New report from Danske Bank: A new stage for the Nordic defense industry

Danske Bank has published a report that is the first of three publications in a new report series that focuses on the Nordic defense industryThe first report explores what is needed to EU should be able to expand and develop its defense industry to strengthen its strategic autonomyBy highlighting important factors and challenges in the area, the report aims to provide insights and recommendations for a sustainable development of the defense sector in the Nordic countries and Europe.

“With Russia’s illegal invasion of Ukraine, war has returned to Europe. To defend Europe’s strategic independence, it is crucial to rebuild a robust defense industry within the EU,” says Louis.

Louis Landeman, Head of Sustainability Analysis at Danske Bank and co-author of the report, emphasizes the importance of building a strong defense industry within the EU.

In an era marked by increasing geopolitical tensions and security threats, Europe faces an acute and growing threat. In recent years, European countries have significantly increased their defense spending, but these expenditures are still low compared to other regions and need to increase further. If these investments financed through increased public debt, the growth effects in Europe could be significant. In the longer term, the complexity of balancing defense spending with higher taxes and/or reduced spending in other policy areas grows.

Changing rhetoric around defense investments

As defense spending has increased, the rhetoric surrounding the defense industry has also changed.

– Previously, investments in the defense industry were considered not feasible for many sustainability and ESG-focused investorsThere is now an increased understanding of the importance of national security and how the defense sector can contribute to protect democratic values and human rights.

In addition to financial challenges, EU defence industry facing structural weaknesses that must be addressed. To address these, European Commission launched “ReArm Europe Plan / Readiness 2030” – an ambitious plan to increase defense spending and mobilize private capital. If successfully implemented, the plan, together with increased national investments, could provide Nordic defense companies with good growth potential in the coming years.