NATO official says Western investors are ‘stupid’ to avoid weapons industry

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A senior NATO official has warned that Western ratings agencies, banks and pension funds are “foolish” to avoid defense investments, and called on financial institutions to adapt to growing security threats.

Admiral Rob Power, chairman of the alliance’s military committee, told the Financial Times that investors’ failure to understand their role in “collective defence” means they risk losing significant government funding in the wake of Russia’s large-scale invasion of Ukraine in 2016. 2022.

Why are you not satisfied with trillions of dollars? What happened to your business instinct? Are you stupid? This is what I say to pension funds as well. Are you stupid?” Bauer said. “If you’re looking for a return on investment. . . “There’s a lot of money to be spent over the next 20 years.”

Power’s appeal comes as European governments seek to increase their military purchases and production to continue arming Ukraine, and just weeks before the inauguration of President-elect Donald Trump, who has called on Europe to rely less on the United States for its security.

“It is about rebalancing power between China and the United States. If the tectonic plates move, you will have earthquakes. If the geopolitical plates shift, you will have wars.” “I don’t think there will be world wars per se, but regional wars, as we see now, “It may be part of our near future.”

Shares in several major European defense companies including the German company Rheinmetall And Norway Kongsberg Collection They rose last year as government orders for tanks, missiles and artillery swelled and investors bet that NATO rearmament would boost profits for years to come.

But some European banks are still reluctant to lend to arms makers to help them ramp up production. This issue is particularly acute for small producers who are critical to the broader supply chain.

While venture capital investments in defense start-ups in NATO countries have done so It has increased fourfold since 2019However, many institutional funds in Europe are still prohibited from investing in armaments based on environmental, social and governance (ESG) concerns. The European Union’s common budget also has Ban on direct investments in defence.

Bauer, a Dutch naval officer who will step down from his NATO post later this month after serving his three-year term, said those policies were outdated.

“There are still pension funds and banks that say it is unethical to invest in defense capabilities because they kill people,” he said.

“Then there is the issue of sustainability goals, and to them I say: Go and visit Gaza. Go and visit Ukraine. Go and visit Yemen. Go visit Syria and have a look. He added: “You will see what war does.” “Investing in defense for deterrence purposes is actually the best measure for sustainability.”

The European Commission and more than a dozen EU governments have grown pressure In recent weeks, the European Investment Bank, the European Union’s lending arm, decided to end an almost complete ban on arms financing to help boost Europe’s defense industry.

Power also noted that some eastern NATO members “are given a lower (sovereignty) rating because they are closer to Russia, closer to the threat. One might assume that if you are part of NATO, you will be rewarded, rather than punished.”

When Standard & Poor’s lowered its credit ratings for Estonia, Lithuania and Latvia in May last year, it cited the economic impact of the war in Ukraine on the three Baltic states.

Ratings agencies took into account the benefits of NATO membership, but also had to consider financial impacts such as increased defense spending in what were ultimately assessments of countries’ ability to repay their debts, people familiar with their methodologies said.

NATO has launched Her own box To invest in defense start-ups, while the European Investment Bank, which is governed by all EU member states, is under pressure from some capitals to expand its loans for defense projects.

“The lack of strategic thinking is sometimes astonishing,” Bauer said. “It is not enough for companies to just look at the next quarter.” He added, “For a large number of business people, (the security threat) is still a distant thing.” But it’s not.

Power said he was shocked after attending a financial gathering hosted by an American financier in Los Angeles last year, where he was the only one wearing a military uniform and defense was not on anyone’s radar.

“The idea of ​​separating money from security is a concern, because economies only flourish in a stable and secure country. NATO has ensured this stability and security for 75 years.

“Defense is not a cost,” Bauer added. It’s an investment. This is what needs to change in the heads of many, many people. “There doesn’t seem to be an automatic connection between investors’ heads, rating agencies, etc. (that process) is annoyingly slow.”