Comment by Sylvie Matelly published by Armament Industry European Research Group, IRIS - Institut de relations internationales et stratégiques, 10 February 2026.
This comment piece explores the growing tension between environmental, societal and governance (ESG) finance and the defence sector in Europe.
Over the past decade, the expansion of ESG criteria has significantly reshaped investment strategies across Europe - often to the detriment of defence industry. While not explicitly excluded by regulation, the sector has been widely sidelined due to reputational concerns, regulatory ambiguity, and a simplified association between defence activities and ethical risks.
The war in Ukraine has disrupted this dynamic. As defence spending increased and the need to scale up production became more pressing, financial actors began to re-engage with the defence industry. However, the author makes clear that this shift should not be mistaken for a long-term reconciliation. Instead, it currently reflects a temporary rebalancing of risk in response to geopolitical urgency, instead of a deeper alignment between defence and sustainable finance.
Looking ahead, the central challenge is how Europe can ensure the long-term sustainability of its defence sector. This will not come from carving out exceptions to ESG frameworks, but from engaging with them more seriously. The comment argues that ESG integration can strengthen operational performance, support innovation, improve access to human capital, and reinforce public legitimacy - all of which are critical for a sector that is both highly capital-intensive and politically sensitive.
At the same time, the argument cuts both ways. If sustainability is understood as the capacity of societies to endure and adapt over time, then security itself becomes a foundational condition. In that sense, the paper calls for a broader rethink of ESG frameworks - one that better reflects the strategic realities facing Europe today, including the role of defence in underpinning long-term stability and sustainability.
"Security must be recognised as a fundamental precondition of sustainability".
Main takeaways
ESG vs defence exceptionalism is not resolved. The recent return of capital to defence reflects short-term geopolitical pressures, not a lasting dynamic.
The path forward. The sector’s long-term viability depends on embedding ESG principles, rather than seeking exceptions.
ESG as an opportunity, not a constraint. Environmental performance, social policies, and governance can enhance competitiveness and legitimacy.
Rethinking sustainability frameworks involves security. If sustainability is about long-term resilience, security needs to be part of the equation.
This text is based on extracts from a comment written by Sylvie Matelly (Director Institut Jacques Delors) for the Armament Industry European Research Group's paper series on "Greening defence: Framing the stakes for industrial and military capabilities". To read the complete piece, follow the link here.
Photo credit from Lincoln Holley on Unsplash.