When Did Defence Become an Impact Theme?
In under three years, investing in defence has moved from exclusion to inclusion in many European impact frameworks. The shift has sparked controversy among investors (impact, ESG, sustainable), regulators and policymakers alike; in the Impact Europe community, opinions are many and varied.
No matter what your take on this issue is, it helps to know what happened when. That’s why we’ve put together a timeline.
The quick version
Pre‑2022: Defence sat outside impact frameworks. Exclusions peaked around 2021.
Early 2022: Russia’s invasion of Ukraine was the inflection point; within weeks asset managers, regulators and policymakers began arguing that defending free societies is a social good.
2023‑24: The focus moved to removing practical barriers (taxonomy wording, EIB policy, fund labelling rules).
2025: Major institutions (Allianz, Euronext) and private‑capital channels openly position defence as an impact theme.
2020-25: Defence becomes an impact theme in Europe
2020
Defence is outside any “sustainable” label in the EU taxonomy regulation for sustainable finance. Most ESG funds exclude it.
2021
About 14 % of all European retail fund assets are subject to weapons restrictions, a level unseen in the U.S.; reputational risk, not regulation, drives the trend.
2022
February: Russia invades Ukraine. European defence stocks jump as investors anticipate higher budgets, foreshadowing an ESG rethink.
March: The first asset‑manager U‑turns: “cracks are emerging” in exclusions. Defence firms lobby to be seen as providers of security, a social good.
A draft EU social taxonomy proposes classing weapons as “socially harmful,” sparking a backlash from industry and some MEPs – the debate goes public.
April: Sustainable investors start rethinking long-held bans; several European banks pledge to review defence screens.
June: EU defence industry turns up the pressure, demanding taxonomy clarity ahead of a Commission proposal.
2024
March: Fourteen EU governments urge the European Investment Bank (EIB) to loosen its bar on defence lending, saying security needs outweigh optics.
April: EU Financial‑Services Commissioner Mairead McGuinness publicly states, “the green taxonomy does not apply to defence funding.”
May: EIB drops its 50 % civilian‑revenue test for “dual‑use” projects (those that have civilian applications as well as military) and sets up dedicated credit lines for defence‑supply‑chain SMEs. “Security is, first and foremost, an environment of freedom and peace for our countries.” - Nadia Calviño, President, EIB
September: European ESG funds’ defence holdings reach €7.7 bn, more than double what they were in Q1 2022.
2025
February: The Trump administration explicitly ties American military support to European increases in defence spending, calling for Europeans to spend 5% of GDP.
March: Top money managers (Legal & General, UBS, Mercer) start rewriting policies to allow broader defence exposure as EU seeks €800 bn in private capital.
Allianz GI scraps nuclear and military exclusions in Article 8 funds. “Today, defence is more and more viewed as a necessity for socio‑economic development.” - Matt Christensen, Global Head of Sustainable & Impact Investing, Allianz GI
May: Euronext rebrands ESG as “Energy, Security & Geostrategy,” launching new indices to channel impact capital into defence.
June: VC funding in European defence tech hits $1 bn, five times 2020 levels, despite lingering ESG constraints.
NATO allies commit to investing 5% of GDP (“on core defence requirements and defence- and security-related spending by 2035”).
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So far, sustainable and ESG investors have shifted their positions on defence publicly. Will investors for impact make similar shifts in their narrative?
That’s up to you.
At Impact Week, our community will get the opportunity to weigh in on this issue. We hope to spark debate and clarify trade-offs of making defence an impact investing theme. We hope you’ll join us for this – and many more controversial discussions – in Malmö. Claim your tickets today.