Ministers stated that ethical investing is destroying Britain’s defense industry.

Ethical investing harms Britain’s defence industry by using “skin deep” moral arguments that undermine the sector’s value, according to a company founded by two ex-Royal Marines.

4GD, which provides combat training for soldiers using virtual reality, special effects and other means, stated that the Government must intervene to protect defence investing in the face of environmental, social, and governance (ESG).

Ethical investing is a way to please retail investors who are more concerned about how their money is used. It avoids funding companies that support the tobacco or fossil fuels industries.

Investors such as the Church of England and Legal and General resisted the defence sector due to ethical concerns. However, others like BlackRock have increased their exposure to this industry.

Robert Taylor, 4GD’s founder and a former Royal Marines reserve officer training officer, stated that the UK undervalues defence. It is becoming increasingly difficult to decide whether the defence is worth investing money in.

“There is also a lack of understanding in the UK about the opportunities for defence, which is a great example of government revenue.”

4GD creates an immersive, close combat training environment by creating moveable walls that can be used to construct structures that resemble terrorist safehouses or other battlefield scenarios.

Taylor stated that the company is now looking to the USA to raise funds for new training centers. This was because many UK investors were demanding dual functionality funding, making it hard to obtain funding in Britain.

He said, “An anomaly we find here in the UK is a rising focus on dual-use technologies. Some groups have attempted to avoid the moral implications of investing in defence by defining an investment as dual-use.

“We are a UK-based company. We have a strong veteran theme running through the company. We’d love to keep that capability or capacity sovereign. However, this must be done in the spirit of business.

Dual-use equipment can be used for both defence and civilian purposes. You can use sensors or cybersecurity software to search for and rescue troops, as well as detect troop movements.

However, Mr Taylor stated that these requirements are not practical and shouldn’t be required.

He stated that he would create a dual use for the sole purpose of achieving potential lines within ESG policies.

Rupert Soames (ex-chief executive of Serco), stated that ethical investors made a “screeching turn” over their opposition to the defence sector after the reality of Vladimir Putin’s warmongering in Ukraine. Serco has defence contracts with the UK and Australia.

Mark Francois, Tory MP and ex-arms forces minister, stated that Russia’s invasion of Ukraine has shown how crucial Britain’s defence sector is.

He stated that: “Our defence industry has proven its ethical value through providing weapons, such as NLAWs [Next-generation light anti-tank Weapons], who have materially helped Ukraine resist Russia’s barbaric invasion.

“I can recall at hustings some year ago when an elector asked me ‘Why don’t you just abolish the arms industry?’ To which I replied, ‘If someone hadn’t been building Spitfires 1940, this would not be happening. If defending freedom from tyranny doesn’t seem ethical, what is?

John Healey (Labour MP and Shadow Defence Secretary) said: “A strong UK defence sector supports our economy and sovereignty.

“Innovative UK defence companies should be able to count on domestic sources for investment. Ministers should look for ways to remove barriers, so homegrown success stories get the support that they deserve.

The Government has not responded to our requests for comment.