Responsible Defence Investment. Fiduciary Duty, Ethics and the European Investor Context

EU Investor Briefing - Executive Summary

European investors are navigating a structural shift in how defence is considered within responsible investment frameworks. Since 2022, geopolitical developments - most notably Russia’s invasion of Ukraine - have triggered reassessments of long-standing exclusion policies and accelerated demand for more structured investment approaches.While defence is increasingly recognised as linked to national resilience and democratic stability, it remains one of the most complex sectors from an environmental, social, and governance perspective. Regulatory frameworks do not prohibit defence investment, but they do require investors to justify, assess, and disclose their decisions.At the centre of this evolving landscape lies fiduciary duty: the responsibility to act in the long-term interests of beneficiaries while navigating growing geopolitical uncertainty.

Part I - A Changing Security Landscape for European Investors

Across Europe, defence investment has moved from the margins of responsible investment discussions to the centre of fiduciary debate.As moderator Dominic Webb observed:“Since the Russian invasion of Ukraine, defense investment has undergone something of a renaissance.”  — Dominic Webb, Responsible InvestorThis shift has not occurred uniformly across Europe. In Northern Europe, responsible investment policies have evolved rapidly, particularly among pension funds and faith-based investors. “Previously, many investors relied on broad exclusions. Since 2022, we have seen more nuanced discussions emerging about what responsible defence investment actually means.”— Anna-Stina Wiklund, Global Advisory AllianceAt the same time, many institutions, particularly those with strong value-based mandates have reaffirmed their ethical boundaries.“Those aren't constraints on our fiduciary duty. They are our fiduciary duty, and we should not generate returns from activities that contradict our mission.” — Linda Sundberg, Church of SwedenThis reflects a defining characteristic of the current landscape: different institutions are reaching different conclusions, but through increasingly structured reasoning.

Part II - Moving Beyond Exclusions: Governance, Risk and Responsibility

The discussion across Europe is shifting from whether defence should be included in portfolios to how risks associated with defence-related companies should be evaluated.Increasingly, investors are moving toward structured due diligence processes. “From a purely regulatory perspective, there is no barrier to investing in defense.” — Aleksandra Palińska, Eurosif

However, this regulatory clarity does not simplify investor responsibility.

‍“The framework leaves the final judgment where it belongs - with investors and their clients.” — Aleksandra Palińska, Eurosif
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Human rights considerations remain central to investment decisions in this sector.

‍“Defense is essential for the sovereignty of states, but it also requires strong risk management - particularly regarding human rights.” — Camille Bisconte de Saint Julien, LBP AM

This highlights a growing consensus: responsible defence investment is not about ideology, but about governance. At the same time, the increasing prevalence of dual-use technologies - products with both civilian and military applications - adds further complexity.

As highlighted during the panel:

‍“It is no longer possible to view defence strictly through a binary lens. Investors need structured ways to evaluate supply chains, technologies, and downstream risks.” — Anna-Stina Wiklund, GAA

Part III - From Principles to Practice: The Role of Practical Frameworks and the GRID Initiative

One of the strongest themes emerging from the discussion was the need to move from high-level principles to practical implementation tools.This is where initiatives such as the GRID (Guidance on Responsible Investment in Defence) work are gaining importance.

As Daniel Neale explained:

“The aim of the GRID initiative is to move the discussion from principles toward practical guidance - helping investors apply consistent approaches when assessing defense-related companies.” — Daniel Neale, Church Commissioners for England

Rather than prescribing outcomes, the GRID initiative seeks to support structured analysis.

‍“We are not telling investors what to think, we are providing tools that help them ask the right questions.”  — Daniel Neale

This reflects a broader shift across responsible investment: from reacting to headlines toward developing repeatable decision-making frameworks.

Such frameworks typically focus on:
• Product-level risk identification
• Export and end-use governance
•  Human rights due diligence
• Transparency and accountability
•  Supply chain traceability

These tools are becoming increasingly important as defence technologies evolve, particularly in areas such as artificial intelligence, cyber systems, and autonomous capabilities.

Concluding Reflections: Fiduciary Duty in an Era
of Geopolitical Uncertainty

European investors are entering a period in which geopolitical developments are increasingly shaping financial risk landscapes. Defence investment is no longer simply a values-based debate.

It is becoming a governance challenge.Across institutions, several themes are emerging:
• Fiduciary duty includes managing geopolitical risk
• Ethical mandates continue to shape institutional boundaries
• Regulatory clarity supports, but does not replace investor judgment
• Practical tools, such as GRID, will play a central role in implementation

Ultimately, responsible investment in defence will not depend on reaching identical conclusions across institutions.
It will depend on ensuring that decisions, whatever they may be - are: structured, transparent, and defensible.

judgement where defence exposure exists.
Several observations emerged consistently throughout the session:
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• Governance matters as much as products. Investors increasingly seek to understand how companies govern technologies, manage export controls and oversee downstream risks.
• Human rights due diligence remains fundamental. International frameworks such as the UN Guiding Principles continue to provide an important foundation for investor expectations, particularly in conflict-affected and high-risk contexts.
• Traditional classifications are becoming less effective. The rapid expansion of dual-use technologies requires more sophisticated approaches than simple sector or revenue screens alone.
• Stewardship is becoming increasingly important. Active engagement, improved disclosure and collaborative initiatives can help investors address information gaps and encourage stronger corporate governance.
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Ultimately, the discussion suggested that responsible investment in the defence context increasingly depends on robust governance, informed due diligence and meaningful transparency.As technology continues to reshape both commercial markets and national security, investors will require practical tools and collaborative approaches to navigate this evolving landscape with confidence.