Defense

Rheinmetall CEO Armin Papperger said at the AGM on 13 May that the automotive supply division, which employs 6,700 people, is no longer a core business. A review is underway which may result in it being divested.

Augsburg based defence industry firm Renk's first attempt at an IPO was cancelled at the last moment in October 2023. Four months later, Renk successfully debuted on the stock market – a move which CEO Alexander Sagel views as a catalyst for growth.

After a decline in demand in China, Dräger foresees a lasting reduction in the market's importance. But the medical technology and safety equipment company could benefit from increased defence spending in Germany.

Defence expenditure is going to rise sharply in Europe. At last week's earnings presentation, Renk CEO Alexander Sagel discussed the likely impact on the company of strengthening the Bundeswehr.

The current ESG debate illustrates that sustainability is not just about being green – but also about geopolitics. Defence industry investments are becoming a new reality for sustainable funds.

The European Union is considering changes to the stability pact to accommodate higher defence spending. But it should look closely at how bond investors might react.