ESG funds continue to embrace arms

Since Russia’s invasion of Ukraine in 2022, the number of ESG European equity funds featuring aerospace & defence (A&D) stocks has increased. Approximately 43% of these funds now hold A&D exposure, narrowing the gap to non-ESG funds’ exposure of 56%. Although this has increased amongst Article 8 funds, Article 9 funds remain less exposed. This shift in approach reflects a new interpretation of the Sustainable Finance Disclosure Regulation (SFDR), which the European Commission has confirmed does not prevent defence investments. Fund managers are keen not to miss out on the sector’s rally, with...