HANSARD
Defence Industry: Environmental, Social and Governance Considerations
- I wish to make a joint statement with HM Treasury, on behalf of His Majesty’s Government.The Government are clear that 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 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 assert 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, that 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 believe that continued private investment in the UK defence industry and our 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.