Challenges for the Defense Industry Against the Background of ESG Concepts

What happens when sustainability standards clash with national security?

Szymon Mitkow, Joanna Antczak, and Mateusz Roszkiewicz shines a light on why defence remains misaligned with ESG expectations in "Challenges for the Defence Industry Against the Background of ESG Concepts".

The authors provide a qualitative analysis of policy and industry trends, examining why the defence industry has so far lagged in ESG engagement and how its strategic status might warrant distinct treatment.

Their key insights:

• Geopolitical conflict has triggered defence budget surges, creating urgent financing needs and tensions with ESG-driven capital markets.
• The EU's sustainable finance agenda is casting a shadow over defence, with many investors now avoiding sectors deemed socially or environmentally harmful.
• Even without legal restrictions, banks and funds are self-imposing limits on the industry, driven by ESG concerns and public pressure.
• The defence sector has done little to build sustainability narratives, reinforcing its perception as a 'sin' industry.
• Yet national security is increasingly seen as a pillar of sustainability. ESG frameworks may evolve to reflect this strategic role.
• The authors recommend creating a special status for defence in ESG regulations, recognising its unique function and applying tailored criteria.

They urge EU policymakers to provide clear guidance so that investors can balance ESG goals with the societal need for security. A broadened definition of "responsible investment" must account for the public good provided by deterrence and defence readiness. The article is a qualitative policy perspective, not based on new empirical data, and its focus is Eurocentric. As such, conclusions may not generalise beyond the EU or reflect rapidly evolving geopolitical realities.