"Sustainable finance has always excluded the military industry"

The European Union's new regulations on sustainable investment threaten the financing of the military industry. Commission advisers recommend hanging the "socially unsustainable" label on the defense sector, equating it with gambling or tobacco, in the midst of war with Russia. Defense companies fear that the label of unsustainable deprives them of investment flows essential to maintaining their competitiveness, especially at a time when the world's major powers are embarking on a much more sophisticated arms race. and technological than in the twentieth century. The director of the Chair in Sustainable Finance , Marcos Eguiguren, discusses this situation.

Just at a time of war between Ukraine and Russia, and at a time when great nations are embarking on a highly sophisticated arms race, the European military sector sees its future investments in jeopardy. What do you think about it?

It's a big contradiction. But in the world of sustainable finance, regardless of what we have experienced in recent years, with growing regulation, banks with securities have always practiced and practice a clear exclusion of the arms industry. It has always been a typical exclusion.

To include the military sector in the taxonomy would pervert it

The inclusion of nuclear energy and gas in the taxonomy was a move to please states like France and Germany. The military industry is a large economic sector that moves a lot of money and has great power of pressure. Could we see a similar move this time?

I don't think so because, although in the Western world there is almost a unanimous rejection of the attack on Ukraine, this does not mean that facts and words can be twisted. Apart from the fact that the military industry is largely a very consuming sector of energy and raw materials. I don’t think military industry lobbies get into it because they are highly specialized corporations that receive funding from a part of the financial system that will send them resources yes or no, regardless of any taxonomy. Also, because governments allocate resources to the military industry. They don't need it.

In any case, they may fear a diversion of funds which is now easy for them. With the taxonomy, perhaps banks find it more interesting to invest in the sectors that are included. In the medium and long term, yes, but the global financial sector is huge and there will be financial institutions from outside the EU financing them. And the states themselves will most likely spend public money on it as well. To include the military sector in the taxonomy would pervert it.

The military industry may fear a diversion of funds that is now easy for them to reach

It's a big contradiction: we're creating a taxonomy for private companies and banks to invest in green energy, obviously excluding the military industry. While states will need to increase investment in the military.

This is what the Germans have called Realpolitik since the post-World War II and Cold War years. Most states are not interested in a powerful military industry, but circumstances force us to defend ourselves. It's a contradiction we have to live with.

Contradictions regarding the military sector are normal, as the Commission has recently insisted on the need to exempt VAT from investments in research projects for the development of industry military.

These contradictions have always existed and today they are becoming more obvious than ever because unfortunately we are having a war in Europe again. We would all like the military to be an outcast industry, but deep down and with common sense, we need it. It's a big contradiction.