Amid escalating global tensions, investors are increasingly willing to finance defense companies, according to a recent survey highlighting this shift in sentiment.

Back in late 2020, nearly half of the respondents were keen on keeping defense manufacturers out of their investment portfolios. However, this number has dropped significantly to just 25% over the past three years.

The trend appears to be fueled by both apprehension and opportunity, as defense stocks have surged following the re-election of US President Donald Trump. He has been actively pressing European nations to bolster their military capabilities.

Trump’s foreign policy moves have also included confrontations with Venezuela, threats aimed at Greenland—a territory of Denmark, a NATO ally—as well as tensions with neighboring Canada and Mexico, and longstanding foes like Iran and Cuba.

Historically, Hargreaves Lansdown reports that many investors drew a hard line against defense investments, particularly in companies involved in the production and sale of weapons not just to military forces but to civilians as well.

Prime Minister Keir Starmer spoke at the Munich Security Conference in Germany this month

However, Dominic Rowles, who leads the environmental, social, and governance efforts at the firm, notes that this trend is not universal. Nearly half of female investors still oppose investing in firearms for civilian and military purposes.

Meanwhile, 18 to 29-year-old investors are also far more likely than older people to avoid them.

Regarding the cause of the shift in attitudes, he says: ‘The world is an increasingly uncertain place. 

‘The war in Ukraine continues, tensions in the Middle East persist, and security concerns are rising across Europe.

‘At the same time, US President Donald Trump has suggested that Europe may not be able to rely on American military support if Russian President Vladimir Putin invades the Baltic states, which are Nato members.’

Rowles says European countries either have already or are promising to significantly increase defence spending, and in the UK there is growing pressure on the government to increase military investment even further.

‘Bigger budgets mean stronger order books, clearer revenue visibility and, in many cases, standout share price performance. 

‘Investors who excluded defence have missed significant gains – prompting some to reconsider the sector’s place in a portfolio.’

This week Prime Minister Keir Starmer said the defence budget must continue to be ramped up, boosting UK stocks like BAE Systems and Babcock.

The boss of BAE, the UK’s biggest defence company, this week posted record annual revenues and profits and called for ‘clarity’ over the government’s military spending plans.

How have views on investing in defence changed?

Hargreaves Lansdown polled a large representative sample of its own customers about their attitudes to investing in defence stocks, though the responses from more than 1,700 people were not reweighted when they arrived back.

When posing its questions, it differentiated between firearms companies, which derive a significant percentage of revenue from weapons for both civilian and military use, and military contractors, which make a large amount of their revenue from non-consumer deals or operations.

– Some 48 per cent of people in the firm’s first such survey in late 2022 ruled out investing in firearms entirely, but that has dropped sharply to 27 per cent three years on.

– The figures for those unwilling to invest in military contractors were 29 per cent last time and 19 per cent now.

– In late 2025, 48 per cent of women reject firearms compared with 19 per cent of men, while regarding military contracting 33 per cent of women investors were against versus 13 per cent of men.

– Younger people are the most uncomfortable with exposure to defence stocks, but  older generations are less so.

– The age breakdown for those opposed to putting money in firearms companies is: 18-29 – 34 per cent; 30-54 – 32 per cent; 55-64 – 27 per cent; 65-80 – 24 per cent; and 80-plus – 19 per cent.

– For military contracting it is: 18-29 – 26 per cent; 30-54 – 24 per cent; 55-64 – 17 per cent; 65-80 – 17 per cent; and 80-plus – 11 per cent.

Hargreaves tips the Aegon Ethical Equity fund (ongoing charge: 0.77 per cent) for those who want to avoid defence stocks and Legal & General UK Index (ongoing charge: 0.10 per cent), a FTSE All-Share tracker, if you want no limits on your investment exposure.

Is investing in defence stocks unethical?

In a time when military threats are intensifying and our national defence is the focus of political debate, fewer people seem inclined to take a hardline view about investing in weapons, the Hargreaves poll suggests.

‘The ethics of investing in defence are understandably complex, and it won’t be the right option for everyone,’ says Matt Dorset, defence analyst at Quilter Cheviot.

‘However, the growing recognition that credible deterrence underpins the security and freedoms we rely on is leading to a broader reassessment of the sector. 

‘For many investors, the role defence companies play in maintaining stability is becoming a more important part of the conversation.’

When it comes to the investment case, Dorset adds: ‘Defence, particularly in Europe, is one of the most compelling long term investment opportunities in the market today.

‘The sector is still in the early stages of what we expect to be a prolonged period of supernormal growth.

‘That outlook is being driven by increasing geopolitical threat across the world, new NATO targets, and a clear shift in budget priorities across Europe and beyond. However, valuations have increased significantly, so being selective in how you gain exposure is essential.’

Quilter Cheviot tips BAE Systems in the UK and Saab of Sweden.

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