Western investors are ‘stupid’ who avoid the arms industry, a NATO official said

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Western rating agencies, banks and pension funds are “stupid” for shying away from defense investments, senior NATO officials have called on financial institutions to adapt to rising security risks.

Admiral Rob Bauer, chairman of the Alliance’s military committee, told the Financial Times that investors’ lack of understanding of their role in “collective defence” meant they risked losing significant government funding as a result of Russia’s general invasion of Ukraine. 2022.

“Why don’t you believe in trillions of dollars? What happened to your business instincts? are you stupid The same goes for pension funds. are you stupid said Bauer. “If you’re looking at the return on investment … it’s going to cost a lot of money over the next 20 years.”

Bauer’s plea comes as European governments rush to speed up military purchases and production to arm Ukraine and weeks before President-elect Donald Trump is inaugurated, calling for Europe to rely less on the US for its security.

“It’s about the balance of power between China and the US. If the tectonic plates shift, you have earthquakes. If the geopolitical power plates shift, you have wars,” he said. “I don’t believe there will be world wars per se, but local wars, as we see them now, are probably part of us in the near future.”

Shares in many large European defense companies, including Germany Rheinmetall and Norway Kongsberg group It has soared in the past year as government orders for tanks, missiles and artillery have swelled and investors say NATO’s arsenal will boost revenue for years to come.

But some European banks are still unwilling to lend to arms manufacturers to help them ramp up production. The issue is particularly acute for small producers who are critical to the wider supply chain.

When there is capital investment in defense startups in NATO countries It has quadrupled since 2019.Many institutional funds in Europe are prohibited from investing in weapons based on environmental, social and governance (ESG) concerns. The common budget of the European Union is also a Prohibition on direct investments in defense.

Baer, ​​a Dutch naval officer who is stepping down from his NATO role at the end of this month after three years in office, says these policies are outdated.

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

“Then there’s the matter of the Sustainable Development Goals, and I say to them: Go and visit Gaza. Go and visit Ukraine. Go and visit Yemen. Go and visit Syria and see. You see what war does,” he added. “Investing in defense for defense purposes is actually the best measure of sustainability.”

The European Union Commission and more than a dozen EU governments are increasing Pressure In recent weeks, the European Investment Bank, the union’s lending arm, has called on the European Investment Bank to end a blanket freeze on arms funding to help shore up Europe’s defense industry.

Bauer pointed out that some eastern NATO members are being given a lower (sovereign) rating because they are “closer to Russia, closer to the threat.” One thinks that if you’re part of NATO, you get a bonus instead of a penalty.

S&P Global Ratings downgraded Estonia, Lithuania and Latvia in May last year, citing the economic impact of the war in Ukraine on the three Baltic states.

The ratings agencies take into account the benefits of NATO membership but also look at fiscal impacts such as higher defense spending and ultimately assess countries’ ability to repay debt, people familiar with their methods said.

NATO is operational. own fund To invest in defense startups, the EIB, which is run by all EU member states, is under pressure from some capitals to expand its lending for defense projects.

“The lack of strategic thinking is sometimes surprising. . . “It’s not enough for businesses to just look at their next quarter,” Bauer said. “For many traders (the security threat) is still a long way off. But no,” he said.

Bauer said he was shocked after attending a financial meeting organized by an American financier in Los Angeles last year, where he was the only one wearing a military uniform and whose defense was on anyone’s radar.

“The general idea that money is disconnected from security is troubling, because an economy can only thrive in a stable and secure country. And that stability and security has been ensured by NATO for 75 years.

“Defence is not an expense,” Bauer added. It’s an investment. This is what needs to change in the minds of many people. Automatic communication among investors, agencies, etc. (in that process) heads doesn’t seem too annoying.