The Strategic Rise of Defence ETFs in Europe’s Capital Architecture
1. Introduction
The emergence of defence-themed exchange-traded funds marks a structural turning point in the integration of financial markets with Europe’s security and industrial policy. Until 2022, the defence sector remained under-represented in European capital flows, constrained by ESG exclusions, fragmented procurement, and the absence of investable benchmarks. The Ukraine war, the EU’s rearmament drive and the NATO 5 %-of-GDP spending horizon have redefined the narrative: defence has become an asset class linked to sovereignty, resilience and technological competitiveness. ETFs have been instrumental in this shift. They provide transparent, liquid exposure to a previously opaque segment, channel generalist capital into strategic industries, and translate political momentum into measurable market demand. Each product reflects a different geography and philosophy of allocation – from broad global indices that capture prime contractors and dual-use firms, to highly concentrated European portfolios aligned with continental industrial autonomy. Together, they have transformed defence from a budgetary domain into a tradable proxy for geopolitical risk and technological superiority.