At a recent industry conference, I was asked whether investing in the defence sector could be considered as sustainable.


My reply was that this was the wrong question and that the question should rather be: ‘Does a nation state have the right to defend itself in the face of external aggression?’ In my view, yes it does.


This exchange illustrates a popular misconception in the investment world around what it means to invest sustainably. Sustainable and ethical investing are often used interchangeably, but they are in fact quite different.


Ethical investing means excluding securities in certain industries and sectors that do not align with an investor’s moral or religious values; thus, an investor may choose not to invest in the defence sector on the grounds that any use of weaponry is immoral, and a nation state only has the right to use diplomacy to defend itself. Others may argue to the contrary, that it has the right to defend itself with appropriate military force. Both are values-based positions and ethical investing is a style of sustainable investing, but the two are not the same.


In the latter example, it is possible to have a sustainable defence company. The distinction is how the company addresses environmental, social and governance (ESG) issues. 

ESG – an analytical framework 

ESG is an analytical framework that allows investors to assess how a company or enterprise is identifying and managing ESG risks and opportunities. It is not an investment style. Whilst it may lead some investors to exclude a particular sector or industry such as defence, tobacco, or alcohol from their investment portfolios, it does not mean that those companies or industries are inherently unsustainable.


What has become increasingly clear is that ESG issues, including climate change and social and economic inequality are material issues for investors. And where these risks are not managed effectively, or opportunities are not captured, this can be detrimental to the investment returns generated.


As stewards of other people’s money, asset managers have an important role to play in guiding the companies we invest in towards a more sustainable future.


In this context we highlight Jupiter’s experience as active, long-term investors. 

Active engagement – driving positive change 

Jupiter is a long-term, engaged shareholder in BP. We believe the oil and gas sector faces a profound challenge in adapting to the energy transition and that BP is better placed than others to manage the transition effectively, due to the greater operational flexibility it developed in the years following the Macondo crisis.


In 2019 we engaged collectively through the Climate Action 100+ initiative to file a shareholder resolution, passed with near unanimous shareholder support, which required BP to disclose how its business strategy, including each new material capital investment, is consistent with the goals of the Paris Agreement.


In 2020, the new CEO unveiled a radical new climate strategy to achieve net zero emissions by 2050, including emissions generated by the use of its products. As an interim measure, BP aims to reduce oil and gas production by 40% by 2030.


In its full-year 2021 results, BP provided additional guidance on how its business will shift further towards fuels with lower carbon intensity and renewables and energy solutions, as it works towards its goal of net zero emissions by 2050. BP expects to increase the proportion of its capital expenditure in low-carbon transition businesses (bioenergy, convenience, electric vehicle charging, renewables and hydrogen) to more than 40% by 2025 and to 50% by 2030.

A reawakening of principles and values in investing 

Today, investors are becoming more aware of the grave challenges posed by climate change and biodiversity loss to the value of the assets that they manage for their beneficiaries. As such they expect these issues to be assessed, valued, and priced-in by their investment mandates and selecting managers. This awakening of the idea that we can express our values and beliefs, is a seismic shift in investor behaviour and perception. 

Sustainability doesn’t need to be complicated 

Capitalism is supposed to be about long-term value creation; using resources wisely and not wastefully. However, historically, as a species, we have been guilty of squandering resources, plundering the planet and exploiting its people – put simply, humans have been bad capitalists.



Increasingly though, investors are more conscious about the impact their investments have on the world around them and they are investing sustainably, for example, by allocating part of their portfolio to environmental solutions, or to social solutions such as affordable healthcare and alternative food production etc.



It ultimately comes down to what kind of investor you want to be.



The value of active minds: independent thinking


A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.

Important Information

This document is intended for investment professionals and is not for the use or benefit of other persons. This document is for informational purposes only and is not investment advice. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the individuals mentioned at the time of writing, are not necessarily those of Jupiter as a whole, and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Every effort is made to ensure the accuracy of the information, but no assurance or warranties are given. Holding examples are for illustrative purposes only and are not a recommendation to buy or sell. Issued in the UK by Jupiter Asset Management Limited (JAM), registered address: The Zig Zag Building, 70