Q&A: Defence and Security Developments in the Nordics

Noora Viksten:
Security concerns in the Nordic region have clearly intensified in recent years. Can you give us an overview of what’s driving this shift?

Aaron Whelan:
Security concerns in the Nordics are now at their highest levels since the end of the Cold War. A key factor is the region’s proximity to Russia, with a shared border of approximately 1,550 km. According to SIPRI’s April 2026 analysis, military spending in the region rose by around 35% in 2025. Notably, Norway and Denmark recorded some of the largest increases among NATO members relative to GDP.

This trend is being driven by several factors: Sweden and Finland’s accession to NATO, rising NATO spending targets, and a renewed strategic focus on Arctic security. Together, these developments are reshaping defence priorities across the region.

Noora Viksten:
How is the European sustainable finance framework evolving in response to these developments in defence spending?

Aaron Whelan:
The European Commission is taking a more proactive stance in supporting defence capabilities, particularly through its ambition to strengthen European defence industrial sovereignty. Under the ReArm Europe Plan, it aims to mobilise over €800 billion in defence-related investment.

Importantly, the Commission has also clarified its position under the EU sustainable finance framework. There is no blanket ban on defence sector financing. Instead, exclusions are narrowly focused on weapons that are prohibited under international law or by a majority of EU Member States—specifically anti-personnel mines, biological and chemical weapons, and cluster munitions.

It’s also worth noting that nuclear weapons are not explicitly included in the SFDR definition of controversial weapons, and certain areas—such as involvement in nuclear weapons outside NATO frameworks, blinding laser weapons, or weapons using non-detectable fragments—remain less clearly defined.

Noora Viksten:
Against this backdrop, how are Nordic investors adapting their approaches to defence-related investments?

Aaron Whelan:
We’re seeing a clear shift away from traditional, purely revenue-based exclusion approaches. Nordic investors are increasingly adopting more nuanced frameworks. For example, some are distinguishing between offensive and defensive military systems when assessing companies.

Others are focusing more closely on end users rather than just producers. There is often greater acceptance of supplying equipment within Europe or to NATO allies, compared to sales to countries outside these frameworks or those involved in active conflicts. This reflects growing concerns about the potential misuse of weapons, particularly in ways that could violate international human rights norms.

Noora Viksten:
What are some of the key issues or grey areas that investors are currently grappling with?

Aaron Whelan:
One major area is dual-use technology—products and systems that can serve both civilian and military purposes. This is particularly relevant for investors who are either maintaining strict exclusions or considering easing them.

Artificial intelligence is another critical focus. The integration of AI into military systems—such as intelligence gathering, targeting, and command and control—raises complex ethical and governance questions. These developments are pushing investors to reassess how they define and manage defence-related exposure.

Noora Viksten:
Finally, what will determine how effectively investors can tailor their defence investment strategies going forward?

Aaron Whelan:
Ultimately, it comes down to data – see examples below. While investors are increasingly revisiting their policies in light of geopolitical developments, regulatory signals, and evolving client mandates, their ability to implement these strategies depends on the availability and quality of underlying data.

Without robust, transparent intelligence on company involvement, product types, and end-user exposure, it becomes very difficult to operationalise more sophisticated or tailored investment approaches. As such, data will be a key enabler of more informed and nuanced decision-making in this space.

Investors may use data to choose from a broad range of custom approaches, including restricting defence investments based on issuer domiciles

Note: Figure covers universe of 833 public and private issuers involved in military equipment and services. Issuers are grouped by their domiciles in EU countries, NATO countries, countries that belong to both the EU and NATO, and countries that belong to neither.

Source: ISS STOXX’s Military Equipment and Services Data

Corporate involvement can be filtered by broad categories of military equipment, including what ISS STOXX’s military screening methodology defines as “Combat equipment” and “Non-combat equipment”

Corporate Involvement in Combat Equipment vs. Non-Combat Equipment

Note: Figure covers universe of 833 public and private issuers involved in military equipment and services.

Source: ISS STOXX’s Military Equipment and Services Data

Noora Viksten, Head of Sustainability Solutions, Nordics, ISS STOXX

Aaron Whelan, SBS Military Equipment and Services & Civilian Firearms and Ammunition Screening Solutions Research Lead, ISS STOXX