The Booming Defence Sector: Strategic Drivers and the Rise of Defence Tech in Global Finance

Over the past few years, defence has returned to the centre of public investment strategies, geopolitical planning, and financial analysis. The war in Ukraine, persistent instability in the Middle East and Sahel, and the sharpening competition between great powers have all contributed to a fundamental reassessment of defence policy across the West. In this context, the sharp increase in defence spending is not merely a political or strategic development—it is becoming a major financial dynamic with long-term implications for markets, investment flows, and industrial planning.

This reconfiguration is already visible in the financial sector. Defence and aerospace ETFs have outperformed broader indices in 2023 and 2024, a trend confirmed by the significant inflow of capital into funds such as the VanEck Defense UCITS ETF or the Global X Defense Tech ETF. At the same time, ESG frameworks—which for years excluded the defence sector on ethical grounds—are now being revised. NATO and EU officials have repeatedly made the case that security is a precondition for sustainability, and that responsible defence companies should be eligible for ESG investments. As a result, a growing number of institutional investors are reconsidering their stance, expanding the investible universe to include defence and dual-use technologies.

But to navigate this evolving landscape, understanding budget allocations is not enough. The performance of defence-related companies increasingly depends on a broader set of factors: NATO’s technological roadmaps, EU programmes such as the European Defence Fund or IRIS², procurement policies shaped by the logic of strategic autonomy, and the shift towards dual-use innovation. Similarly, the future of defence investment is shaped by the evolution of military doctrines—from multi-domain operations to drone swarms and AI-enabled C2 systems—which in turn generate demand for new products and services.

Equally important is the ability to monitor the emerging wave of companies developing new technologies, products, and services with potential defence or dual-use applications. A major shift is underway: defence innovation is no longer the exclusive domain of traditional industrial giants. Startups and smaller tech-driven firms—working in fields such as autonomous systems, cybersecurity, quantum sensing, materials science, and AI—are now playing a critical role in shaping the future of defence capabilities. These companies are agile, often born in the commercial sector, but increasingly tapped by governments for defence-oriented solutions. Identifying which of these firms are positioned to scale, secure procurement contracts, or offer breakthrough capabilities is essential for understanding where value will be created in the next generation of defence and security markets. In other words, anticipating financial outcomes requires a deep understanding of strategic priorities and capability development.

This is precisely where Defence Finance Monitor offers a unique perspective. Our work connects strategic analysis with financial insight, providing constant updates on NATO and EU defence policies, capability needs, technological developments, and regulatory frameworks. We cover how new doctrines and operational requirements translate into procurement programmes, and how they impact the economic performance of the companies involved. We follow the defence tech ecosystem, from large contractors to emerging startups, analysing where innovation is happening and what it means for the sector’s value chain.

Defence is no longer a marginal or exceptional sector in financial markets. It is becoming an increasingly important component of national reindustrialisation strategies, innovation policy, and investment portfolios. To follow its evolution—and to understand its implications for capital allocation and industrial transformation—one needs access to reliable, detailed, and up-to-date analysis.

This is what Defence Finance Monitor delivers. Subscribing means staying informed about one of the most consequential and fast-moving domains of our time, where finance, strategy, and innovation converge.