Analysis-Europe's top money managers start to bring defence stocks in from the cold

Naomi Rovnick, Iain Withers and Simon Jessop

Thu, Mar 13, 2025, 6:13 AM 4 min read

By Naomi Rovnick, Iain Withers and Simon Jessop

LONDON (Reuters) - European plus managers are reconsidering their policies connected investing successful defence, nether unit from clients and immoderate politicians to loosen restrictions and assistance money the continent's contention to re-arm.

Under European Union rules, a fig of funds badged arsenic sustainable request to guarantee their investments 'Do No Significant Harm'. Many person avoided the assemblage entirely, with adjacent motor shaper Rolls Royce and Airbus, which has a large commercialized aviation division, judged disconnected limits.

But arsenic the EU present seeks astir 800 cardinal euros ($870 billion) of concern to bolster defence aft U.S. President Donald Trump said Europe indispensable instrumentality much work for its ain security, the assemblage is excessively important to ignore.

Britain's largest capitalist Legal & General is among those readying to summation vulnerability to defence, saying the sector's entreaty has "risen dramatically" amid deeper geopolitical tensions, Reuters reported connected Thursday.

Some of Europe's largest money groups person separately begun to reappraisal their policies astatine committee level, radical acquainted with the companies told Reuters, though the complexity and arguable quality of rewriting sustainability policies to see arms makers marque the process tricky, the radical said.

Switzerland's UBS Asset Management told Reuters it was reviewing defence assemblage exclusions crossed funds portion Mercer, a starring advisor to pension funds, said investors were asking plus managers to see defence successful portfolios, including those with sustainability aims.

The EU's spending boost has sent European aerospace and defence stocks including Germany's Rheinmetall and Italy's Leonardo to grounds highs on with the assemblage scale - and near investors without vulnerability ruing missed opportunities.

"Some (asset managers' clients) are saying, we really deliberation it's important that... Europe beryllium capable to support itself. And truthful we'd really similar you to marque investments successful this sector," said Rich Nuzum, planetary main concern strategist astatine Mercer, which advises investors managing $17.5 trillion of assets.

Exclusions connected investing successful arguable weapons – specified arsenic clump munitions and biologic weapons – are wide held and informed by planetary treaties. EU and UK rules bash not prohibition concern successful astir different defence companies, but an capitalist absorption connected environmental, societal and governance (ESG) helped dissuade large plus managers from doing so, similar with tobacco.

"We're coming to a constituent wherever the ambiance is that if you regularisation retired defence, you're the 1 who has to explain, not the different mode around," said Carl Haglund, CEO of Finnish pension and security radical Veritas and ex-defence curate of Finland.