ESG and National Security: Time to Reset the Balance
In a recent article in The Australian, Beaten Zone Venture Partners Founder Steve Baxter warned that ESG frameworks, if left unchecked, could unintentionally undermine Australia’s sovereign defence capability. His comments highlight the urgent need to recalibrate how responsible investment and national security intersect.
Here is a summarised version highlighting a few key points:
The Emerging Risk
ESG mandates are increasingly influencing the allocation of capital across industries. Yet when these frameworks exclude companies contributing to sovereign Defence, they create vulnerabilities in Australia’s ability to deter and defend.
Why it Matters
Sovereign Defence is not an optional sector; it is the backbone of national resilience. Excluding defence innovators from financial support or concessions solely because of ESG classifications undermines both Australian security and allied warfighting capabilities.
A Practical Example
If banks apply ESG filters that exclude Defence innovators, those businesses could be denied protections that other industries take for granted. Consider the Financial Claims Scheme (FCS), which protects deposits up to $250,000. Denying this coverage would unfairly disadvantage firms that are building critical national capabilities.
Steve’s Perspective
As Steve told The Australian
“ESG frameworks should never be weaponised against companies contributing to Australia’s security. If well intentioned polices result in few tools for our warfighters, then those policies need to be recalibrated”
Resetting the Policy Levers
Australia needs an approach that balances responsible investing with sovereign imperatives. Regulatory levers – including access to financial protections and government concessions should remain open to Defence-critical firms, unless there is clear evidence that national security is compromised.
Our Position
At Beaten Zone Venture Partners, we invest in sovereign early-stage businesses with products that have material military use and contribute to Australia’s national security and the survivability of allied warfighters. Our role is to ensure capability is delivered before it’s needed. Aligning ESG with national security isn’t a compromise; it’s a necessity.