Labour MPs urge British banks and fund managers to no longer class defence investments as ‘unethical’ as they bid to boost support for Ukraine

More than 100 Labour MPs and peers are urging British banks and fund managers to class defence investments as ethical in a bid to boost support for Ukraine.

In an open letter, the group of parliamentarians demanded a ‘rethink’ of environmental, social and governance (ESG) frameworks for investing.

They warned that these ‘often wrongly exclude all defence investment as unethical’ and said there can be ‘no more ethical investment’ than backing Ukraine.

As well as boosting the supply of ‘vital’ military kit to Kyiv, rethinking ESG principles will also accelerate the development of Britain’s own defences, the MPs added.

Labour MP Alex Baker co-ordinated the letter addressed to Britain’s banks and fund managers.

Signatories included former Royal Navy chief admiral Lord Alan West and former NATO secretary general Lord George Robertson.

PM Sir Keir Starmer recently announced Britain’s defence spending will rise to 2.5 per cent of GDP by 2027, amid fears about continued US backing for Europe’s security.

Meanwhile, Chancellor Rachel Reeves has changed the remit of the £27.8billion National Wealth Fund so it can be spent on defence.

More than 100 Labour MPs and peers are urging British banks and fund managers to class defence investments as ethical in a bid to boost support for Ukraine

Prime Minister Sir Keir Starmer welcomed Ukrainian President Volodomyr Zelensky to London at the weekend

In an open letter, the group of parliamentarians demanded a ‘rethink’ of environmental, social and governance (ESG) frameworks for investing

US President Donald Trump’s decision to abandon Ukraine and suspend aid to Kyiv – amid his spat with President Volodymyr Zelensky – has sparked panic across Europe.

The continent’s leaders are holding crisis talks as they scramble to shore up their security in the face of the threat from Russia.

In the letter, the Labour MPs and peers wrote: ‘Ukraine needs to be in the strongest possible position to defend itself against an aggressive military superpower.’

They added: ‘Our financial institutions can do more to enable our UK defence sector to provide the vital miltiary supplies President Zelensky needs.

‘You can also help Britain to rapidly generate the capabilities needed to defend itself. 

‘For too long companies with the ability to develop military technology at speed have faced unnecessary barriers to doing business in the UK.

‘With defence manufacturers in constituencies nationwide, there is clear potential to drive economic growth.

‘For the UK 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.’

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.

‘We urge financial institutions immediately to sweep away ill-considered anti-defence rules which are acting as a barrier to doing what is right,’ the letter read.

Ms Reeves recently pledge to cut red tape to make it easier for the Government to buy military equipment earlier.

She also widened the parameters of the National Wealth Fund to drive investment in the defence sector.

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

Last April, then-PM 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,’ he said.

‘They must also ensure they comply with a range of domestic and international laws and regulations.

‘Having engaged extensively with our members, as well as with defence firms, we do not see a tension between supporting ESG goals and supporting the defence sector.

‘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.’

Asked whether the PM agreed that missiles and fighter jets should count as ethical investments, a Downing Street spokesman 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.’

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