Why ESG rules must change to take down killer drones

Reappraisal and re-classification of defence technology can help save lives at the heart of Europe, allowing fund houses to invest in protective shields.

Private wealth is likely to be a key determining factor in protecting civilians and the infrastructure they rely on in Ukraine.

In an age of remote warfare, defence against weaponised drone swarms is arguably the utmost priority. Yet family office philanthropists and too many environmental, social and governance (ESG) fund managers are hamstrung by rules that regard all defence investment or donations as ‘unethical’.

In Ukraine, more than 80 per cent of battlefield casualties are now caused by drones. It is not troops or tanks doing the most damage, but anonymous pilots 30 kilometres away from their targets in charge of algorithmically programmed machines.

Beyond the military front lines, it is the homes, hospitals, transport hubs, power stations and many other critical community sites that are all under great threat and will continue to be until peace is restored. Even through ceasefires, which have rarely been adhered to, Russian munitions often punch holes in the buildings and the resolve of the people far removed from the fighting.

Scanning the skies

Electronic warfare (EW) through drone detection and suppression, where killer UAVs (unmanned aerial vehicles) can be incapacitated without any shots being fired, is the best form of defence for Ukrainian civilians.

To put it simply, the system can quietly scan the sky from a hospital rooftop. It detects a drone 20 kilometres away, identifies the frequency it’s using, and automatically sends a counter-signal disabling its control connection at the protocol level. No explosions, no casualties, no collateral damage — just a removed threat. Rather than defencetech, such solutions are akin to peacetech and already exist. In this kind of warfare, humanitarian support must also evolve to the less peaceful era we face, or it risks becoming irrelevant.

Remember, we’ve seen the importance of investing significantly — and early — into detection technologies before. Before the second world war, the UK government mobilised and collaborated with private companies and scientists to develop radar, which provided the crucial early warning system during the Battle of Britain, enabling cities to prepare and respond to the formidable Luftwaffe. It is almost impossible to estimate how many lives were saved as a result. We wouldn’t think twice about such an investment being unethical today. The very notion is absurd.

Yet, astonishingly, inflexible British and European regulations often prevent philanthropists, charities and investment managers from using the legitimate channels to back this technology. This is not about funding weapons. It is about funding the digital equivalent of that early radar system.

Private capital connections

Policies that limit life-saving innovation are not just outdated, they are dangerous. It’s time for private capital to be allowed to step up, much as it did when Princess Diana brought the plight of communities affected by minefields and the charities working to save innocent people in war-torn countries to light.

The fact that The HALO Trust had its origins in military expertise and technology didn’t preclude it from becoming a global charity. Nor should it if a charity that funds the purchase of EW jamming technology for Ukraine to neutralise drones were created.

“Policies that limit life-saving innovation are not just outdated, they are dangerous. It’s time for private capital to be allowed to step up”

At present, the UK Charity Commission rules would deem this to be assisting foreign war efforts, especially if military personnel were required to put the necessary infrastructure in place. Yet it is those unfortunate enough to be on the frontlines who are best placed to protect Ukraine’s 1,300 km border with Russia.

Closer to home, western Europe is becoming increasingly familiar with hybrid warfare that might be inflicted upon its towns, cities and deep sea infrastructure.

In an annual update last year, MI5 director general Sir Ken McCallum said Russia’s GRU agents had carried out “arson, sabotage and more dangerous actions conducted with increasing recklessness” in Britain, since the invasion of Ukraine in 2022. More than 750 Russian diplomats — “the great majority of them spies” — have been expelled, he added.

Quite clearly, the UK and other European nations also need anti-drone and suppression technology to protect civilians and critical infrastructure. The most effective solutions are being developed in Ukraine amid warp-speed innovation to counter threats. So it is in everybody’s interests that action is taken sooner rather than later, where capital is concerned.

In March, more than 100 Labour MPs and peers called on British banks and fund managers to review the assessment of all defence investments as “unethical”, where ESG investment requirements take an anti-defence stance.

By necessity, Ukraine was quick to acknowledge the importance of wealthy benefactors, charities, institutions and companies large and small that were capable of supporting the nation’s defence.

These private contributions, alongside those of allied countries, have been critical, and any qualms about where the money would go were quickly dispelled. It is time for something similar — albeit focused on non-kinetic technology — to happen in the UK and across the continent to save innocent lives.

Mega defence projects

Work is already underway on a £103m ($139m) mega defence project — titled Project Atlas — which plans to fund an EW ‘wall’ along the Ukrainian border with Russia, utilising the technology of a company called Kvertus, which has been highly effective in neutralising killer drones.

Funders of Project Atlas include: the Ukrainian Armed Forces; Ukrainian bank PUMB, owned by oligarch Rinat Akhmetov; Ukraine’s largest private hospital chain, Dobrobut; and international food and agritech industrial group, MHP, alongside other prominent businesses. Ukrainian Olympic fencing champion Olga Kharlan and Kvertus itself have also contributed. But they require international support to reach the target.

If fund managers, wealthy philanthropists, the general public, and companies were able to invest or donate as they do to anti-mine charities, this could dramatically increase money going into vital technology that has already saved an estimated 100,000 Ukrainian lives through deployment on the frontlines and cities.

Reappraisal and re-classification of what constitutes defence technology is the only way forward. Beyond the urgent needs of Ukraine, it may be the stadia, power stations, and civilian infrastructure of wider Europe that needs it next. Having technology proven in the harshest battlefield since the second world war stands the best chance of success, for all concerned.

Andriy Dovbenko (left) is a Ukrainian-born and UK-based early-stage investor and Principal of UK-Ukraine TechExchange

Keith Johnston (right) is founder and CEO of SFO Alliance, an membership body for single family offices