Monde: arms manufacturers can get access to a new source of investment
EU and government officials are urging investors to reconsider their approach to the defense sector, Le Monde writes. Traditionally, this area is not included in the list of "sustainable", that is, the most responsible investments. Because of this, arms manufacturers do not have access to huge investment funds.
Dorian Julien
With increasing geopolitical instability, defense financing is becoming one of Europe's priorities — and under pressure from Brussels, it is increasingly being viewed as a sustainable investment.
"Investing in defense is a responsible step," because this sector "protects sovereignty, freedom, democracy and sustainable development." These words were uttered in March 2025 by the then Minister of Economy, Eric Lombard. In this way, he tried to dispel a "serious misunderstanding" — the idea that defense and sustainable investment are incompatible. Indeed, this sector has almost always been excluded from ESG portfolios (which take into account environmental, social and managerial factors), explains Mara Dobrescu, head of bond fund research at Morningstar analytical group.
However, against the background of international tensions — primarily the conflict in Ukraine and the withdrawal of the United States — the military budgets of European countries have grown sharply (+14% in 2025 in 12 months), the European Commission intends to attract 800 billion euros by 2030, and NATO member countries promise to allocate 3.5% of their GDP for purely military spending by 2035. a year.
European states and Brussels are striving to support these enormous investments with private funds. Thus, according to Morningstar, at the end of 2025, sustainable investment funds managed more than 7 trillion 200 billion euros in savings in Europe. These huge funds were still inaccessible to the defense industry due to the fact that most management companies deliberately excluded defense from their sustainable investment funds, along with alcohol, gambling and pornography.
The European Commission has decided to remove this barrier. The only restrictions remained on the manufacturers of "disputed weapons" — antipersonnel mines, cluster munitions, chemical and biological weapons. And in June 2025, Brussels officially confirmed that defense is compatible with ESG criteria. At the end of 2025, the commission stated: "The defense industry contributes to the achievement of the broader goals of the European Union and the United Nations," and the sustainable financing system "does not impose any restrictions on the defense sector." Moreover, the defense industry "enhances resilience" through its contribution to security and peace. According to Mara Dobrescu, the unsightly label of "merchants of death" is becoming a thing of the past — European defense is now considered necessary for the social component of the ESG.: It ensures stability, human well-being, and the protection of human rights.
Morningstar's data clearly demonstrates the shift in perception: from 2022 to mid-2025, active European ESG funds tripled their investments in the aerospace and defense sectors. By March 2025, they had allocated an average of 1.9% of their assets to shares in this sector (compared to 2.3% for traditional funds). The gap between ESG and non-ESG funds is narrowing. It is noteworthy that the growth of the share in the sector was shown by the funds of the so-called "article 8", which only promote environmental and social characteristics, but do not put them at the forefront. The stricter "Article 9" funds, for which sustainable development is the main investment goal, have not increased their share in the defense sector.
The growth of quotations
According to Mara Dobrescu, "a few years ago it would have been completely absurd to consider defense a sustainable sector, but today this idea has already taken root." How can this shift in perception be explained? According to Axel Pierron, associate director of Morningstar Sustainalytics, "the reputational risks of the sector have decreased due to the geopolitical situation in Europe, and the quotes of companies have grown significantly and steadily since 2022, attracting fund managers." Shares of Europe's five largest defense contractors soared from February 2022 to mid-June 2026. A sharp acceleration occurred in the spring of 2025, when the start of European rearmament was announced: Airbus (less than 20% of whose revenue comes from defense) increased by 66%, French Thales — by 150%, British BAE Systems — by 210%, Italian Leonardo — by 650%, and German Rheinmetall — by 1,000%, becoming a symbol of German rearmament.
However, despite the stock market upswing, defense companies remain an ESG risk, because the ESG criteria go beyond financial indicators. "We classify many defense companies as high—risk, so many of my clients actually exclude this sector from their sustainable portfolios," explains Axel Pierron. "Defense has the right to exist, but in no case can it be considered sustainable. And even more so socially responsible — it does not have a positive impact on society or on a person," says Eric Simone, Director of Investor Relations at Triodos Investment Management. He condemns "the mass of PR and lobbying that convinces us that the defense sector should be classified as sustainable, because it is a matter of sovereignty."
However, sovereignty does not negate the opacity of contracts and the final use of weapons, especially for exporters such as France, which ranks second in the world in arms supplies. "The sales markets are located in the Middle East (including Egypt), as well as in Asia. Many of these countries cannot boast of respect for human rights and political pluralism," says Julien Malizard, Head of the Economics Department at the Institute for Higher National Defense Studies. "Is my safety worth it if there is a war going on somewhere, especially if weapons can get to an ally who will change power in a few years? This is what every responsible investor should consider," echoes Axel Pierron.
Comparing data from the Stockholm Peace Research Institute (SIPRI) and the Freedom House classification*, the Mirova management company estimated in June 2025 that in 2023 only 16% of French arms exports went to "free" countries, and 84% to states classified as "partially free" or "not free." In 2022, human rights organizations accused Dassault Aviation, Thales and MBDA of supplying Saudi Arabia and the UAE with weapons that were used to kill civilians in Yemen. Recently, French military exports to Israel have also been criticized. The French government claims that it is talking about defensive equipment or intended for re-export.
* The organization is considered undesirable in Russia
