War...what is it good for

Nato Admiral, Rob Bauer, said that Western rating agencies, banks and pension funds are stupid for not investing in defence companies. And lots of money can be made too. Rheinmetall, the German tank and armored vehicle manufacturer, has seen its share price go from €83 four years ago to €647 today, an increase of 778% over that period. Other defence contractors such as Kongsberg Gruppen has seen its share price rise by 437% over the same period.

EU ESG (environmental, social and governance) rules prohibit several institutional funds in Europe from investing in defence companies as well there being a ban using the EU's budget to buy arms, so lots of European investors aren't investing in these types of companies and enjoying these gains.

Should EU funds be investing in defence companies? Bauer says "investing in defence for deterrence purposes is actually the best sustainability measure." You can argue that he has a point. Having a good defence will deter other nations from invading you and actually prevent war, not cause war.

But that argument falls apart pretty quickly when you look at what is happening around the world. Israel spend trillions on defence and say that the bombing of Gaza, Lebanon, Yemen and Iran is to protect themselves. Many organisations have accused Israel of committing genocide in Gaza. Depending on whose side you are on, a country is either defending itself or committing genocide. Either way, tens of thousands of people are dead.

It is not as if these companies only make weapons for countries to use for defence. They also make them for countries who will use them to kill other people. The US department of defence requested a budget of $850 billion for the year. Combined casualties between the Afghanistan and Iraq wars is the region of 400,000 people.

If we decide that it is ok to make money off war and death, why stop there? What about pornography? If you have ever watched Hot Girls Wanted on Netflix you will get an idea of how grim that world is and how it exploits young girls.

Or tobacco? We know that tobacco companies lied to the public as well as regulators for years on the dangers of smoking. We know that cigarettes are full of poison and they cause a litany of life ending illnesses as well as putting a huge strain on health services. There is no positive benefit to smoking but there's money to be made from them. BAT has a dividend yield of 7.9%

We invest money so it is worth more in the future than it is today. We will not agree with aspects of some or companies (or their owners) but there are limits to what we want to invest in the search for a return.

Steven Barrett

13 January 2025