By Alban Kacher
(Reuters) -European exchange operator Euronext on Tuesday announced a series of measures to encourage investment into the region’s defence industry, including by helping companies list on stock markets and launch new bonds faster.
The move follows a political push to increase investment in the industry and reduce reliance on U.S. armaments after criticism from the Trump administration that the region was not spending enough on its own security.
In a statement renaming ESG – the acronym given to Environmental, Social and Governance-driven investing – as Energy, Security and Geostrategy, Euronext’s CEO and Chairman Stephane Boujnah said it was responding to a “new geopolitical order”.
“European aerospace and defence companies have expressed the urgent need to invest heavily in their innovation and production capacities to guarantee Europe’s strategic autonomy for the next decade,” Euronext said in the statement.
Among the measures, Euronext said it would revisit the methodologies for ESG indexes to limit the exclusions currently placed on defence companies.
In line with regulatory guidance, “Euronext will encourage ESG rating agencies to restrict the concept of controversial weapons only to armament activities prohibited by relevant international treaties,” it said.
The exchange also reiterated plans for a new series of indexes focused on energy, security and geostrategy, which it unveiled in March.
Indexes are used to evaluate the performance of market segments. They can also serve as a base for creating funds.
ANALYSTS SCEPTICAL
Euronext said it would also seek to support initial public offerings in the sector through its new IPOready Defence programme, to be launched in the third quarter, which will benefit from European Union funding.
Thyssenkrupp, currently in the process of spinning off and separately listing its warship division TKMS, said it would analyse the initiative’s potential impact.
“The geopolitical situation requires decisive action to strengthen military readiness and defense capabilities in Germany and Europe,” it said.
However, there were few details on the steps it would take to get more companies to list and some analysts were sceptical.
“Promoting defence IPOs is helpful but at the end of the day, the market determines the success or failure of IPOs, not Euronext,” said ING analyst Reg Watson.
Euronext is now able to cut the time necessary to list European defence bonds to just two days, Boujnah said during a call with journalists.
Tuesday’s announcements align with a broader geopolitical shift as Europe strives to increase military spending after U.S. President Donald Trump said Europe must take more responsibility for its own security.
European Commission President Ursula von der Leyen said in March that the EU could mobilize up to 800 billion euros ($906 billion) to strengthen its defence industry.
European asset managers have been reassessing their policies on investing in defence, as politicians and customers pressure them to loosen restrictions and help fund the race to re-arm.
Euronext operates exchanges in Amsterdam, Brussels, Dublin, Lisbon, Milan, Oslo and Paris.
($1 = 0.8835 euros)
(Reporting by Alban Kacher in Gdansk. Additional reporting by Christoph Steitz. Editing by Milla Nissi-Prussak, Mark Potter and David Evans)
