When HL ran its first Sustainable Investor Survey in 2022, defence stocks were off-limits for many, with nearly half of respondents rejecting any exposure to firearms.
Fast-forward to December 2025 (our latest survey) and sentiment has shifted sharply – only 27% of respondents now want to exclude firearms entirely, while discomfort with military contracting has fallen 10%.
But when we dig deeper, we find it’s not a uniform shift.
48% of women still reject firearms, compared with just 19% of men – the largest gender gap of any issue in our survey. Similarly, a third of women avoid military contracting, versus only 13% of men.
There are stark generational divides too. Around a quarter of respondents aged 18-29 report discomfort with military contracting, compared with just 11% of those in the 80+ bracket.
This article isn’t personal advice. Investments can rise and fall in value, so you could get back less than you invest. If you’re not sure if an action is right for you, ask for financial advice.
What is causing the shift?
The world right now is an increasingly uncertain place, with high geopolitical tensions. The war in Ukraine rumbles on, while conflicts in the Middle East and rising tensions across the Indo-Pacific grab headlines.
At the same time, President Trump has suggested Europe might not be able to rely on US military support if Russia invades the Baltic states, despite them being NATO members.
European countries have increased their defence spending significantly in recent years. European defence spending reached €380bn in 2025, a rise of over 60% since 2020. Countries like Estonia and Latvia – sitting on the Russian border – have committed to spending as much as 5% of GDP on defence.
Back in the UK, defence spending will increase from 2.3% to 2.5% of GDP by 2027, with an ambition to reach 3.5% by 2035. Though there’s growing pressure for military investment to rise even further.
Rising defence budgets mean fuller order books, longer-term visibility of revenues and, in many cases, strong share price performance. Defence stocks have been among the market’s standout performers in recent years, meaning investors excluding the sector missed out on significant gains.
So, as governments double down on security, some investors are reassessing whether defence companies have a place in their portfolios.
Why investing in defence isn’t right for everyone
Many investors will still have deep ethical concerns about the defence industry.
What it produces are designed for combat, often with devastating consequences. They have the potential to kill and injure both military personnel and civilians.
These weapons can also cause extensive damage to infrastructure, crippling essential services and facilities. The impact on local communities can be profound, often resulting in displacement and long-term social and economic disruption.
Some would also argue regimes that violate human rights and commit alleged war crimes are supported by some defence companies.
For example, allegedly BAE Systems, the UK’s biggest defence contractor, has had trading relationships with 13 countries on the UK’s human rights watchlist. And it’s also been alleged that several defence companies, including BAE Systems, sold military equipment and weapons to Saudi Arabia, later used to commit war crimes in Yemen.
It’s worth noting that BAE Systems cannot confirm who it trades with, but says it’s committed to upholding ethical standards.
2 fund ideas
Whether you want to invest in defence, or avoid it entirely, there are funds on the Wealth Shortlist that could align with your personal preferences.
Here are two fund ideas – one that will never invest in defence, and one that does.
Investing in these funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.
For more details on each fund, its risks and charges, use the links to their factsheets and key investor information.
Want to avoid defence stocks?
Aegon Ethical Equity
Audrey Ryan has managed the Aegon Ethical Equity fund for over 27 years. She aims to identify and understand the key environmental, social and governance (ESG) risks of each company, industry and sector she invests in.
Ryan believes companies that lead the way in governance and sustainability tend to outperform over the long run.
The fund uses a strict exclusions-based approach. It won’t invest in companies that generate significant revenues from unethical activities, like tobacco, alcohol and gambling.
Companies that manufacture military armaments, nuclear weapons, or associated strategic products, are also excluded, as well as those producing civilian firearms.
The fund also won’t invest in companies that operate in countries with poor human rights records if they don’t have solid policies to address this issue.
Investors should note the fund’s investments in smaller companies add risk.
Want to invest in defence stocks?
Legal & General UK Index
Legal & General UK Index provides investors with broad exposure to the UK stock market. It tracks the FTSE All-Share, investing in around 550 of the UK’s biggest companies, including household names like AstraZeneca, BP and Barclays.
No sector is off limits for this fund – it invests in a variety of areas some might find controversial, including tobacco, alcohol and gambling.
The fund also invests in defence companies like Rolls Royce, which makes engines and other components for a range of military aircraft, naval vessels and defence systems, alongside its well-known civil aerospace operations.
Defence currently accounts for 5.9% of the fund. Investors should note that as this is a tracker fund, exposure to defence companies is determined by each company’s weight in the index, so will rise and fall over time.
The fund invests in smaller companies, which adds risk.
Investors should note that, as of 31 December 2025, this fund invests 14.47% in companies involved with the extraction of oil, gas or coal. This could leave the fund vulnerable to fluctuations in commodity prices, regulatory changes aimed at reducing carbon emissions, and potential shifts in consumer preferences towards sustainable alternatives.