NATO official slams financial institutions for shunning defence investments

Admiral Rob Bauer, Chair of NATO’s Military Committee, has sharply criticized Western rating agencies, banks, and pension funds for their reluctance to invest in defense sectors, warning that they risk missing out on significant opportunities as the geopolitical landscape shifts.

The top NATO official called out these institutions for failing to recognize the essential role of defense investments in the current global security climate, Caliber.Az reports via foreign media.

In an interview with the Financial Times, Bauer questioned the business instincts of financial players who have been avoiding defense sector investments despite the growing demand for military resources.

“Why are you not convinced by trillions of dollars? What has happened to your business instinct? Are you stupid? And that’s what I say to pension funds as well. Are you stupid?” Bauer stated. “If you are looking at return on investment . . . there’s so much money to be spent over the next 20 years.”

Bauer’s remarks come as European governments intensify efforts to bolster military procurement and production, particularly to sustain support for Ukraine amid Russia's ongoing invasion. With NATO rearmament accelerating, Bauer highlighted the economic potential in defense contracts and urged investors to rethink their strategies.

“This is about the rebalancing of power between China and the US. If tectonic plates shift, you have earthquakes. If the plates of geopolitical power shift, you have wars,” he said. “I don’t think there will be world wars per se, but regional wars, as we see now, are probably part of our near future.”

While shares in major European defense companies such as Germany’s Rheinmetall and Norway’s Kongsberg Gruppen have surged, some financial institutions remain hesitant to lend to arms manufacturers, particularly smaller producers essential to the defense supply chain. Despite a rise in venture capital investments in defense start-ups since 2019, several institutional funds continue to avoid defense investments due to concerns about environmental, social, and governance (ESG) criteria.

The NATO representative criticized these policies as outdated, particularly in light of the current security environment. “There are still pension funds and banks that say it’s not ethical to invest in defense capabilities because they kill people,” he remarked. “And then there is the issue of sustainability goals, and to them I say: go and visit Gaza. Go and visit Ukraine. Go and visit Yemen. Go and visit Syria and have a look. You will see what war does.” He added, “Investing in defense for deterrence purposes is actually the best sustainability measure.”

Bauer’s comments come amid increasing pressure on the European Investment Bank (EIB) to end its near-total ban on weapons funding. Several EU governments have called on the EIB to expand its lending to strengthen Europe's defense industry.

He also expressed concern over the treatment of eastern NATO members in sovereign ratings. He pointed out that countries such as Estonia, Lithuania, and Latvia had been downgraded by agencies like S&P Global Ratings, which cited the economic impact of the war in Ukraine. "One would assume that if you’re part of NATO, you will get a bonus, instead of being punished," Bauer said, referring to the downgrades of these countries, which are geographically closer to Russia.

Highlighting NATO’s own efforts to invest in defense start-ups, Bauer stressed the importance of strategic thinking in business and finance.

“The lack of strategic thinking is sometimes astonishing . . . It’s not enough for businesses to just look at their next quarter,” Bauer said. He expressed frustration with how slowly the connection between security and economic prosperity is being understood by investors and rating agencies. “For a large number of business people, [the security threat] is still a sort of far away thing. But it’s not.”

The official also shared his shock at a recent financial gathering in Los Angeles, where he was the only participant wearing a military uniform, and defense was largely absent from discussions. “This whole idea that money is disconnected from security is a concern, because economies thrive only in a stable and secure country. And that stability and that security has been guaranteed for 75 years by NATO,” he emphasized.

In conclusion, Bauer underscored the need for a fundamental shift in the perception of defense. “Defense is not a cost. It’s an investment. And that’s what has to change in the heads of many, many people. It doesn’t seem to be an automatic connection in the heads of investors, rating agencies, etc. [that process] is irritatingly slow.”

By Khagan Isayev