Secretary of State for Defence (): The Government is clear
the UK’s defence sector has an integral role in supporting the
first duty of government: to promote and protect the United
Kingdom’s core national interests: the sovereignty, security and
prosperity of the British people. That includes supporting allies
and partners and contributing to broader international security.
Nowhere is this clearer than in Ukraine - where we continue to
have a leading role in providing our Ukrainian friends with our
support and with vital military aid to resist President Putin’s
illegal and brutal war.
Our defence industrial base underpins our Armed Forces, maintains
our continuous-at-sea nuclear deterrent, and safeguards our
critical infrastructure. The private sector is essential to our
national security whether in peacetime or times of emergency. The
ongoing maintenance of critical industrial facilities, skills,
and intellectual property onshore, and the approach we take to
sustain these, gives us confidence that we can continue to
operate independently, in defence of the country’s interests,
without external political influence and protecting the sensitive
technologies that underpin our military capability.
Despite this, defence companies are being excluded from access to
debt and equity capital, citing Environmental, Social and
Governance (ESG) grounds. This not only threatens an important
part of the economy that, through MOD expenditure alone, directly
and indirectly supports over 200,000 jobs, but it fails to
recognise that the UK’s defence industry is essential to
protecting our way of life. Such divestment also threatens to
increase the cost of procurement, diverting taxpayers’ money away
from other defence spending and from public services. The
industry’s value to us as a key strategic asset is only
increasing at a time of global uncertainty.
As outlined in the Defence Command Paper Refresh, this Government
asserts that there is nothing contradictory between the
principles within ESG and the defence industry. On the contrary,
a strong national defence, including our nuclear deterrent, is a
pre-requisite for the freedoms (including social liberties) which
we often take for granted, and the aspirations that investors and
financial services companies seek to address using ESG
considerations.
As stated in the Green Finance Strategy published this Spring,
the Government believes that continued private investment in the
UK defence industry and its NATO allies is essential to protect
the UK national interest, the UK economy and broader
environmental and social goals.
Moreover, the UK defence sector has reflected ESG considerations
in a range of ways. Industry is driving innovation in new
technologies to improve sustainability and companies are
embedding ESG metrics into their remuneration structures.
Additionally, defence companies are exploring how to raise
standards across the board, improve access to information and
communicate the positive vision of what they are achieving on
these subjects.
Whilst investors must always be free to make their own choices,
they should do so on the basis of the facts, and those seeking to
inform those choices through providing ESG ratings should be
clearer on their methodology and more prompt to correct errors
when these are pointed out. Defence spending helps prevent war
and helps support the British way of life, and those of our NATO
allies and partners.
MOD is showing leadership itself on the environmental and social
agenda, including the application of the Social Value Model
within MOD’s procurement process; we are focused on tackling
economic disparities, tackling climate change and promoting equal
opportunity. Through the Defence Suppliers Forum, we are working
with industry at a strategic level to build sustainability into
defence supply chains and tackle greenhouse gas emissions
reduction. Crucially, HM Treasury has also published a
consultation on a potential regulatory framework for ESG ratings
providers with the aim of improving transparency and promoting
good conduct in the ESG ratings business.
The Government will, with our industrial partners, continue to
explore and champion the wider environmental and social benefit
of the defence sector and ensure it continues to represent the
highest standards of corporate governance. The Economic Secretary
(my Hon Friend, the Member for Arundel and South Downs) and I
will continue to engage with defence companies and the financial
sector on access to investment and financial services for
industries critical to our national security.
This Government believes that the important values within ESG
should not undermine capabilities developed to help us preserve
peace and security, without which sustaining those values would
not be possible.
