Tesla CEO Elon Musk and Andreessen Horowitz co-founder Marc Andreessen have taken aim at Environmental, Social and Governance (ESG) funds and what they view as a bit of hypocrisy, as investors mull whether ESG rules should be updated to allow for investment in defense companies amid Russia's invasion of Ukraine.
Andreessen tweeted out a screenshot on Tuesday of a Reuters article which referenced a note from analysts at Citigroup who noted defense is "likely to be increasingly seen as a necessity that facilitates ESG as an enterprise, as well as maintaining peace, stability and other social goods" following Russia's invasion of Ukraine.
"Recent events in Europe, we think, will significantly increase the likelihood of defense's inclusion in the EU's Social Taxonomy", they added.
"The plan: ESG funds will invest in defense companies to make the weapons required to fight wars with hostile regimes we buy energy from, because ESG funds won't invest in energy companies," Andreessen tweeted in response.
Musk replied to Andreessen's tweet, adding that ESG rules "have been twisted to insanity."
A 2018 European SRI Study found that 63.6% of EU investors excluded "controversial weapons" and 45.7% excluded "all weapons" from their portfolios due to the investments being "increasingly incompatible" with ethical and sustainable objectives.
Sweden's Skandinaviska Enskilda Banken AB recently said it would revise its ESG rules to permit six of its funds to invest in companies that generate more than 5% of their revenue from the defense sector starting April 1.
"It is SEB Investment Management’s view that investments in the defence industry are of key importance to uphold and defend democracy, freedom, stability and human rights," the company told FOX Business in a statement. "At the same time, it is important to keep in mind that many of our customers and unit-holders still do not want to invest in the defence industry, and therefore going forward many of our funds will continue to exclude such investments."
Excluded investments will include companies that manufacture, develop, or sell weapons that violate international conventions, such as cluster bombs, land mines, and chemical and biological weapons, as well as companies that contribute to the development of nuclear arms programs or the production of nuclear weapons.
|GD||GENERAL DYNAMICS CORP.||249.69||+2.72||+1.10%|
|HII||HUNTINGTON INGALLS INDUSTRIES INC.||238.74||+1.72||+0.73%|
|LMT||LOCKHEED MARTIN CORP.||449.41||+1.64||+0.37%|
|NOC||NORTHROP GRUMMAN CORP.||479.84||+4.68||+0.98%|
Defense stocks have soared since the beginning of Russia's invasion, with shares of Raytheon Technologies up more than 11% year-to-date, shares of General Dynamics up more than 17% year-to-date, Huntington Ingalls Industries up more than 16% year-to-date, Lockheed Martin up more than 31% year-to-date and Northrop Grumman up more than 22% year-to-date.