Danske Bank has released a report—the first in a three-part series—focusing on the Nordic defense industry. This initial publication examines what the EU must do to expand and develop its defense industrial base in order to strengthen its strategic autonomy. By highlighting key factors and challenges in the sector, the report aims to provide insights and recommendations for the sustainable development of the defense industry across the Nordic region and Europe.
“With Russia’s illegal invasion of Ukraine, war has returned to Europe. Rebuilding a resilient defense industry within the EU is essential to protect Europe’s strategic independence,”
Louis Landeman, Head of Sustainability Analysis at Danske Bank and co-author of the report, underscores the importance of establishing a robust defense industrial base inside the EU.
As geopolitical tensions and security threats rise, Europe faces an immediate and growing risk. In recent years, European countries have substantially raised defense spending, but these levels remain low compared with other regions and will likely need to increase further. If these investments are financed through higher public debt, the resulting growth effects in Europe could be significant. Over the longer term, balancing higher defense spending with increased taxes and/or cuts in other policy areas becomes increasingly complex.
Shifting rhetoric on defense investments
Alongside rising defense budgets, the public and investor discourse around the defense industry has changed.
“Investments in the defense sector were once seen as off-limits for many sustainability- and ESG-focused investors. Today there is a growing recognition of national security’s importance and how the defense sector can help protect democratic values and human rights,”
Beyond financing challenges, the EU’s defense industry faces structural weaknesses that must be addressed. To tackle these issues, the European Commission has launched the “ReArm Europe Plan / Readiness 2030”—an ambitious initiative to increase defense spending and mobilize private capital. If implemented effectively, this plan, together with strengthened national commitments, could create meaningful growth opportunities for Nordic defense companies in the coming years.
The report emphasizes several practical priorities for strengthening the defense industrial base: improving procurement practices to support scalable production; encouraging cross-border collaboration to reduce fragmentation and boost interoperability; incentivizing private investment through transparent risk-sharing mechanisms; and investing in workforce training and research and development to sustain technological leadership. Taken together, these measures are intended to make defense-related production more resilient, economically sustainable, and better aligned with strategic needs across member states.
The Nordic region, with its advanced industrial capabilities, skilled labor force, and existing defense suppliers, is well positioned to benefit from a coordinated European effort. Still, realizing that potential will require coherent policy measures at both the EU and national levels, clear signaling to investors, and careful management of trade-offs between defense priorities and other public spending needs.
Finally, the report highlights the importance of aligning defense industrial policies with broader sustainability and ethical considerations. While the defense sector serves essential security functions, integrating transparency, accountability, and respect for human rights into procurement and production processes can help reconcile defense objectives with the values many European citizens and investors expect. This approach can also broaden the base of potential investors who view responsible defense-related activities as compatible with environmental, social, and governance standards.
Overall, the Danske Bank report calls for a pragmatic, strategic response to current security challenges—one that boosts Europe’s industrial capacity while ensuring investments are sustainable, well-governed, and consistent with democratic principles. If executed successfully, these efforts could significantly strengthen Europe’s strategic autonomy and offer solid growth prospects for Nordic defense firms in the years ahead.