our view on defence stocks

With the Russian invasion of Ukraine followed by Germany’s additional investment of over €100 billion to its defence budget earlier this year, there’s been a rally in defence stocks. Most notably Germany-headquartered Rheinmetall and Hensoldt as well as BAE systems, the British multinational arms, security, and aerospace company have all gained in value. As a consequence, many clients have asked us about our approach to defence stock investing.

We don’t hold an exclusion on the industry or the sector. Rather, we exclude companies on the basis of their business activities and whether they service or build nuclear weapons and controversial weapons (such as landmines or biochemical and biological weapons). While we respect the right of nations to defend their sovereignty, we believe that the use of nuclear or controversial weapons cannot be justified due to the indiscriminate and the lasting damage caused through their use, a position supported by extensive research and clarified in the Coutts Exclusions Policy.

“Our decision to exclude companies involved with nuclear or controversial weapons was based on the lasting and destructive nature of these weapons,” says Leslie Gent, Head of Responsible Investing. “Our opinions on these types of weapons and the rationale for excluding has not changed based on current events.”

The perspective taken by Coutts reflects our commitment to all aspects of environmental, social and governance (ESG) investing. “Our exclusions derive from our values as well as prudent investing principles around long-term returns,” says Leslie.

PROFIT WITH PURPOSE

We, as a business, balance both purpose and profit. Coutts is serious both about its responsible investing approach, but also more widely, about the approach we take to ESG in its entirety. Being the first UK-headquartered private bank to achieve B Corp status highlights our commitment to taking sustainability seriously. Generating a positive impact not just for our clients but also for wider society has been pivotal for our longevity and success, and we believe that an ESG integrated approach will generate sustainable returns over the long-term.

Concerning an area like defence stocks, which in light of current news has shifted our conversations, it’s important to consider the long-term implications. Combined with our B Corp status as proof of our commitment to sustainability, Coutts’ client centric approach means that we continuously strive to meet the highest standards of social and environmental performance, and public transparency.

Find out how we have made an impact in our first year as a B-Corp.