The Church of England Pensions Board has sharply tightened its stance on defense-related investments, cutting its permitted revenue threshold for defense exposure in half and signaling heightened scrutiny of dual-use manufacturers, according to its updated Defence Investment Policy.
The move follows what the board described as “careful reflection” on recently updated guidance from the Church of England’s Ethical Investment Advisory Group (EIAG) and a survey of scheme members, according to a news release. The EIAG warned that investors cannot be assured that weapons or defense technologies “will be used in line with Just War principles,” advising “extreme caution” toward companies deriving a material share of revenue from defense sales.
Sectors under most scrutiny include weapons manufacturers, suppliers with exposure to indiscriminate weaponry, and dual-use technology firms — a category that expanding, the board noted in the news release, will require new data sources, deeper due diligence, and sustained engagement, particularly where companies may have links to oppressive regimes.
The Pensions Board said its revised rules reflect rising geopolitical instability and the investment risks associated with conflict, citing United Nations’ data showing increased global violence. The board also flagged concerns over “opaque and porous” defense-export regimes, which it said raise the risk of equipment surfacing in active conflicts or “alleged genocides.”
Under the strengthened policy, the Board will lower its allowable revenue threshold for defense-related companies from 10% to 5%. It will continue to exclude all companies involved in indiscriminate weapons, including nuclear arms, in line with longstanding ethical screens.
While the Board acknowledged that U.K. pension schemes must necessarily hold U.K. government bonds —thereby indirectly financing government defense expenditure — it said a tougher line on direct corporate exposure was both “reasonable and proportionate.”
The EIAG “strongly supports efforts . . . to encourage peacebuilding and to address systemic drivers of conflict,” the board noted, adding that scheme members expressed clear support for the Pensions Board’s new responsible-investment priority focused on peacebuilding within the global Anglican Communion.
Beyond investment restrictions, the updated policy elevates peacebuilding as a strategic priority. This includes supporting the development of the Global Centre for Peacebuilding and Business and expanding links with Anglican communities in conflict-affected regions.
The policy shift adds the Church of England Pensions Board to a small but growing group of asset owners wrestling with how to manage exposure to defense firms amid both rising geopolitical risk and increased sector interest from other institutional investors seeking “resilience” assets.
