Public Acceptability and ESG vs. Defence Exceptionalism: The European Defence Industry at a Crossroads

The rapid expansion of ESG (Environmental, Social and Governance) criteria in European finance has profoundly reshaped investment strategies over the past decade, often to the detriment of the defence sector. Long perceived as incompatible with responsible investment frameworks, defence industries have been subject to widespread exclusion policies, driven as much by reputational concerns as by simplified ethical narratives. However, the geopolitical shock triggered by the war in Ukraine has disrupted this paradigm, forcing policymakers and financial actors to reassess the strategic role of defence and the conditions of its financing.

This paper explores the growing tension between ESG compliance and defence exceptionalism in Europe. It argues that the current shift from exclusion to pragmatic re-engagement does not amount to a structural reconciliation between defence and sustainable finance, but rather reflects a temporary reweighting of risks under security pressure. Beyond regulatory adjustments, the long-term sustainability of Europe’s defence technological and industrial base depends on its ability to credibly integrate ESG principles into its industrial, social and governance practices. Rather than treating ESG as an external constraint, the paper shows how environmental performance, social policies and stronger governance can become levers of operational efficiency, talent attraction, investor confidence and societal legitimacy. Finally, it suggests that sustainable finance frameworks themselves may need to evolve to better reflect strategic realities, by recognising security as a foundational condition of long-term sustainability. In this perspective, a new pact between defence, finance and society is required to reconcile strategic autonomy, democratic accountability and sustainable development.