EU just announced €800 billion in defence funding – what does it mean for impact firms?

The President of the European Commission, Ursula von der Leyen, this week unveiled an ambitious plan to ramp up Europe’s military and defence infrastructure. Under the name "ReArm Europe", it plans to mobilise both public and private money to make Europe more self-reliant and better support Ukraine.

Some €800 billion ($855b) could in theory be utilised, via various EU funds, national budgets, capital market borrowing and private investment, for the endeavour.

The context of this, of course, is the suspension of aid for Ukraine from the United States, and the anxieties across Europe about how the US' shift in relations with Russia may embolden the latter to act more aggressively.

"Europe faces a clear and present danger on a scale that none of us has seen in our adult lifetime," said von der Leyen.

A 'dual-use' opportunity?

This is by far not the first funding mega-plan the EU has unleashed in recent years. In an odd bit of symmetry, the most recent example, the NextGenerationEU package which emerged in the wake of the Covid pandemic to help countries recover, was also nominally worth around €800 billion.

Much of that money has found its way into national public funds deployed for social and environmental benefit. For instance, in Spain, the NextGenerationEU provided some backing to an ambitious multi-million euro plan to boost climate and social investment in the region, as previously covered here.

From an impact perspective, the potential of the ReArm Europe plan presents a more mixed picture than something like NextGenerationEU.

For one thing, more spending on development and manufacturing will lead to job creation, which itself is a social benefit, though one a little outside the traditional 'impact' remit.

The focus on defence innovation in the ReArm Europe plan does hold some promise for civil use of emergent and disruptive technologies, many of which are developed for 'dual-use' (ie military and civilian) applications and could be put to good use undergirding Impact projects.

For instance, spending on AI- and data-driven backend processes could well be also applied to large-scale environmental projects, and deeptech companies in particular may benefit from fundamental hard-and software development that may be produced.

A shift from climate action

On the other hand, the defence industry is famously a major climate culprit, and with a perceived shift away from climate action amid the heightened emphasis on national security, it’s perfectly possible that ReArm Europe could lead to a larger carbon footprint.

That said, a report commissioned by the EU parliament in late 2024 looking into increased EU defence spending did highlight some areas in which such a build-up may contribute to lowering that impact.

A greener EU defence strategy

The report suggests that enhanced intra-EU cooperation on defence infrastructure, with attendant shared maintenance and procurement, could clear away a fair bit of waste and redundant processes, making the process more efficient and less resource- and carbon-intensive. Increased cooperation and interoperability could also prolong defence equipment lifespans, meaning less wastage in replacing systems.

With that in mind, impact companies pursuing cleaner industrial production and manufacturing may well stand to benefit from contracts within the ReArm Europe plan. The lifting on caps for public spending and debt as part of the plan may also have a diffuse benefit to other ecological transition companies, freeing up public spending in general.

That of course depends on how open-minded those holding the purse-strings will be when considering investments designed to promote Europe’s future.

Potential benefit for 'us', but not for 'them'

There is, however, one distinctly pessimistic note to end on when it comes to global impact. As noted by Bloomberg, European funds for global development – much of which was earmarked for climate resilience and mitigation in poorer countries – is being diverted to national defence budgets.

So while the ReArm Europe may hold some promise for impact projects in Europe, it seems likely the continet-wide shift to a security approach that it heralds may mean the world’s poorest make do with even less help.