The Booming Defence Sector: Strategic Drivers And The Rise Of Defence Tech In Global Finance

Over the past few years, defence has returned to the centre of public investment strategies, geopolitical planning, and financial analysis. The war in Ukraine, persistent instability in the Middle East and Sahel, and the sharpening competition between great powers have all contributed to a fundamental reassessment of defence policy across the West. In this context, the sharp increase in defence spending is not merely a political or strategic development—it is becoming a major financial dynamic with long-term implications for markets, investment flows, and industrial planning.

This reconfiguration is already visible in the financial sector. Defence and aerospace ETFs have outperformed broader indices in 2023 and 2024, a trend confirmed by the significant inflow of capital into funds such as the VanEck Defense UCITS ETF or the Global X Defense Tech ETF. At the same time, ESG frameworks—which for years excluded the defence sector on ethical grounds—are now being revised.

NATO and EU officials have repeatedly made the case that security is a precondition for sustainability, and that responsible defence companies should be eligible for ESG investments. As a result, a growing number of institutional investors are reconsidering their stance, expanding the investible universe to include defence and dual-use technologies. But to navigate this evolving landscape, understanding budget allocations is not enough.

The performance of defence-related companies increasingly depends on a broader set of factors: NATO’s technological roadmaps, EU programmes such as the European Defence Fund or IRIS², procurement policies shaped by the logic of strategic autonomy, and the shift towards dual-use innovation. Similarly, the future of defence investment is shaped by the evolution of military doctrines—from multi-domain operations to drone swarms and AI-enabled C2 systems—which in turn generate demand for new products and services. Equally important is the ability to monitor the emerging wave of companies developing new technologies, products, and services with potential defence or dual-use applications.