Opinion: Defence investment is necessary. But let's not call it sustainable.

The world feels more dangerous than it did a year ago – and not just on Europe's eastern border. Strikes on Iran, a Middle East on a knife's edge, Europe striving to assert its strategic sovereignty.

Given this, Europe's push to boost defence spending is legitimate, necessary, and may even be responsible. But sustainable? No. And conflating the two is a mistake we cannot afford to make.

The danger in blurring lines

The push to classify defence as "sustainable investment" exposes a confusion that the sector spent years working to avoid. With the credibility of sustainable finance already under pressure, blurring these lines is not a technical quibble but a threat to the integrity of the field.

Conflating the two is a mistake we cannot afford to make

Let me be clear with the wording.

ESG funds are centered on corporate responsibility – standards of conduct. However controversial certain human activities may be, they can still be carried out responsibly. Defence is no exception, and its growing presence in European ESG portfolios reflects that logic.

Impact investing is different. It seeks to build a desirable long-term state of the world by directing capital toward enterprises whose core business models generate measurable, additional, positive impact on society and the environment.

Defence is not the territory of impact finance

By that standard, defence does not qualify. Conflicts are among the most destructive forces on the planet – in human, ecological, and democratic terms. Wars destroy hospitals, schools, water infrastructure, and housing, setting back decades of development in weeks.

Yes, defence spending contributes to security. But what would the positive impact indicators even look like? Lives saved? By which counterfactual? This is not the territory of impact finance.

What troubles me most is what this debate reveals: a confusion that has been eroding the meaning of "sustainable finance" for years.

Impact's role in European sovereignty

While ESG is a framework for embedding accountability within the existing economy, impact finance backs the new entrants – companies building solutions to climate disruption, biodiversity loss, and unequal access to education, healthcare, and food. These are different tools with different purposes.

And those challenges have not disappeared because geopolitics has shifted. The equation is more complex, not simpler.

If we are serious about sovereignty, impact finance has more to offer than many realise: reducing food dependence through regenerative agriculture, cutting energy costs through renewables, building a resilient digital ecosystem grounded in European values, preparing the next generation for an AI-driven economy. These are sovereign questions too.

I am not arguing that defence should be ignored by investors. I am arguing that words matter. Retail investors who choose impact funds are making a deliberate choice – they deserve honesty. The moment "sustainable" means everything, it means nothing. If we want to finance defence, let's create defence funds and say so plainly.