In these dark and uncertain times, there is a clear need for Europe to defend itself. I don't think anybody would really argue with that. What we can and should argue about is who should be responsible for funding it. I have a clear view on this: It is the responsibility of our governments to protect and defend us against threats. After all, this is why they have the monopoly on the use of force and extraordinary powers to raise funds and act quickly in these moments.

Leaders across the continent are leveraging these powers as I write. By unleashing national escape clauses, issuing new defence loans and redirecting the EU budget, our heads of state are collectively allocating EUR 800 billion to rapidly rearm Europe.

When governments buy weapons, they control them. They know where these lethal devices will be stored, transported and deployed. As the buyers, governments also decide what types of arms they're investing in. For example, under international humanitarian law, they are prohibited from using nuclear, biological, chemical or other controversial weapons that are disproportionate and typically cannot discriminate between civilian and military targets. And when war – or the threat of war – is over, our governments have control over what to do with any remaining armaments, which is crucial.

It is correct that our democratically elected governments take on this very serious responsibility. They must enact the will of the people and will face scrutiny over their decisions. The weapons that governments buy are also funded with debt and taxes. This financial structure provides a further incentive to end conflicts quickly and peacefully.

This is not the case, however, if private investors invest in weapons manufacturers. In that situation, the primary motivation is to deliver profit for shareholders. We cannot – and must not – ignore the obvious fact that these companies and their investors benefit from conflict. It's their business model.

Unlike our governments, weapons manufacturers (and their investors) have an overwhelming financial interest in stoking up the threat of danger, pushing clients to buy more weapons and keeping wars going on for as long as possible. And when war is over, they will look for other markets and conflicts to sell their products. They become rich during wars. When private investors are funding weapons manufacturers, they also inherit a perverse incentive to keep the conflicts raging. After all, investors want to make a profit. For mid and long-term investors, they benefit most from conflict that stretches decades. This is a fundamental flaw that coincides with private investors funding the weapons industry. It goes directly against our aim of restoring peace.

For private investors, transparency over the types of armaments being made or who they will be used against is extremely limited. It ends the moment the weapons leave the factory. This is one of the opaquest industries in the world. It’s especially true for the secondhand arms market, which is completely untransparent. And it would be extremely reckless for investors, pension funds or banks to make assumptions.

As lethal weapons change hands, history shows that they can land in sinister places, wrecking destruction and terrorism. Although private investors may believe that they are funding the re-armament of Europe, they could just as easily end up paying for school shootings, civilian deaths or crimes against humanity elsewhere in the world. As an investor it’s simply impossible to know how, where, and by whom weapons will be used.

As surreal as it seems to us in Europe, US citizens can browse and purchase from a range of guns at their local Walmart store during their weekly food shop. Semi-automatics, hand pistols, rifles and more are for sale. Unsurprisingly, guns like these are often at the center of mass shootings. This is what happens when weapons are used for commercial gains and most certainly not what Europe’s pension holders and sustainable investors want to support. On the contrary.

The money from private investors could also be used by weapons manufacturers to make dubious donations to politicians. In 2024 alone, defence companies paid US politicians more than USD 148 million, to sway their policies and earn contracts. Despite just 6% of the population agreeing with pro-gun groups like the NRA, they have an outsized influence on governance. This undermines democracy, the very concept that we are trying to uphold and protect.

When private investors fund weapons manufacturers, they do not have transparency over what they are investing in. This is incompatible with the first rule of investing: Know what you own. For sustainable investors, it’s even less compatible as the very purpose of weapons, namely to cause death and destruction, is diametrically opposed to any sustainable or ESG objectives.

As we wade through geopolitical tension and uncertainty, governments should be in control of the weapons industry. Long-term sustainable investors have a different role. We must invest in a society that protects and promotes the quality of life of all its members, and that has human dignity at its core. And we must be prepared and able to help war-torn countries like Ukraine rebuild their infrastructure. That is where our long-term value lies.

As investors and fellow humans, this is the right side of history.

This column was originally published in Dutch on IEX Profs.