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    Spooked by Nukes

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    It has been a truly nightmarish Halloween week. Forget the usual paraphernalia of ghosts, vampires, and jack-o’-lanterns. This year, several news stories competed to make the scary experience so much more genuine: the horrors of a crowd crush in Seoul, a falling bridge in Gujarat, a typhoon-induced landslide in the Philippines, and even a fugitive deadly cobra ready to strike in the heart of Stockholm[1].

    Amidst all these fresh and bloody shocks, one could almost forget about the spookiest elephant in the European room. Alas, the war in Ukraine hasn’t been spirited away yet. Ghost-themed parties with fake witches serving spiderweb-decorated glasses of Bloody Mary were probably not a thing in Kyiv’s underground in the past few days. The authentic soundtrack of falling bombs is thrilling enough for the capital’s beleaguered citizens, I would imagine.

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    But perhaps the real scare is still to come. This week, several newspapers reported on (alleged) discussions among senior Russian military leaders about when and how Moscow might use a tactical nuclear weapon in Ukraine. I wonder if it is just tough talk from the generals who are increasingly frustrated about their failures on the ground. Yet the details leaking out of the Kremlin point to a tangible threat that I find impossible to ignore. Growing up in the cold war years does have that effect on me. And surely, I am not the only one to experience that blood-curdling sensation at the mere thought of nuclear war.

    No wonder the number of investor conferences featuring geopolitical issues has been growing. There were at least a couple just last week in Stockholm. Defence industry representatives and retired generals must be in high demand as speakers, enjoying their hero moment in the spotlight. And if you think those events are irrelevant for an ESG investor, think again.

    Sustainability and weapons are, apparently, no longer mutually exclusive concepts. Since last February, attempts to squeeze defence stocks in the ‘S’ bucket of ESG are hardly viewed as a joke. Some of the arguments sound rather convincing, too. Security is certainly the foundation of a sustainable society, a human right enshrined in international treaties. But then you consider the nature of the products they hawk, and it all becomes blurry. Can investors really distinguish between a defensive weapon and an offensive one? Indeed, any weapon can cause harm in the hands of an aggressor. And that cannot possibly rhyme with the important ‘do no significant harm’ sustainability principle preached by EU regulators as well as religious leaders.

    Some would go even further to blame our current spell of nuclear war scare on the mighty Western defence industry (or, more precisely, on the military complex that seems to run the show in Washington, D.C.). “Here we are near the brink of nuclear war… because the United States just can’t keep its goddamn nose out of anyone’s backyard,” says Jeffrey Sachs[2] in an interview posted on Twitter last week by another professor, Steve Hanke, from the Johns Hopkins University in Baltimore, Maryland.

    “The world’s very survival depends on prudence, diplomacy, and compromise by all sides,” argues Sachs, who seems as spooked by the nukes talk as I feel. Voices like his are hardly audible in the conference rooms of Stockholm, though. We are too busy cheering the local defence industry and waiting impatiently to be admitted into the safe bosom of the North Atlantic alliance.

    Unfortunately, it seems like Halloween is not quite over yet.

    [1] To be fair, the escapist feat of Sir Hiss, aka Houdini, did not have any deadly outcomes and pales in comparison to the rest of the news flow.

    [2] The famous economist is the Director of the Center for Sustainable Development at Columbia University where he directed The Earth Institute from 2002 until 2016. He is also President of the UN Sustainable Development Solutions Network and a commissioner of the UN Broadband Commission for Development.

    Image courtesy of Skyler Sawyer on Unsplash
    Julia Axelsson, CAIA
    Julia Axelsson, CAIA
    Julia has accumulated experience in asset management for more than 20 years in Stockholm and Beijing, in portfolio management, asset allocation, fund selection and risk management. In December 2020, she completed a program in Sustainability Studies at the University of Linköping. Julia speaks Mandarin, Bulgarian, Hindi, Russian, Swedish, Urdu and English. She holds a Master in Indology from Sofia University and has completed studies in Economics at both Stockholm University and Stockholm School of Economics.
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