Labour MPs and peers urge banks to view UK defence investments as ethical

More than 100 Labour MPs and peers have called on British financial institutions to class UK defence investments as ethical to boost support for Ukraine.

In an open letter on Thursday, the group called for a “rethink” on environmental, social and governance (ESG) investment requirements that often exclude defence firms as “unethical”.

Labour MP Alex Baker co-ordinated the letter addressed to Britain’s banks and fund managers, with signatories including former Royal Navy chief admiral Lord Alan West, former Nato secretary general Lord George Robertson and chairman of the Commons Defence Committee Tan Dhesi.

It comes as pressure mounts on Europe to bolster defence spending in the fallout from a disastrous Oval Office meeting between US President Donald Trump and Ukrainian President Volodymyr Zelensky.

With the US suspending military aid to Ukraine, Prime Minister Sir Keir Starmer and other European leaders have entered crisis talks to shore up the continent’s security in the face of threats from Russia.

The letter from Labour MPs read: “For the United Kingdom to both support Ukraine in its hour of need and ensure defence of our own nation, we must rethink ESG mechanisms that often wrongly exclude all defence investments as ‘unethical’.

“There can be no more ethical investment than giving the Ukrainian people every ounce of support that can be mustered by their allies.”

After Sir Keir announced a rise in the UK’s defence spending to 2.5% of GDP last week, the MPs urged banks to start “turning on the financial taps to the firms that stand ready to deliver the best of British innovation, capability and skills”.

The letter, which is backed by the Labour Growth Group, made clear that the MPs and peers support the ESG model, saying it is “rightly here to stay”.

But they added that they believe ESG is “synonymous” with the Ukrainian cause.

Chancellor Rachel Reeves recently promised to cut red tape to make it easier for the Government to buy military equipment earlier and widened the parameters of the National Wealth Fund to drive investment in the defence sector.

Asked on Thursday about whether Number 10 agrees that missiles and fighter jets should count as ethical investments, a Downing Street spokesperson said: “The only ethical issue, the main ethical issue at stake here is that Russia has launched this barbaric invasion of Ukraine and they could end this war today by withdrawing their troops.

“Our commitment to Ukraine remains unwavering.”

The previous Conservative government also called for defence investment to be classed as ESG.

Last April, then-prime minister Rishi Sunak said the government wanted to encourage private sector investment in the sector, stating that it counts “beyond doubt” towards ESG assessments.

David Raw, managing director for commercial finance at UK Finance, the banking trade body, said the sector is “fully committed” to supporting defence companies.

“Providing finance in this area is complex and banks can face the threat of violent protest. They must also ensure they comply with a range of domestic and international laws and regulations,” he said.

“We are continuing to engage with Government and the defence sector to tackle any barriers that do arise and continue our support for defence companies.”

James Alexander, chief executive of the UK Sustainable Investment and Finance Association, said sustainable finance regulations “at no point” prohibit defence investments.

He said: “Defence and sustainability can go hand in hand. Just as energy independence and national security are intrinsically linked.

“While investor freedom is of course paramount, it’s important that rules and regulations continue to recognise that defence investments can be part of sustainable funds.”