Introduction

As geopolitical tensions rise and nations re-evaluate their strategic priorities, there is growing momentum behind the concept of Sustainable Security, an approach that balances military preparedness with responsible investment practices and long-term societal resilience. For investors and capital providers, this evolving landscape presents both a challenge and an opportunity. Traditional ESG frameworks have often excluded defence companies, particularly those involved in weapons manufacturing. However, in recent years, a more nuanced approach is emerging — one that recognises the critical role that responsible national security can play in safeguarding democratic values, ensuring stability, and driving innovation with civil society benefits.

The Rise of Dual-Use Technologies

At the heart of this shift is the increasing prominence of dual-use technologies — innovations developed for defence purposes that also have significant civilian applications. These include:

  • Cybersecurity infrastructure protecting both military systems and financial institutions

  • Artificial Intelligence (AI): a dual-use technology with applications from autonomous drones to threat prediction. The global military AI market is forecast to grow from about USD 9.2 billion in 2023 to USD 38.8 billion by 2028, representing a ~33% compounded annual growth rate (CAGR)

  • Space-based technologies supporting satellite navigation, weather forecasting, and disaster response. The launch rate for defence and dual-use satellites is expected to increase by 160% by 2034

  • Autonomous systems used in defence but adaptable to transport, agriculture, and emergency services
    These sectors are attracting growing interest from investors seeking innovation-led growth without compromising sustainability principles.

Market Growth and Investment Trends

Recent data underscores the expanding investment landscape in defence and dual-use technologies:

  • Global defence market: valued at approximately USD 2.5 trillion in 2024, projected to reach USD 3.9 trillion by 2033

  • Venture capital in defence tech: up 33% year-on-year, reaching USD 31 billion in 2024

  • European defence ETFs: USD 8.4 billion invested in 2025 alone, double the 2024 figure

  • Dual-use startups: over 15,000 scale-ups globally developing technologies applicable to both defence and civilian markets

From Exclusion to Engagement

In 2024, EU officials moved to clarify that sustainable finance regulations do not bar investment in defence. The Financial Services Commissioner, Mairead McGuinness, stated that “the EU’s sustainable financial framework does not impose any limitation on financing of the defence sector.” Recent moves by certain financial institutions signal a shift from blanket exclusions to selective inclusion. These policy revisions allow investment in a wide range of dual-use and defence companies, provided they meet ethical and legal criteria. Article 8 funds under the EU Sustainable Finance Disclosure Regulation (SFDR) are beginning to hold defence stocks — particularly those not involved in controversial weapons or sales to repressive regimes. Responsible security investing does not imply indiscriminate support for all arms manufacturers. It demands active stewardship and rigorous due diligence. Investors increasingly focus on firms that:

  • Operate transparently and ethically

  • Align with international arms trade standards

  • Innovate in non-lethal and dual-use technologies

  • Support resilience, humanitarian response, or democratic security

What Does the Future Look Like?

Since Russia’s invasion of Ukraine in 2022, we have seen a new approach to security through sustainability. Investment policies are being updated, with capital flowing from providers who once avoided the sector. The need for innovation in defence tech has spurred new investment vehicles with an ESG or dual-use focus. An example is the NATO Innovation Fund, launched in 2023, pooling €1 billion from NATO member states to invest in start-ups developing dual-use emerging technologies such as AI, autonomy, space, and biotech.

1. Responsible Defence Goes Mainstream

A growing number of ESG funds are expected to adopt “best-in-class” or impact-weighted approaches, recognising that stability and peace are prerequisites for sustainability.

2. Growth in Dual-Use and Peace Technologies

Technologies in AI, cybersecurity, and disaster logistics will attract further capital, especially where civilian benefit is clear.

3. Sustainability Innovation in Defence Firms

Firms such as BAE Systems and Lockheed Martin are beginning to integrate climate risk disclosures and emissions goals. These efforts are likely to become procurement criteria for defence contracts and signals of investability.

4. Evolving ESG Frameworks

Expect future updates to the EU Taxonomy and SFDR to reflect security’s role in resilience. The AMF (French regulator) has called for a defence category or label in the SFDR review. This could formally validate certain defence investments as sustainable, particularly those focused on peace support, crisis prevention, or critical infrastructure.

In Summary

Sustainable investing in national security is no longer a contradiction. It is a question of how, not if, the sector can align with long-term ESG objectives. Companies that demonstrate transparency, ethics, and civilian benefit are increasingly seen as legitimate components of resilient and responsible portfolios.

All views expressed are personal to the author.