You don’t normally associate ESG funds with the Aerospace and defence Industry.

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You don’t normally associate ESG funds with the Aerospace and defence Industry. However environmental funds do hold a small percentage of their investments in Aerospace and Defense and in 2022 European ESG might start reporting investments in defence firms. But as these companies work to reduce their carbon emissions, the regulatory environment around cybersecurity forces firms to address cyber risk the may become viable investments.

ESG integration funds will assess the financial risks of companies that dont follow certain ESG guidelines, such as reduced cash flow, environmental litigation, stranded assets, or shrinking valuation. (Note the downgrade of Equifax by Moody’s following its 2017 cyber attack and its impact on cashflow). But they can also consider the positive impact of other ESG factors, such as energy efficiency and diverse labour force. Some of those positive factors could potentially offset some of the negative ESG considerations and lead the funds to still invest.

With cyber high on the regulatory agenda, the US DoDs cyber program on a go slow pending a rewrite, we can expect a focus on the defense sector and small business, when the various house committees reform in Quarter 4 this year.

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