exchange, noted, 'The new ESG signifies energy and security, as well as geopolitical contributions,' adding, 'Citizens, investors, and corporations are all moving in this direction.'
However, there are strong voices of criticism. Investment strategist Sasha Veslik, originally from Hiroshima, stated, 'Nuclear weapons are inherently destructive weapons' and criticized that they directly contradict the original values of ESG. Bloomberg Intelligence has also pointed out that including corporations that develop nuclear weapons could pose a reputational risk to investors.
Regulatory gaps are also highlighted as an issue. According to the European Union's Sustainability Finance Disclosure Regulation (SFDR), nuclear weapons are not included in the list of 'controversial weapons,' making it non-compulsory to exclude them from investments. As a result, European investor groups are calling for clearer guidelines.
Experts warn that while defense investments may boost revenue in the short term, they could heighten dual risks of increased carbon emissions and a new nuclear arms race in the long term. According to carbon accounting firm Greenery, NATO emitted about 256 million tons of carbon last year, which is said to be five times Greece's annual carbon emissions.
Benjamin London School of Economics political economy professor remarked, 'In the past, investments related to nuclear weapons were considered unethical,' noting that as the Russia-Ukraine war intensifies, it seems that the awareness of the inevitability of defense investments has spread within the investment management sector.