Understanding the conflict two years on.

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Back in the early 2000s, when war in the West seemed unlikely, corporations, investors, and consumers had a lot of time to ponder what companies should do to be good citizens. Environmental, social, and governance (ESG) policies were all the rage—and from an ESG perspective, defense manufacturing was deplorable. How times have changed.

Back in the early 2000s, when war in the West seemed unlikely, corporations, investors, and consumers had a lot of time to ponder what companies should do to be good citizens. Environmental, social, and governance (ESG) policies were all the rage—and from an ESG perspective, defense manufacturing was deplorable. How times have changed.

Today, a growing number of funds allow themselves to invest in weapons manufacturers. But ESG policies have hurt the industry—and inadvertently contributed to the delays now plaguing arms suppliers to countries such as Ukraine.

“Everyone knows the military is using weapons and technology to kill civilians. … How can it be that responsible investment funds hold shares in companies that are funding and equipping the military? That makes these funds accessories to murder,” said Mulan, a pro-democracy activist in Myanmar. According to a 2022 report by ALTSEAN-Burma and the North Carolina-based NGO Inclusive Development International and a more recent study, “companies with links to Myanmar’s junta are often included in ESG indexes.”

In the first 27 months after taking power in a February 2021 coup, the Myanmar military imported at least $1 billion worth of weapons and raw materials for weapons, a U.N. rapporteur found. The country’s rebel forces, which have recently made significant advances, make innovative use of 3D-printed guns—but arms manufacturers supply them, too, with other weaponry.

Skepticism about arms-makers long permeated Western countries, too. “In the late 2010s, 13 of 395 of the funds monitored by [the investment research firm] Morningstar in Europe directly excluded defense,” said Robert Limmergard, the secretary-general of the Swedish Security and Defense Industry Association.

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