Europe's 'crazy' regulations hampering defence spending & investment, warns Nato chief

Europe’s “crazy” Environmental, Social and Governance (ESG) Regulations have hampered defence spending and investment and have set the continent much behind China and Russia in terms of military readiness, according to Nato chief Mark Rutte.

The ESG Regulations are made to ensure that financial institutions such as banks, pension funds, and asset management funds make ’ethical’ investments that safeguard environment and are in line with United Nations (UN) sustainability goals. Rutte, the Secretary General of the North Atlantic Treaty Organization (Nato) has said that the regulations have adversely affected the defence ecosystem.

Rutte’s remark comes as European members of Nato are under huge pressure from US President Donald Trump to spend more on defence. Trump has threatened to encourage Russia to attack Nato allies if they would not ramp up defence spending to his liking.

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Speaking in Switzerland’s Davos where the World Economic Forum (WEF) is being organised, Rutte said that the situation is now such that Russia, which has emerged as the biggest security threat to Europe in recent years, produces arms four times faster than Europe.

It’s crazy that defence is clubbed with drugs, porn in regulations, says Rutte

Rutte said it was “crazy” that Europe’s investment regulations have clubbed the defence industry with drugs and pornography.

“We still are not able to explain to the pension funds, to the banks, the difference between illicit drugs and pornography on the one hand and spending on our collective defence on the other. And somehow it’s all the same basket. This is crazy, but this is one of the reasons why I’m trying to reach out to the 1 billion people living in Nato territory and asking them: go to your banks and your pension funds and tell them that you want to be defended and you want them to spend more," said Rutte, according to The Daily Telegraph.

Highlighting that the priority remains to keep the ability to fight Russia in case of an attack, Rutte said the ability is compromised with the regulations in place. He went on to say that China was producing arms four times faster than Europe.

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Rutte said, “All over Nato we produce in a year, in terms of ammunition, what Russia is producing in three months. So this is evidence that we have huge problems, and that’s why my plea is, yes, we are safe now but in four or five years, if we do not ramp up production and do not ramp up spending, then we are really into difficulty.”

Separately, Belgian defence company John Cockerill’s CEO Francois Michel said that ESG regulations risked “destroying the European defence industry”.

“Clearly there is an issue with the ESG regulations on the financial side because, whatever the regulations we have in Europe in general, finance has been pushing the defence industry to sit apart from civilian infrastructure and from civilian activities. This is destroying the European defence industry, this is something we absolutely need to solve, and I fully agree with the fact that public spending is not the only answer. Private capital has to be able to flow efficiently between savings and companies,” said Michel, as per The Telegraph.