President Vladimir Putin is trying to reshape Greater Russia, but Western Europe is unprepared to defend itself. The war in Ukraine exposed its shortcomings, but Ukrainian politicians are still not doing enough to rebuild the military. One reason is that environmental, social, and governance (ESG) policies continue to paralyze defense investment.
Let’s start with the European Investment Bank, which funds investments to achieve the European Union’s policy goals. The bank has long refused to finance dual-use projects like drones unless more than half of the expected revenue comes from civilian use. It took more than two years after the Ukraine war began for banks to be exempted from the dual-use standard. However, banks still refuse to finance the production of weapons and ammunition.
Some of Europe’s largest private banks have sustainability policies that say they will not provide financial services or loans to companies that produce “controversial weapons” or components. That broad category typically includes antipersonnel landmines and cluster munitions, which Ukraine uses as a legitimate defense. the purpose.
Financial institutions are responding to pressure from left-wing nonprofit groups that believe peace comes from disarmament, not deterrence. The influential Berlin-based Facing Finance newspaper criticized the “European arms industry for trying to present itself as the guarantor of Europe’s security and freedom” and said, “The arms industry is clearly not a sustainable investment.” Whatever that means, you won’t be surprised to learn that sustainability is not a priority for Russia, Iran, China, or North Korea.
European defense companies need private investment to expand the continent’s industrial base, conduct research and development, and train and maintain a skilled workforce. The lack of private investment is particularly constraining small and medium-sized defense companies, including those producing critical components.
A European Commission report this year found that around 40% of small and medium-sized defense companies struggle to obtain financing, compared with 30% of all SMEs. More than half of UK businesses of this size that have sought banking services in the past 12 to 24 months say access is a barrier to growth, according to research by industry group ADS, which represents UK defense and security companies. replied.
“Excluding the defense industry from private funding opportunities could undermine Europe’s defense efforts and pose security risks to the EU and its member states, particularly in areas such as cybersecurity, artificial intelligence and space. ”, the European Commission’s report warns.
Europe is gradually waking up to the global crisis. Twenty-three of NATO’s 32 members are currently on track to meet the defense spending standard of 2% of gross domestic product (GDP), with some countries talking about targets of 3% or more. But they will need the help of Europe’s private sector, which is indulging in sustainability fantasies at the expense of the continent’s security.
