Defence Industry: Environmental, Social and Governance Requirements

Luke Akehurst Excerpts

Wednesday 28th January 2026 Westminster Hall

[Luke Akehurst (North Durham) (Lab)]

It is a pleasure to serve under your chairship, Ms McVey. I thank the hon. Member for Windsor (Jack Rankin) for securing this important debate and introducing it so eloquently. It is an honour to follow the hon. Member for Strangford (Jim Shannon), who always makes important contributions to debates about defence matters, and my hon. Friend the Member for York Outer (Mr Charters), whose knowledge of defence financing is extremely granular.

This debate is a chance to make it clear that the highest form of corporate social responsibility is for a company to be involved in the defence of the country. To me, it is quite bizarre that people and institutions would put the provision of proper equipment for our armed forces or our allies who are fighting against fascism in Ukraine in the same category for divestment as tobacco, pornography, modern slavery or forced labour. That just seems perverse.

Investment in the task of keeping the British people safe from the growing threats posed by hostile actors is not just legitimate, but a moral necessity. In the context of the strategic defence review, which correctly identifies the urgency and significance of unlocking private capital to drive the investment in defence that we need to meet the growing and complex threats facing the country, the impact of environmental, social and governance ratings on securing finance for defence must be looked at more closely than ever before.

We must not lose sight of the fact that the whole point of having the strongest possible defence capability is to act as a deterrent. We are not aiming to use these weapons; we are using them to try to prevent a war from happening. I am sure that I do not need to point out to Members the ethical, environmental and social harm of conflict. I know they are acutely aware that the best way to avoid war is to prepare for one. Only by projecting strength and showing our enemies that we are ready to fight can we deter the worst-case outcome.

As the hon. Member for Windsor said, back in March 2025 I and 100 other Labour MPs signed a letter, which was co-ordinated by my hon. Friends the Members for York Outer and for Aldershot (Alex Baker)—she is disappointed not to be able to join us today—calling on Britain’s bank and fund managers to do away with rules that class investment in defence, notably in supporting Ukraine’s fight against Russian aggression, as somehow unethical. As the letter stated,

“There can be no more ethical investment than giving the Ukrainian people every ounce of support that can be mustered by their allies.”

That same standard, of course, applies to our own defence —one of the core tasks our constituents send us to this place to take care of. Ten months on from that letter, today’s debate is a prime opportunity for the Minister to update us on what consideration the Government have given to this issue, especially with regard to what I hope is the imminent defence investment plan.

As a Member of Parliament for a constituency in north-east England, I am particularly excited by the opportunities that the Government’s increase in defence spending can create for my constituents in North Durham and across the region. Less than a third of the Ministry of Defence’s spending with British industry is directed to London and the south-east, so defence can be an engine for growth in the regions.

I share the Labour Government’s ambition for defence spending to act as a key engine for economic growth, especially in more deprived, post-industrial parts of the country, which have borne the brunt of decades of deindustrialisation, including my North Durham constituency. It is worth noting that, during the cold war, there were tens of thousands of jobs in the defence sector in north-east England. There was Swan Hunter shipyard, and there was a very large factory, Vickers, producing land systems—it is still a very good factory, under Pearson Engineering, but a lot smaller. People remember the industrial contribution the north-east was making to defence.

Unfortunately, the north-east now has the lowest per capita defence spend of any region or nation, according to the MOD’s own figures. I would go so far as to argue that there are significant ethical and social benefits from the kind of defence investment that would bring jobs to our area, upskill my constituents and provide them with the opportunity to make a good living in exercising the patriotic duty of pitching in by equipping the people who are defending our country. Can the Minister update us on the impact of ESG ratings on directing capital towards areas such as the north-east, where there is a heritage of industrial jobs and skills, and where investment would bolster the Government’s agenda of tackling regional inequality and bringing opportunity back to places such as County Durham?

When they go wrong, ESG ratings can act as a drag on crucial investment in defence, but that does not mean we should write off the importance of ethical considerations when financing the defence of our nation. It is right that, even when investing in defence capabilities, we do all we can to operate in line with, for instance, the planet’s environmental limits. Indeed, many defence companies have already changed in line with ESG considerations. Through the UK defence ESG charter, the defence sector in the UK has collaborated to drive ambition and action on sustainability. The charter promotes greater transparency, dedicating firms to working together to meet commitments focused on climate transition, clean technology, societal impact, and governance and ethics. The charter was shortlisted for the 2025 Trade Association Forum awards in the ESG initiative of the year category.

To give one example—it is actually the company that the hon. Member for Strangford talked so eloquently about, because it has a site so near to his constituency—Thales in the UK sources all its electricity from renewables, and ESG forms at least 15% of its supplier selection criteria. The platinum medal from EcoVadis places Thales among the top 1% of all firms in its rankings. Clearly, the moral grandstanding of backing away from defence investment on ethical grounds does nothing to improve the ethical footprint of the defence industry. Instead, we ought to be working with industry to incentivise better practices, such as those I have just outlined. With that in mind, will the Minister elaborate on the positive role that ESG can play for defence companies? How can we ensure that the industry takes the greatest possible consideration of its impact on the planet, without getting in the way of its No. 1 priority, defending our nation?

Thankfully, ESG standards are becoming less and less of a roadblock to defence spending, with ESG-labelled investment in defence rising steadily since 2021. However, broader structural issues continue to act as a barrier to unlocking growth in defence. SMEs, as my hon. Friend the Member for York Outer mentioned, face particular challenges in accessing finance and banking, because of banks’ own compliance policies rather than ESG ratings. Will the Minister expand on how the Government can address those challenges, and encourage banks to adjust their compliance policies to better ensure that defence SMEs can access the capital they need to get off the ground?

We must never lose sight of the moral case for the defence of our nation, which I know matters so much to my constituents in North Durham, many of whose family members are veterans or serving in the armed forces; indeed, one in 10 of the households in my constituency is in that position. We must do all we can to secure the capital that our defence industry needs to rearm the country at pace and stand up to the growing threats we face. I look forward to hearing from the Minister about how we can ensure that ESG requirements do not act as a barrier to this moral and practical necessity, and I hope to continue working with Members across the House to drive investment in the British defence industry, especially in the north-east of England.