ESG needs to be redefined to include defense investment. A strong western allied military has helped to minimize global violence and reduce poverty to historically unprecedented levels. Strength of arms + western unity (it's all relative) have allowed us to deter most wars before they even start and to efficiently impose peace on those conflicts that were not deterred.
As we enter a more multi-polar world violent conflict is increasing* and mankind is at risk of major setbacks in the average standard of living. It is irresponsible for capital allocators, particularly those who manage public funds, to bind themselves with policy and an ahistorical moral viewpoint to avoiding "national security tech or even weapons systems". For 99.999% of defense technology, even weapons systems, the technology itself carries no moral valence. Missiles being fired in the Red Sea today are being used to shoot down incoming drones, saving lives and protecting the global economy.
I was talking with a prospective institutional LP at a well known firm a few months back about our thesis and portfolio. Their internal policies bar them from investing in defense in the private markets. Oddly enough, this institution's public portfolio includes Raytheon, Lockheed Martin, and Boeing (ouch), amongst others.
A strong nation capable of defending our values and our partners is something to be proud of, not something to shy away from. Private institutions must re-evaluate their timidity when it comes to investing in national security. Furthermore, Congress should act to ensure that public money cannot be managed by those too squeamish to do what must be done. If a money manager thinks a defense investment is a financially a poor decision, they should pass but nobody managing public funds should be able to blanket ban investments in the common defense. The US's dominance in the 90's and 2000's has imbued our society with a sense of moral privilege that we cannot live with in the 2020s.
If we want to avoid WW3, we need to mobilize every aspect of our society to a maximum deterrence effort and given that one of our greatest strengths is in our capital markets / capitalist system, we must leverage it to the fullest extent possible.
* War in Ukraine and fears of a broader Eastern European conflict, War in Israel and fears of a broader Middle Eastern conflict, Red Sea piracy/maritime disruption, conflict in the Philippine Sea between the Philippine and Chinese navies, Venezuela is claiming Guyana's oil fields / sovereign territory, China affirms it will take Taiwan and that it's patience is limited, the North African Sahel is one of the world's top breeding grounds for global terrorism, and to top it off Russia is now claiming the US's ownership of Alaska is illegitimate. The world is on the precipice of a firestorm.
