British MPs from the Labor Party are urging banks to reconsider labeling defense  investments as “unethical”.

According to the FT, MPs sent a letter to lenders and fund managers.

The letter calls for the removal of ESG (Environmental, Social, and Corporate Governance) investment requirements.

Due to ESG, all defense investments are often mistakenly labeled as “unethical”.

ESG are the three main factors used in the UK to measure the sustainability and ethical impact of investments in companies or businesses.

This is essentially a set of standards that assess how a company operates with respect to environmental, social, and corporate governance factors.

ESG criteria are becoming increasingly important for investors who want to invest in companies that are not only profitable but also ethical and responsible.

British lenders and funds may refuse to finance defense companies because of their “unethical” products. In this regard, the MPs called on banks to abandon that block financing for defense companies.

“For far too long, companies capable of developing military technology have faced unnecessary barriers to doing business in the UK,” the MPs said.

The government has pledged to ease bureaucracy around defense contracts and faciliatate access to loans for small businesses.

Former Tory Defense Secretary Grant Shepps warned that ESG standards could undermine the UK defense sector by limiting access to finance.

In 2024, reports highlighted the challenges small defense companies in Europe face, including difficulties in securing funding due to ESG concerns.