Eric Trappier’s (Dassault, Cidef) rant against the banks
It burns to pieces between finance and the defense industry. In a letter addressed to Minister of Armies Sebastien Lecornu on November 22, of these Challenges Copied, Cidef (French Defense Industries Council) President Eric Trappier, also CEO of Dassault Aviation, warns of “increasing difficulties” in the arms industry’s “relations with banks and investment funds”. Eric Trappier explains that these difficulties are related to “direct investments in continuously defined activities” with “the application of special rules by the financial sector” related to EU policy. Obviously, to the popular European taxonomy.
What is the problem? Eric Trappier writes: “Systematically, this work combines the production of equipment (anti-personnel mines, bomb munitions, chemical weapons, biological weapons) authorized and prohibited by states and international organizations under the same term “defense industry”. This approach, according to Eric Trappier, leads to the “stigmatization” of the defense industry, “and therefore leads to difficulties in relations with banks and funds, which tend to exclude industrialists from the sector from their portfolios”.
According to a Barclays study based on data from Morningstar, 20% of equity funds that promote environmental and social criteria (known as “Article 8” in financial jargon) exclude companies involved in military contracts, Cidef boss emphasizes. This number increases to 40% for funds whose purpose is sustainable investment (“Article 9”). Worse, the CEO of Dassault Aviation emphasizes that “manufacturing equipment in the service of nuclear deterrence is aggravating for many banks and foundations.”
Bpifrance and Caisse des dépôts were selected
“At a time when international events have placed defense issues at the center of European states’ policies and the European Union has allocated significant sums to industry to meet the needs of European militaries,” this blacklist seems unacceptable. Cidef’s boss, ASD (Association of European Aerospace and Defense Industries), refers to a document from the European arms lobby, which even names organizations that apply “systematic exemptions” to some of their products “Investments in defense. Thus, in France, Caisse des dépôts, Bpifrance, Banque Postale AM and additional public service pension scheme (RAFP) is selected.
In Germany, the document refers to some local Länder banks (Landesbanken) and savings banks (Sparkassen), especially in Bavaria (Bayern Invest), Baden-Württemberg (LBBW), Hesse and Thuringia (Helaba). Hamburg region (Warburg Invest) and Frankfurt (Deka AM). The list also includes Italy’s deposit fund (Cassa Depositi e Prestiti), Netherlands’ APG AM, Pensione, Tail fund and ABN Amro IS funds, as well as Norway’s Norges Bank IM and KLP and Sweden’s AP-Fonden.
How to improve the situation? A letter from Cidef to Sébastien Lecornu proposes an action plan drawn up under the ASD. This plan specifically calls on States to take responsibility for public or semi-public organizations that do not play the defense support game. “As shareholders and owners, Member States can require these investors to remove systematic defense exemptions where they exist and/or encourage them to increase their investment in European defense companies,” the ASD action plan details.
ADB reform
The document also recommends the publication of a “high-level strategic reference document”, which could take the form of a “joint communication from the Commission and the High Representative”.EU foreign and security policy, editor’s note) and should be developed in close cooperation with Member States and industry”. This document will clarify that in order to comply with European legislation on sustainable finance, investors must limit their exemptions to companies belonging to the four weapon categories (anti-finance) mentioned above. anti-personnel mines, cluster bombs , chemical weapons, biological weapons).
ASD’s action plan presented by Cidef also calls for changing the criteria for the eco-label, the European eco-label for retail financial products. If the project seems to be on hold now, the latest version of the European Commission’s draft called for the exclusion of companies generating more than 5% of turnover in the defense sector. Finally, the defense industry is calling for a review of the European Investment Bank’s (EIB) investment criteria. “Currently, the ADB is only allowed to support dual-use projects (civil and military, editor’s note). Therefore, the ASD once again calls on Member States to change the ADB loan policy and remove the current inconsistent defense exception.”
Europe’s defense double talk has been condemned by the military industry for months. In a column published at the end of September, the head of Thales, Patrice Kane, pointed to the EU’s schizophrenia on the subject: “On the one hand, he wrote that under the pressure of growing geopolitical tensions and especially the war in Ukraine, Europe is committed to strengthening its defense and sovereignty capabilities. On the other hand, in this sector, tend to weaken their companies by not spontaneously integrating into sustainable finance.”
“Simple” option
Admittedly, Thales’ CEO explained that defense is not formally excluded from ESG criteria. But the result is the same. “Financial players have to decide for themselves whether to include defense companies in their portfolios labeled as ‘green’ or ‘responsible’. To do this, they are studying the weak signals that Europe is sending. However, it has been paying off for several years. Late- to believe that the EU is quick to conclude that there is a mismatch between the defense industry and sustainable finance (…) On the strength of these observations, a significant number of financiers have “logically” concluded that the simplest – some would say simple – and least risky option is defense was to withdraw from the permanent funds.”
The consequences of this exception are manifold. “These threats to financing aggravate the environmental transition efforts initiated by the sector and undermine the goals of technological and industrial independence set by the European Strategic Compass,” said the center’s researchers Amélie Férey and Laure De Roucy-Rochegonde. – tank IFRI, in a note called “Don’t Bank on Bombs”. Defense industry in front of new European standards”, Released September 22.
In February 2021, MEPs Françoise Ballet-Bleu and Jean-Louis Thierault’s flash mission to finance the defense industry announced the refusal to open bank accounts for defense start-ups and small and medium-sized enterprises, including products such as bulletproof vests. . In his column, Patrice Kane emphasized that the exclusion of the defense industry from ESG criteria affects the valuations of European companies, their HR attractiveness and “gradually limits their access to capital markets and diverts European investors in favor of ‘foreign investors’.” . Thus, Thales group floating shares saw the share of investors from continental Europe (excluding France) fall from 20% to 8% between 2017 and 2021.
