Articulating ESG Criteria and the Financing of the EDTIB: A Prospective View

The war in Ukraine has highlighted the lack of investment in European defence by EU countries since the end of the Cold War. Awareness is real, as shown by the commitments of most countries to significantly increase their military spending in the months and years to come. The European institutions have also taken a stand on several occasions in favour of strengthening Europe’s defence capabilities. A solid and dynamic defence industry is an essential instrument for this reinforcement. Then, Europeans must guarantee EDTIB companies a secure and long-lasting access to the necessary funding, while the dialogue between defence industry and financial players has often appeared complicated.

There are many reasons to explain this situation, some relating to the specific characteristics of the defence industry (classic risks of an industrial and innovative activity to which are added specificities linked to the production of weapons and to the poor reputation of the sector) but also to recent changes in financial markets (inflation of compliance requirements around the fight against corruption, money laundering, etc., increasing consideration of extra-financial criteria in risk management coupled with a difficulty in assessing the risk associated with defence activities due to a certain lack of knowledge of the sector).

This paper presents these different aspects that complicate the relationship between defence companies and financial players. It opens ways to remedy these difficulties and build a solid and productive dialogue while the war in Ukraine and the needs for military equipment to defend European countries certainly constitute new opportunities to rethink this relationship…