Defence stocks look set to rally further as environmental, social, and governance (ESG) concerns take a back seat.
Investment bank Citigroup said there has been “a material shift in ESG consensus,” with the outbreak of war alerting European governments and investors to the important role defence companies play in “protecting liberal democracies and their values.”
Additionally, defence activities look '"unlikely to be excluded" from the EU Social Taxonomy, except for the manufacturing of some controversial weapon types.
The Taxonomy is a classification system that establishes social activities, determining whether an activity or company is viewed as ‘social’.
Citigroup said that it expects the “realisation of the social value of the defence industry to crystallise and become increasingly recognised” moving forward.
Shares in UK sector leader BAE Systems PLC (LSE:BA.) have risen by about 15% since the invasion of Ukraine.