Defence Stocks Are Booming in 2026. The Ethics Data Tells a Different Story.
Defence equities are delivering the kind of returns that make fund managers look brilliant. Lockheed Martin, RTX Corporation, Rheinmetall -- all near all-time highs. NATO budgets climbing past 3% of GDP. European rearmament at Cold War levels. If you own an index fund, you almost certainly hold these companies.
But financial performance is only half the picture.
Mashinii scored 13 major defence companies across 11 independent ethical dimensions using court filings, regulatory actions, investigative reports, and NGO data. The result: defence is the lowest-scoring sector in our entire database. Not by a small margin. By a wide one.
The Tailwinds Behind the Boom
The defence rally is not speculative. It is driven by structural shifts in global security spending.
| Driver | What It Means for Defence Stocks |
|---|---|
| NATO spending targets rising to 3-3.5% of GDP | Expanded procurement pipelines across US and European contractors |
| Ongoing conflict in Eastern Europe | Accelerated orders for munitions, missile systems, armoured vehicles |
| Indo-Pacific security competition | Naval and aerospace budget increases across allied nations |
| European rearmament programmes | Record defence budgets in Germany, France, Poland, and the Nordics |
| AI and autonomous systems investment | New contract categories for ISR platforms and defence tech |
Rheinmetall has more than tripled from its pre-2022 levels. Lockheed Martin, RTX, and Northrop Grumman all sit near record highs. The S&P 500's Aerospace and Defence sub-index has outperformed the broader market by a significant margin year-to-date.
None of that is in dispute. What this article examines is a different question: what do these companies look like when measured against publicly sourced ethical data?
The Scores: 13 Defence Companies, Ranked
We divided the companies into two groups: pure defence contractors, whose revenue is predominantly military, and dual-use companies that straddle civilian and defence markets.
Pure Defence Contractors
These companies derive most of their revenue from weapons systems, military platforms, and government defence contracts.
| Company | Ticker | No War Score | Avg Score |
|---|---|---|---|
| Lockheed Martin | LMT | -90 | -19.5 |
| Huntington Ingalls | HII | -90 | -21.8 |
| RTX Corporation | RTX | -80 | -28.2 |
| Northrop Grumman | NOC | -80 | -21.4 |
| General Dynamics | GD | -80 | -22.7 |
| Rheinmetall | RHM | -80 | -22.7 |
| L3Harris Technologies | LHX | -70 | -10.5 |
| Boeing | BA | -70 | -20.9 |
Every pure contractor scored between -70 and -90 on the No War, No Weapons dimension. Group average: -80.0 on No War. -21.0 overall.
Lockheed Martin and Huntington Ingalls scored -90, the deepest negative range in our system. According to public procurement records and arms export data, both companies hold extensive weapons contracts and documented involvement in nuclear weapons programmes.
RTX Corporation (formerly Raytheon) carries the worst overall average at -28.2 across all 11 dimensions -- the lowest of any company in this analysis.
Dual-Use and Defence-Adjacent Companies
These firms generate meaningful defence revenue alongside substantial civilian operations.
| Company | Ticker | No War Score | Avg Score |
|---|---|---|---|
| Textron | TXT | -60 | -12.3 |
| GE Aerospace | GE | -60 | -7.7 |
| Leidos | LDOS | -60 | -11.4 |
| Airbus | AIR | -50 | -9.5 |
| Palantir Technologies | PLTR | -40 | -9.1 |
This group scored between -40 and -60 on No War, averaging -54.0. Overall averages range from -7.7 (GE Aerospace) to -12.3 (Textron) -- less negative than the pure contractors, reflecting positive contributions from civilian operations on other dimensions.
Palantir, which provides data analytics to defence and intelligence agencies rather than manufacturing hardware, scored -40 on weapons involvement. Airbus, which splits revenue between commercial aviation and military platforms, scored -50.
It Goes Beyond Weapons
The No War dimension is where the gap is widest. But the pattern extends across multiple areas of documented corporate conduct.
| Dimension | Avg (Pure Defence) | Avg (All 13) |
|---|---|---|
| No War, No Weapons | -80.0 | -69.2 |
| Planet-Friendly Business | -37.5 | -31.3 |
| Fair Pay & Worker Respect | -26.3 | -21.3 |
| Fair Trade & Ethical Sourcing | -25.0 | -18.0 |
| Honest & Fair Business | -25.0 | -20.7 |
| Zero Waste & Sustainable Products | -15.0 | -10.7 |
| Safe & Smart Tech | -10.0 | -10.0 |
Environmental scores are negative across the board, driven by documented emissions from manufacturing operations and regulatory findings identified in public records. Worker treatment scores are negative for every company in the group. Governance scores reflect documented instances of procurement fraud, overcharging, and regulatory penalties found in public filings and court records.
Not a single defence company in this analysis scored positive on average across all 11 dimensions.
The Trade-Off, in Numbers
This is the tension at the heart of defence investing in 2026. The sector delivers strong returns while recording the lowest ethical scores in our database.
| Metric | Defence (Pure) | Defence (All 13) | S&P 500 Avg |
|---|---|---|---|
| Avg No War Score | -80.0 | -69.2 | -15.3 |
| Avg Overall Score | -21.0 | -16.5 | -6.2 |
| Lowest Dimension | No War (-90) | No War (-90) | Varies |
The S&P 500 average from our analysis of 40 major companies is -6.2. Pure defence contractors scored roughly three times worse. Even the dual-use group scored more than double the index average in the negative direction.
This is not an argument for or against holding these positions. It is a factual presentation of what the scoring data shows. Investors weigh returns, risk, and values differently. Mashinii exists to make the ethical dimension visible so allocation decisions are informed, not accidental.
The European Rearmament Factor
Europe's rearmament programme is a significant driver of 2026 defence stock performance. After decades of declining military budgets, European governments are spending at levels not seen in a generation.
Rheinmetall, the primary German beneficiary, scored -80 on No War and -22.7 overall -- squarely alongside its American counterparts. Airbus, which builds the A400M military transport and Eurofighter components alongside commercial aircraft, scored -50 on weapons with a -9.5 overall average.
For European investors holding these companies through DAX, CAC 40, or Euro Stoxx 50 index trackers, the implication mirrors what American S&P 500 investors face: passive allocation means defence exposure, whether intended or not.
See the full breakdown of defence stocks in your index fund
What About "Ethical Defence"?
Some investors argue that defence spending serves legitimate national security purposes and should not be penalised in ethical scoring. That is a reasonable position. It is also not what our methodology measures.
The No War, No Weapons dimension tracks documented involvement in weapons manufacturing, arms exports, military contracts, and conflict-zone operations based on publicly available procurement records, export licence data, and investigative reports. It does not make a political judgement about whether these activities are justified.
A score of -90 means extensive, well-documented involvement. A score of -40 means moderate involvement. A score of 0 or positive means no documented involvement, or involvement limited to non-weapons categories.
How to weigh this is your decision. Some investors view defence exposure as acceptable or desirable. Others want to limit or exclude it. The data serves both approaches.
See how all 11 dimensions are scored
Five Takeaways
1. Every pure defence contractor scored negative overall. The best overall score among the eight pure-play companies is L3Harris at -10.5. The worst is RTX Corporation at -28.2.
2. The No War dimension is the most extreme. No defence company in our database scored above -40 on this dimension. Pure contractors cluster between -70 and -90.
3. Problems extend well beyond weapons. Defence companies scored negatively on environmental performance, worker treatment, ethical sourcing, and governance. The underperformance is across the board.
4. Dual-use companies scored less negatively, but still negative. GE Aerospace (-7.7 overall) and Palantir (-9.1 overall) performed better than pure contractors. Neither reached positive territory.
5. Financial returns and ethical scores move in opposite directions. Defence stocks are among the best financial performers of 2026 and the worst ethical performers in our database. That is a trade-off, not a contradiction.
How Mashinii Scores
Every score in this analysis is built from independently verifiable sources: court filings, regulatory penalty records, investigative journalism, and NGO reports. Companies cannot influence their scores through self-reporting, lobbying, or sustainability questionnaires.
Mashinii scores across 11 independent dimensions -- not a single blended number. A defence company can score poorly on weapons and differently on environmental performance. Both scores are visible. Nothing is averaged into a meaningless composite.
Learn how the methodology works
Check Your Defence Exposure
If you hold an index fund, a target-date fund, or any diversified ETF, there is a high probability that defence contractors are among your holdings. The sector's weight in major indices has grown as share prices have climbed through 2026.
Whether you keep that exposure or reduce it is your decision. Making it informed requires knowing what you own.