MILAN – The European Commission is evaluating easing restrictions within the bloc’s sustainability investment framework to grant defense companies access to more loans from financial institutions.
European defense companies have faced difficulties in fulfilling the Commission’s Environmental, Social, and Governance (ESG) investing criteria, primarily due to policy and ethical considerations stemming from their weapons production, which were viewed as contrary to some of the pillars.
This has previously led to criticism from the armament sector, which blamed the regulation as having discouraged banks from lending to companies, ultimately hindering their access to key investment opportunities.
Such frameworks may be revised, a Commission spokesman told Defense News, as part of broader efforts to simplify rules for defense businesses across Europe and facilitate production.
“The Commission is assessing whether access to finance can be further reinforced, including through relevant adjustment of the sustainable finance framework,” spokesman Thomas Regnier said in an email statement.
Such considerations are part of the defense “Omnibus” proposal the bloc is expected to present next month, which is “aimed at creating conditions for rapid industrial ramp-up across Europe and will propose to amend EU legislation accordingly,” Regnier wrote.
As part of the White Paper for European Defense Readiness 2030 adopted in March, the Commission collected data and suggestions from member states and industry to help remove EU regulatory barriers and discriminations affecting the continent’s defense industry.
Another challenge concerns the European Union Taxonomy regulation, which is responsible for defining which economic activities are deemed environmentally sustainable.
The language currently does not count most arms manufacturing as activities that contribute to the bloc’s environmental or social sustainability objectives. For example, the classification centers on “do no significant harm” as a standard.
Since Russia’s invasion of Ukraine, there has been growing pressure from defense officials to revise this exclusion to allow more security activities into both the EU taxonomy and ESG framework.
In 2023, EU defense ministers issued a joint statement that called for “strengthening Europe’s defense technological and industrial base’s access to finance and its ability to contribute to peace, stability and sustainability in Europe.”
In March, the European Investment Bank heard this plea and modified some of its investment practices, including expanding the eligibility of companies for security and defense investments.
Elisabeth Gosselin-Malo is a Europe correspondent for Defense News. She covers a wide range of topics related to military procurement and international security, and specializes in reporting on the aviation sector. She is based in Milan, Italy.
Read the full article here
