« Our Europe for decades was based on a dogma; funding defense was bad “, Emmanuel Macron on March 18, 2026, during the christening of the France Libre aircraft carrier. Despite the security emergency, defense financing remains the poor relation of European investment. To guarantee its freedom, Europe must urgently integrate security as a pillar of social sustainability.
While war has returned to the European continent for a long time, and the United States is no longer the reliable military partner it claimed to be for Europe, a major contradiction persists at the heart of public policies: Europe proclaims its desire for strategic sovereignty while sabotaging the financial conditions of its manufacturing industry. defense. Two years after the alert launched here on the EI Portal about the deleterious impact of Environmental, Social and Governance criteria (ESG) on the French Industrial and Technological Defense Base (BITD), the observation is unambiguous: the problem has not disappeared, it has become normalized.
Â
The strategic paradox persists: rearmament without financing
Since 2022, European political discourses have radically evolved. Strategic autonomy, industrial sovereignty, rearmament, ramp-up: never has the BITD been so central in public rhetoric. However, private financial flows have not followed.
The more than 4,000 defense SMEs and ETIs continue to face explicit or disguised banking refusals, degraded financing conditions, increased dependence on public orders, or even structural difficulty in raising funds for innovation or export. This situation is not a market anomaly: it is the product of an unfavorable normative framework, in which defense remains perceived as a ” à risque réputationnel “, regardless of its legality, state control or strategic role.
Â
CSRD: a new layer of complexity for SMEs
The entry into force of the CSRD directive (Corporate Sustainability Reporting Directive) on January 1, 2024 transformed reputational risk into an unprecedented obligation of transparency, requiring companies to justify their social impact through rigid European standards, the ESRS (European Sustainability Reporting Standards). For BITD SMEs, often subcontractors to large clients, this directive creates a cascading effect, where they must provide complex extra-financial data so as not to be excluded from the value chain of their clients or their financiers. According to a study by the European Commission from January 2024 “ Access to equity financing for European defence SMEs » cited in the information report of the National Assembly n°2625 of May 15, 2024 on the defense industry, 46% of investors surveyed have prohibited themselves from financing defense players due to ESG and reputational criteria. Consequently, over the 2021-2022 period, half of companies have given up seeking debt financing, compared to 6.6% on average for all European SMEs.
According to data from the European Commission, “ Access to equity financing for European defence SMEs », January 11, 2024
Â
The persistent blockage of regulated savings
Despite the urgency of the war economy advocated by the executive, the mobilization of private savings remains a legislative way of the cross. The project to use the Livret A and the Sustainable and Solidarity Development Booklet (LDDS) to finance defense came to a sudden halt when the Constitutional Council censored this provision in the finance law for 2024, judging it to be foreign to the field of finance laws (Decision No. 2023-862 DC of December 28, 2023). Although the Military Programming Law (LPM) 2024-2030 and the plan ReArm Europe attempt to protect investments, the effective direction of French savings towards the defense industry still comes up against the reluctance of banking establishments who fear downgrading their own ESG rating with international agencies.
Â
The influence of NGOs: the reputational hunt continues
The normative arsenal is skillfully used by non-governmental organizations to maintain pressure on the banks. The NGO PAX kept up the pressure in 2024 with its report “ Don’t Bank on the Bomb “, which systematically identifies European financial institutions supporting companies linked to nuclear deterrence, provoking divestment movements out of simple fear of «name & shame » media. For France in particular, Airbus, Safran, Thalès et MBDAas well as possible financial stakeholders. This influence is all the more effective as banks seek to maximize their Green Asset Ratio (GAR), an indicator of the European taxonomy which does not count defense activities as ” durables “, mechanically encouraging banks to reduce their exposure to the military sector to follow the guidelines of the European Banking Authority on publications under transparency and the 3rd pillar.
Â
Transatlantic differences anchored in the definition
The imbalance between European and American companies has increased. While the European Union tends towards ever more sustainable policies, the United States is, on the contrary, distancing itself from the major international guidelines in this area. Thus, in 2023, the French Agency for Institutional Investors pointed out these divergences in definitions and therefore constraints. Indeed, compliance with ESG criteria depends on the very definition we give them, particularly from the point of view of sustainability.
Â
Towards a recognition of the « Sustainable Defense » ?
The salvation of the BITD will go through a semantic and legal battle at Brussels level. This is the meaning of the speech by the President of the Republic on March 18, 2026 cited at the opening, where Emmanuel Macron recalled that financing defense means above all financing the independence of France. France has become aware of this, with the creation of the defense innovation fund, supported by MBDA, BPIfrance and the Caisse des Dépôts but it still remains to be defended to European authorities. Several projects are being studied in this direction, in particular the major ReArm Europe plan. The challenge in 2026 is to officially integrate defense as an activity contributing to ” social sustainability “, on the grounds that security is the essential prerequisite for the exercise of all other freedoms and the objectives of ecological transition. Without this paradigm shift in the delegated regulations of the European Commission, Europe’s strategic autonomy will remain an ambition hampered by its own normative bureaucracy.
Pierre Galan, AEGE Defense Club
To go further:
Â
