The European Commission is considering relaxing certain rules within the bloc’s sustainable investment framework to enable defense companies to obtain more financing from banks and financial institutions.
Defense firms in Europe have struggled to meet the Commission’s Environmental, Social, and Governance (ESG) standards, largely due to ethical and policy concerns related to weapons manufacturing, which conflicted with some of the sustainability principles.
This situation has previously drawn criticism from the defense sector, which argued that these regulations discouraged financial institutions from providing loans, thereby limiting companies’ access to vital investment opportunities.
A Commission spokesperson told Defense News that the rules could be revised as part of wider initiatives aimed at simplifying regulations for defense manufacturers throughout Europe and supporting increased production capacity. Thomas Regnier, the spokesman, noted in an email, “The Commission is examining whether financing access can be strengthened further, potentially through adjustments to the sustainable finance framework.”
These considerations are linked to the upcoming defense “Omnibus” proposal expected from the EU next month. This proposal intends to create conditions for rapid industrial growth across Europe and will suggest changes to relevant EU laws, Regnier explained.
In March, the Commission adopted the White Paper on European Defense Readiness 2030, gathering input from member countries and industry stakeholders to identify and address regulatory obstacles and biases within the EU that affect the defense sector.
Another key issue is the EU Taxonomy regulation, which determines which economic activities qualify as environmentally sustainable. Currently, most arms production is not recognized as contributing to the EU’s environmental or social sustainability goals. The regulation relies on the principle of “do no significant harm” as a benchmark.
Following Russia’s invasion of Ukraine, defense officials have increasingly pushed to revise these exclusions to allow more security-related activities to be incorporated into the EU taxonomy and ESG guidelines.
In 2023, defense ministers from across the EU jointly called for enhancing the defense industrial base’s ability to access funding and contribute to Europe’s peace, security, and sustainability.
Responding to these calls, the European Investment Bank adjusted its investment policies in March, broadening the range of companies eligible for security and defense-related financing.
