Our sustainability rules do not prevent investment in or finance for defence companies.
The financial sector plays a vital role in supporting all sectors, including defence.
There is nothing in our rules, including those related to sustainability, that prevents investment or finance for defence companies.
Our sustainable finance[2] rules apply to firms providing financial products and services as well as some listed companies. They do not require financial institutions to treat defence companies differently because they are in the defence sector.
Our sustainability-related rules have 2 aims:
- To ensure information about investments claiming to be sustainable can be trusted and readily understood.
- To improve the quality of sustainability-related information in the market.
These rules should not be confused with financial institutions’ own policies relating to the type of businesses they wish to support and their own appetite for risk.
Rightly, it is up to individual lenders and investors whether they provide the capital defence companies need. Some consumers will also want options to invest in line with their ethical values, so it is important they have the freedom to make choices about where they invest their money.
Further information for regulated firms
- We have disclosure rules based on the global Taskforce for Climate-related Financial Disclosures (TCFD)[3] recommendations. These rules aim to improve the quality of climate-related information in the market. This allows firms to better assess risks and opportunities within their own businesses and in those they invest in or finance. We plan to consult on updating the TCFD rules for listed companies to refer to the new International Sustainability Standards Board (ISSB) standards, subject to Government endorsing them. These standards have a similar aim to TCFD, and extend to sustainability factors beyond climate.
- Our sustainability disclosure and labelling regime[4] for investment products (SDR) is about preventing firms from making unsubstantiated claims about the sustainability of their investments and ensuring such claims can be trusted. It does not prescribe which activities or investments are sustainable, nor does it prevent investments in certain sectors, including defence.
- Where benchmark administrators offer benchmarks aligned with the Paris Climate Agreement (UK Paris-aligned Benchmarks or UK PABs) or UK Climate Transition Benchmarks (UK CTBs), our rules require companies involved in any activities related to controversial weapons to be excluded from the benchmark portfolio. However, where administrators provide UK PABs or UK CTBs it is up to firms to choose whether to use these benchmarks.
- HM Treasury is currently finalising the scope of the regulatory regime for ESG ratings providers. Following this, we intend to consult on proposed rules later in 2025. The regime will improve transparency and quality of ESG ratings. It is not our intention to prescribe the contents of an ESG rating.
- There are no FCA sustainability rules that stop banks from serving defence clients. Banks may have their own defence-related policies, which some banks describe as part of their sustainability disclosures.