The defence sector is expanding and driving the development of new business models. The development of defence technology, which includes modern satellite, software and dual-use technologies, is seen as an important part of societal stability.
“The sector is making major technological leaps. Companies that previously had no connections to defence technology will benefit from the sector’s transformation. By updating our principles, we ensure that we can be involved in this development as an investor,” says Varma’s Deputy CEO Markus Aho.
Products or services for the armed forces of different countries are often produced by companies in many other sectors, such as manufacturers of vehicles, aircraft, engines and turbines. The defence sector is also closely linked to companies operating in the logistics, infrastructure, telecommunications and technology sectors.
Excluded from Varma’s direct investments are companies that manufacture controversial weapons and whose headquarters are not located in the areas of NATO, Switzerland, or the IP-4 countries (Japan, South Korea, Australia & New Zealand).
The defence sector is subject to due diligence
The defence sector falls under the due diligence process defined by Varma’s Principles for Responsible Investment. This means that when investing in companies that fall within the scope of the process, the portfolio manager must always exercise special diligence in assessing the companies’ responsibility. At Varma, the due diligence process also extends, for example, to sectors exposed to climate and environmental risks.
Investing in the defence sector has been possible at Varma before. However, certain conditions applied to investing in companies involved in the manufacture or sale of weapons restricted by international arms control agreements. The company’s engagement in such activities had to represent only a minor share of its total business.
“The previous guidance may have led to situations where investments were not made in a company because some of its manufactured components or software may have been linked to the manufacture of weapons restricted by arms control agreements,” says Hanna Kaskela, Varma’s Senior Vice-President of Sustainability and Communications.
Additional information:
Hanna Kaskela, Senior Vice-President, Sustainability & Communications, tel. +358 40 584 5045 or hanna.kaskela(at)varma.fi
Marjut Tervola, Communications Manager, tel. +358 45 673 0120 or marjut.tervola(at)varma.fi