The Defence Sector & Finance

The Defence Sector & Finance


The Defence Technological and Industrial Bases is indispensable for maintaining peace and security. After all, it provides an armed force with services and equipment. If it does not, the armed forces are left hobbled. This also applies to the Dutch armed forces. Nevertheless, the defence and security sector is experiencing difficulties in accessing private finance. Referring to Environmental, Social and Governance (ESG) criteria, companies in the sector would not be able to access private financing from pension institutions, insurers and financial service providers. Because of the same criteria, the sector is experiencing difficulties in opening accounts with private banks. Below is summary on the current state of the issue.


The defence sector has long encountered problems in applying the criteria of FMO-IM (the Dutch development bank). Like the World Bank, it applies United Nations rules for investing in both attractive returns and meaningful development impact. FMO-IM also stipulates that it and its clients will not finance, produce, use or trade in or distribute activities such as arms and ammunition (exclusion ground 8) if they constitute more than 10% of a company’s turnover.


Currently, the EIB is only allowed to financially support dual-use (“dual-use”) projects. The bank’s Strategic European Security Initiative aims to provide more flexibility, but eligible projects must remain dual-use and predominantly civilian.


The EU Taxonomy Regulation came into force in July 2020. The taxonomy is a comprehensive classification system listing environmentally sustainable economic activities. The purpose of classifying economic activities is to provide businesses and capital markets with clarity on what is sustainable, thus supporting investment flows intos those activities. To classify an economic activity as sustainable, it must meet at least one of the six identified environmental objectives set out in the taxonomy. Moreover, the activity must not significantly harm any of the other objectives, while also respecting basic human rights and labour standards. This means that good performance/compliance with one objective cannot compensate for poor performance/non-compliance with another. The taxonomy has been supplemented by the amendment to the disclosure requirements set out in the EU Non-Financial Reporting Directive (NFRD). With this change, companies will have to disclose what proportion of their turnover comes from Taxonomy-aligned activities, as well as how much of their expenditure is related to Taxonomy-related activities. These regulations do not adequately reflect the defence and security sector’s crucial contribution to achieving robust sustainability goals, including in the long term. Indeed, many investors often interpret EU sustainable finance regulations as simply excluding defence companies.

EcoLabel for Retail Financial Products. The draft scheme for an EcoLabel for Retail Financial Products stipulates that for companies that derive more than 5% of their turnover from manufacturing or trading conventional weapons and/or military products for “combat”, they will not be eligible for financial products. Although these are supra-legal criteria of a voluntary nature, they set a precedent.



In 2022, the European Commission took a clear position on the defence sector’s access to private funding: “Strengthening the resilience of our supply chains and industries’ access to private funding will be necessary for our European Defence Technological and Industrial Base. The European Investment Bank should also use all its tools to contribute to that effort. It is equally important to ensure that horizontal EU policies, such as initiatives on sustainable finance, remain consistent with the European Union efforts to facilitate the European defence industry’s sufficient access to public and private finance and investment.” (Strategic Compass, page. 35).

Minister of Defence Ollongren, State Secretary of Defence Van der Maat, the Commander of the Armed Forces as well as the Chairman of the NATO Military Committee have also publicly called for the defence sector to have better access to the financial sector. A consultation between the Dutch government and the Dutch Banking Association has been announced….

Security seen as foundation of welfare state again

De NIDV zet zich in om de toegang van de defensiesector tot de private financiele dienstverlening te verbeteren. De sector volgt de criteria van Internationaal Maatschappelijk Verantwoord Ondernemen. Zij draagt actief bij om het fundament onder de ESG-criteria te verstevigen. Dat fundament is bescherming van onze vrede en veiligheid. Aan het einde van de vorige eeuw werd een appel gedaan om conflicten uit te bannen met ecologische, economische en sociale maatregelen. Bescherming van onze veiligheid werd aan deze drie pilaren van onze welvaart ondergeschikt geacht. Inmiddels dringt weer op elk politiek niveau door dat het streven naar meer welvaart zonder bescherming is gedoemd te mislukken. Veiligheid is immers het fundament onder deze pilaren. Dat fundament moet worden verstevigd! Daarom kan de defensiesector toegang worden verleend tot private financiële diensten.

The NIDV is committed to improving the defence sector’s access to private financial services. The sector follows the criteria of International Corporate Social Responsibility. It actively contributes to strengthening the foundation under the ESG criteria. That foundation is protection of our peace and security. At the end of the last century, an appeal was made to eliminate conflicts with ecological, economic and social measures. Protection of our security was considered secondary to these three pillars of our prosperity. Meanwhile, it is again percolating at every political level that striving for more prosperity without protection is doomed to failure. After all, security is the foundation of these pillars. That foundation must be strengthened! That is why the defence sector can be given access to private financial services.

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