Candriam is lowering the ESG bar for two major funds. This is intended to make investments in “selected defense companies” possible.
The move concerns the investment company Candriam Business Equities, the successor to Dexia Business Equities, which comprises two funds: Global Income invests in companies worldwide and has net assets of 993 million euro (September 2025), while its sibling EMU invests in eurozone companies and accounts for approximately 214 million euro. In both cases, these are Article 8 funds, meaning they promote environmental and social characteristics.
Candriam announced that the exclusion policy of both funds will change as of March 16. It will shift from “level 2A” to “level 1 CTB-aligned.” “This change can be seen as a reduction in ESG ambition,” the official notice stated.
Exclusion levels
The asset manager applies four different exclusion levels with somewhat confusing labels: 1, 1 CTB-aligned, 2A, and 3 SRI, with CTB referring to the European Commission’s Climate Transition Benchmark. In practice, both funds are moving from the third to the second, less stringent, exclusion level.
Both levels exclude activities related to controversial weapons, tobacco, and thermal coal. However, level 2A goes further by also excluding conventional weapons and gambling. In addition, this policy excludes polluting electricity producers, the most polluting companies in the oil and gas sector, and companies that seriously violate the principles of the UN Global Compact. Under level 1, only companies that most severely violate the principles of that Global Compact are excluded.
“We are expanding the investment universe, creating the possibility to invest in selected defense companies”
Candriam
Why the easing? As with peers in the sector, the main intention appears to be opening the door to certain defense companies. “We are expanding the investment universe of the Candriam Business Equities strategy, thereby creating, among other things, the possibility to invest in selected defense companies,” Candriam said in a statement to Investment Officer. “This adjustment is also in line with recent European regulations, which clarify that defense stocks do not automatically have to be excluded from sustainable investment strategies.”
“Broad spectrum of ESG preferences”
“It is an optimization of our fund offering to continue aligning with the broad spectrum of ESG preferences among investors, while maintaining our disciplined and responsible investment approach,” Candriam also said. The fund house thus acknowledges that not all clients take the same view when it comes to ESG. For some clients, returns remain more important.
“As a long-standing leading player in sustainable investing, we remain fully committed to offering investment solutions with a high degree of ESG selectivity. At the same time, we recognize that investors do not share identical ESG preferences. While some prioritize strict sustainability criteria, others place greater importance on broad financial diversification combined with responsible investing.”
Friendly bank Belfius rewrote its ESG charter almost a year ago to allow investments in certain defense companies. Competitor KBC Asset Management will ease the exclusion policy of its responsible investment funds as of February 27 and will introduce a whitelist approach.