LONDON, Aug 2 (Reuters) - The chief executive of Britain's biggest military contractor BAE Systems said on Wednesday that the war in Ukraine had made ethically focused investors more open to buying shares in defence companies.
Before Russia's invasion of February 2022, some European investors who favoured firms with strong environmental, social and governance (ESG) profiles had shunned the defence sector, with fighter jets, missiles and tanks deemed unsustainable investments.
But Charles Woodburn, BAE CEO, said that picture had shifted somewhat since war broke out on European soil.
"If I was to wind the clock back to pre-Ukraine, there were a number of investors who just wouldn't meet us," he said.
"What we see is that pendulum now swinging into a more balanced position of... ethical considerations, ESG considerations, co-existing with the need for defence and security."
BAE, like other defence companies, has benefited from rising military spending as a result of the Ukraine war, and its shares have risen 63% since the invasion started.
Liberum analyst Joachim Klement said companies that dealt in shunned weapons like anti-person landmines remained off limits for ESG investors. But big defence contractors working with the U.S. and its Western allies were "increasingly being accommodated" in such portfolios, he added.
Woodburn said more work still needed to be done on making the investment case for defence stocks.
The trend of some investors to exclude them on ESG principles had been particularly evident in London, though that had not prompted BAE to consider changing or adding to its listing.
"We have no intention of changing our listing destination," he said.
Several UK companies have favoured a U.S. listing as Britain's appeal as a global financial centre has lost some of its shine with Brexit, and as valuations and liquidity in New York outperformed.
British chip designer ARM has chosen to list in New York rather than London, while UK building materials group CRH will move its primary listing there this year.
The United States is BAE Systems' biggest market, accounting for 44% of sales in 2022, with Britain its second biggest. (Reporting by Sarah Young; additional reporting by Simon Jessop; editing by John Stonestreet)