Barclays and Legal & General have come under scrutiny for being among the top 10 major European investors in arms companies, both investing billions in the sector every year.
The financial sector invested almost $1trn globally in the arms sector between 2020 and 2022, a report from the Global Alliance for Banking on Values has revealed.
69 per cent of the investments in weapons came through shareholding, with 19 per cent coming from loans and 11 per cent from underwriting.
Funding for arms companies is dominated by American institutions, with the top ten funders globally all being American and collectively giving $464bn between 2020 and 2022, almost half of the total estimated investment in the sector.
Meanwhile, Barclays and Legal & General were among the top 10 European investors in arms companies overall, contributing $6bn and $5bn respectively.
Collectively, the top 10 European investors contributed $79bn, or about eight per cent of the total invested worldwide.
Martin Rohner, executive director of the Global Alliance for Banking on Values, said: “We call on the financial industry to stop fuelling the production of, and trade in, weapons and arms, and let’s start to all profit from peace, not war.”
While the report didn’t detail which arms companies were being selected for investment by the major banks, it comes after firms such as BAE Systems and Chemring reported bumper profits.
Since Russia’s invasion of Ukraine, BAE has seen its stock price soar, with the firm’s order backlog reaching record levels in 2023, as global defence spending rose by nine per cent to a record $2.2trn (£1.7trn) last year.
However, some have argued that arms companies should be seen as a less controversial investment following the Russian invasion of Ukraine.
Last year, defence secretary Grant Shapps claimed that divestment from the weapons industry due to ESG investing was threatening “industries critical to our national security”.
“The important values within ESG should not undermine capabilities developed to help us preserve peace and security,” the minister argued.
In November, it was revealed that some ESG funds had quietly begun to add arms companies to their portfolios, reigniting the debate.
Barclays and Legal & General were contacted for comment.