Despite opposition from the left, the European Parliament has endorsed an amendment to sustainable finance benchmarks that will permit companies manufacturing “controversial weapons” to be included.
The European Parliament has essentially validated a revision to EU legislation enabling investments in «controversial weapons» to fall within the bloc’s sustainability framework. As a result, firms producing incendiary munitions, depleted-uranium ammunition, and even nuclear arms could potentially qualify for the Environmental, Social, and Governance (ESG) label.
Earlier this year, the European Commission proposed narrowing the list of weapons industry companies excluded from the EU’s sustainability benchmarks, aiming to reduce ambiguity and uncertainty for investors.
Consequently, firms engaged in manufacturing incendiary and nuclear weapons will no longer be barred from obtaining ESG labels — a concept traditionally linked to ethical investing but now being adjusted to reflect the current geopolitical context.
According to a Bloomberg analysis, ESG equity funds exposed to the nuclear weapons sector have grown by over 50% since Russia’s full-scale invasion of Ukraine in February 2022.
Expanding the meaning of ESG
In presenting its proposal, the Commission argued that the term «controversial weapons» requires clarification and simplification “because the pertinent international treaties and conventions signed by member states refer to prohibited weapons rather than controversial weapons.”
The Commission’s move to revise the regulation comes amid increasing pressure to strengthen the bloc’s defense capabilities, with plans to mobilize up to €800 billion in funding over the next four years.
At a parliamentary plenary session on Wednesday, the Socialists and Democrats, the Greens/EFA, and The Left factions opposed the Commission’s amendments, as EU rules grant both Parliament and member states the right to reject delegated acts from the Commission — but these objections were dismissed.
Spanish Socialist MEP Jonás Fernández stated that the Commission’s changes would mislead investors by labeling indices containing assets unrelated to climate goals as “green.”
“If the objective is to enhance clarity, this delegated act does the opposite by broadening the ‘green’ definition until it loses its significance,” he remarked.
The Left’s MEP Marc Botenga told Euronews, «It seems this decision aims specifically to promote the production of innovative, controversial weapons such as incendiary devices, undetectable fragments, blinding lasers, or lethal autonomous weapon systems.”