From “sustainable” arms to self-sustained militarisation: the role of the EIB in the EU arms race

2025 was undoubtedly the year of defence. This is what the President of the European Council António Costa claimed addressing a high-level audience gathered in Luxembourg for the European Investment Bank (EIB) Group Forum in early March. Military spending from European member states has shown a surge the likes of which we hardly ever see. The very fiscal and debt-sustainability rules that kept European governments’ hands so carefully out of the public purse for years, impeding to seriously face the challenges posed by the climate crisis,  have been conveniently set aside or creatively reworked, all to make room for a level of public spending in the arms industry that is entirely unprecedented.

After all, it’s not as though European governments are alone in this change of heart. A generous influx of other public and private players took part in the “sea change” which cannot but be welcomed by representatives of arms manufacturers such as Philippe Errera, executive vice-president of the French drone-manufacturer Safran. After a career of continued revolving doors between the French Ministry of Defence and arms manufacturers, Errera knows the context is favourable for corporate interests to be swiftly translated into lucrative contracts backed by public money. Indeed it’s not as if the arms industry has been short on chances in recent months to rub shoulders with political decision-makers. Earlier in March, Safran sponsored the Brussels European Defence Exhibition and Conference (BEDEX), a three-day event where arms manufacturers could use a red carpet to showcase the latest-generation weapons that form the backbone of modern warfare. And it did so alongside companies such as the US-based Lockheed Martin, the biggest arms company in the world whose fighter jets, missiles and attack helicopters have been widely reported to have been used to perpetuate the genocide in Gaza.

From their side, the EIB and its risk-taking financing arm, the European Investment Fund (EIF), were more than happy to join in and help pad their already well-lined pockets. The EIB Group’s investments in the defence sector multiplied by four in only two years, from €1 billion to €4.4 billion, exceeding the target of 3.5% of the Bank’s new investments already earmarked for this purpose. EIF’s investments in the sector have increased more than five times between 2021 and 2025, reaching the peak of €376 million in 2025. Underpinning this trend are changes in the Bank’s policies which gave the green light for the EIB Group to make defence spending one of its core priorities, whilst making purely military projects eligible for financing. Standing on that same stage in Luxembourg, the President of the EIB Group, Nadia Calviño, claimed the Bank will continue on this trend and expand its investments in the sector in the coming years.

The only red line still existing concerns projects in ammunition and weapons manufacturing, which Vice-President Robert de Groot, responsible for defence, claims the Bank will not cross. Nonetheless, this massive and continued flow of public capital into the military industry already plays a pivotal role in fuelling the current arms race, even without its direct involvement in arms manufacturing. For these public investments to be paid back with interest, military equipment must be sold, used and renewed to make it profitable enough, meaning that the EIB lending for defence creates an economic incentive to fuel the arms race and armed conflict itself. This is a phenomenon that goes beyond the nature of the projects in which the EIB chooses to invest its resources – as demonstrated by a closer analysis of its “sustainable” investments in recent years.

Celebrating greenwashing: arms manufacturing which made the EU Climate Bank make the climate grades 

Climate change and the deterioration of ecosystems do not cease to exist simply because they’ve scaled back on the political agenda. Proliferating armed conflicts and wars is at odds with what would be needed in times of climate breakdown. Independent research has shown that if the worlds’ militaries were a country, they would have the fourth national carbon footprint, even greater than the Russian Federation. And yet, a subtle shift has taken hold in recent years, one in which the banner of “sustainability” can fly undisturbed over military production projects that fuel the global arms race as well as the systematic violation of human rights on Europe’s borders.

The EIB, the self-proclaimed “EU Climate Bank”, played a crucial role in this respect. In 2025, the EIB celebrated it outperformed in its climate commitments, claiming that close to 60% of its 2024 total financing was devoted to projects that contribute to mitigate and adapt to climate change. Behind the green curtains lies manufacturing of drones, military components and substantial investments into giant arms manufacturers.

It’s here we meet Safran again. In 2021, the EIB signed a €500 million into Safran’s research activities into carbon-free aviation – namely, propulsion systems powered by synthetic fuels rather than hydrocarbures. An interesting choice, given that at the time of the contract signature, Safran ranked 24th in SIPRI’s list of the biggest arms companies worldwide due to its role in manufacturing the propulsion system of the Rafale combat aircraft produced by French Dassault Aviation Group. Just as the investment into the French company has been presented to “reduce significantly emissions for air transport” from the EIB’s green loans, it also increased its arms revenues by 15.2% in only one year from 2023 to 2024. The Italian military giant Leonardo also profited from the green loans. A €260 sustainability-linked loan was said to contribute to cutting the CO2 emissions of the company, which had up to 83% of its revenues generated by arms trade in that same year.

The Bank was not operating solely. With the outbreak of the war in Ukraine, the Commission has proactively worked to make military manufacturing officially included in the list of sustainable economic activities, thus diverting expanding shares of “green” private investments going into these companies. According to estimates, Safran and Leonardo are in a list of 27 European arms manufacturers which have profited out of private and public “green” investments. Only in 2025 Safran received up to €5.6 billion from private investors, while Leonardo had almost €1 billion of these investments.

Recent disasters such as the “black rain” of soot, carbon and other pollutants dropping from the sky in Teheran after the US-Israeli airstrikes on Iranian oil deposits feel like a slap in the face, serving as a stark reminder that sustainability considerations cannot be decoupled from the social purpose of the product manufactured. Contrary to the ongoing normalisation of continued disruption of international law, the call for an international recognition of ecocide which for years has been pushed back by fossil fuel and military lobbyists alike should remind that international agreements and cooperation is of fundamental importance to adequately face the global scope of the challenge that climate change is facing us with.

Yet the ongoing militarisation of European industrial manufacturing raises concerns not only for its environmental impacts, but for the role that the expansion of arms manufacturing can play in repression of political dissent and for the criminalisation of migrants trying to overcome the taller and taller walls that fortress Europe is building under the aegis of the far-right. An EIB investment into the US-based company Skydweller bears witness of how the narrative of sustainable arms manufacturing is leveraged to carry out human rights violations against migrants by the brutal border control agency, Frontex. Skydweller has received the EIB’s investment, supported by the EU budgetary guarantee under the InvestEU program, to produce – in Leonardo’s plants in Grottaglie, Italy - a “free-carbon drone” operating with solar panels. Right before the opening of Skydweller’s Spanish base, Robert Miller, CEO of Skydweller, openly declared that the drone has raised the interest of Frontex. The partnership between Swydweller and Thales - well known for providing border control equipment to Frontex – is one step closer to becoming reality.

The European Investment Fund and the militarisation of the financial ecosystem

According to recent figures, investments in AI expansion in the military sector is the fastest-growing in Europe, with an equivalent of $8.7 billion invested in 2025, a fourfold increase compared to 2020. In the global race for AI dominance, technological innovation in the military industry is presented as the booster of European productivity to finally catch up with its forever competitors in the US. Under the impetus of the European Commission’s DG DEFIS, the EIF played a less visible but pivotal role in boosting this trend. President Nadia Calviño made it plain herself: the strategic role that the EIB Group can play in defence does not occur in traditional lending in military infrastructure and SMEs operating in the supply chain, although it has massively increased. On top of this, the EIF is nurturing a European ecosystem of private Venture Capital funds specialised in deeptech, space and military startups. To put it simply: the EIF is investing in funds which, in turn, invest in companies operating in the defense sector  to create a financial ecosystem which allows for a self-reliant and continued pipeline of capital flowing to the military industry. So that any private investor witnessing EIF’s involvement in a private fund can find it reliable and profitable enough to invest in its turn. All these investments are backed by public guarantees allocated to the Defence Equity Facility, a package of €175 million of budgetary guarantees which was supposed to be deployed by the end of 2027 and in fact was already completely allocated by the end of 2025, thus leading to the need for it to be scaled up to a total amount of €1 billion.

Behind the scenes of the EIB Group Forum in early March, the EIF signed its biggest-ever military investment into Joint Capital’s fund, which is expected to raise up to €235 millions to go into approximately 25 startups operating in the high-tech defence sector. Through investments into private capital funds such as the ones run by Keen Venture Partners and Sienna Hephaistos Private Investments, the Bank claims the desirability of driving the innovation of the European industry through means of militarisation. The press release of the latest investment makes the narrative clear: that any innovation in the defence sector enhances civilian life, thus presenting military investments as part of the “good economics” handbook. For example, the EIB Group’s 2025 investment report claims a 1% increase in GDP of military spending will generate an 0,25 percent in GDP. The most partisan estimates of military lobbyists even suggest an increase of around 0.7% in GDP. However, they obfuscate the fact that the economic and social benefits of government spending in other sectors are much larger. Investments in green public services can boost economic growth, drive employment and generate widespread, accessible prosperity for the benefit of all. And the innovation which wants to make warfare look “smarter” and faster through AI-driven systems is now being challenged by the reality on the Iranian ground, which has recently demonstrated how “intelligent” military analysis systems can lead to criminal killing of 170 Iranian girls as well as make the rhythm of bombing unprecedented.

On top of this, the reliance of these Intermediated and complex forms of investments makes it increasingly difficult to trace the allocation of public finance. The opaqueness of indirect investments which involve multiple private actors make accountability out of research. Through one of these indirect investments, the EIF was found to have indirectly allocated Horizon2020 resources in the pockets of Paragon - the Israeli company that has provided the Graphite spyware used by the Italian government to control activists and business leaders personal devices. Last year, the Bank also adopted a latest reform of its Transparency policy to provide confidentiality to loans in the military, adding another veil of opacity that runs counter to the principles of transparency to which the bank claims to adhere, effectively dispossessing public opinion and civil society of the tools that enable public institutions such as the Bank to be held accountable. And whilst democratic institutions are increasingly unable to keep tabs on the actors fuelling the war machine, high-level meetings between arms manufacturers and policymakers such as the one held in EIB Group’s shiny venues create new opportunities for more and more contracts to be signed behind the talking, far away from the centres of democratic decision-making.