Nato’s senior military official, Admiral Rob Bauer, has sharply criticised Western financial institutions for avoiding investments in the defence sector, describing such actions as “stupid” in light of the rising security threats posed by global geopolitical tensions. In an exclusive interview with the Financial Times, Bauer called on banks, pension funds, and rating agencies to rethink outdated policies, arguing that they risk missing out on substantial government funding and return on investment amid increasing military spending following Russia’s invasion of Ukraine in 2022.
Bauer, who is set to step down from his position as Chairman of Nato’s Military Committee, accused these financial entities of failing to recognise their critical role in “collective defence.” He urged investors to capitalise on the burgeoning demand for defence products, which is expected to see substantial government orders over the next two decades. “Why are you not convinced by trillions of dollars? What has happened to your business instinct? Are you stupid? And that’s what I say to pension funds as well,” Bauer said in a blunt statement. He emphasized that the global security landscape had shifted, and ignoring the defence sector would be a grave mistake for those seeking robust returns.
The Admiral’s comments come at a time when European governments are urgently increasing their military procurement to support Ukraine’s fight against Russian forces, with defence contractors, such as Germany’s Rheinmetall and Norway’s Kongsberg Gruppen, reporting significant growth in share prices as a result. However, Bauer noted that while there has been a surge in venture capital funding for defence start-ups, some European banks remain hesitant to lend to arms manufacturers. This reluctance is especially problematic for smaller producers who are vital to the overall supply chain, a challenge that Bauer deems shortsighted.
One of the key points raised by Bauer is the ethical stance many financial institutions take regarding defence investments, often citing environmental, social, and governance (ESG) concerns. Some pension funds and banks avoid funding defence companies, arguing that such investments support violence. Bauer, however, countered this viewpoint by urging critics to consider the stark realities of war in conflict zones such as Gaza, Ukraine, Yemen, and Syria. “Investing in defence for deterrence purposes is actually the best sustainability measure,” he stated, adding that failure to support defence industries in times of growing global instability would be a strategic error.
The EU has been increasing its pressure on the European Investment Bank (EIB) to relax its near-total ban on financing weapons manufacturing, with the aim of strengthening Europe’s defence industry. The European Commission and several EU governments have voiced concerns about the gap in defence investment, especially as the threat from Russia and other global powers intensifies. Meanwhile, Bauer also pointed out that some Eastern Nato members are facing lower sovereign credit ratings due to their proximity to Russia and the ongoing conflict in Ukraine. For these nations, Bauer argued that Nato membership should provide a security bonus rather than a penalty.
Bauer’s plea for a shift in investment mindset reflects a broader concern that many businesses, and particularly financial institutions, are still disconnected from the security risks facing Europe and beyond. “The lack of strategic thinking is sometimes astonishing,” he remarked, pointing out that many investors continue to focus solely on short-term profits without recognising the long-term implications of global instability.
In the interview with the Financial Times, Bauer also discussed his surprise at the lack of focus on defence during a financial gathering in Los Angeles, where he was the only participant in military uniform. “This whole idea that money is disconnected from security is a concern,” Bauer said, highlighting that economic stability is inseparable from national security, which has been guaranteed by Nato for over 75 years. He concluded by reiterating that defence should not be viewed as a cost, but rather as a critical investment that supports broader economic and geopolitical stability.
