London, January 22nd, 2026 – The share of defence-related companies in European sustainable fund portfolios has increased significantly over the past year, according to new analysis from Clarity AI, the leading global sustainability technology company. One of the more pronounced increases was observed among funds disclosing under Article 8 of the Sustainable Finance Disclosure Regulation (SFDR), where average exposure to companies involved in armament production rose by nearly 60%, from 0.9% of average portfolio weight in the last quarter of 2024 to 1.42% by the last quarter of 2025.
The data shows that this shift has occurred across all SFDR fund types, including Article 6, Article 8, and Article 9 funds.
Rising exposure across sustainable fund categories
Clarity AI’s analysis of European equity funds reveals a steady increase in the share of portfolios exposed to defence-related activities over seven consecutive quarters. Article 6 funds remain the most exposed, with armament-producing companies accounting for an average of 1.75% in early 2024, rising to 2.52% by the end of 2025.
Article 8 funds have followed a similar trajectory, with average exposure increasing from 0.8% at the start of 2024 to 1.42% by year-end 2025. Article 9 funds, the most restrictive category, have also recorded a gradual rise in exposure over the same period.
The data indicates that the most pronounced changes occurred from early 2025 onwards, pointing to a structural shift rather than short-term adjustments.
Policy context and market response
Several factors appear to be contributing to the growing share of defence-related companies in sustainable fund portfolios. These include market-driven effects, such as rising valuations of defence-related companies in market-capitalisation-weighted portfolios, alongside active investment decisions.
These dynamics are unfolding against a backdrop of heightened geopolitical tensions, ongoing armed conflicts, and rising defence spending commitments across Europe, as well as policy initiatives aimed at strengthening Europe’s defence capabilities.
Earlier in 2025, the European Commission clarified that investment in the defence sector is compatible with the EU sustainable finance framework, including the Sustainable Finance Disclosure Regulation (SFDR) and the Corporate Sustainability Due Diligence Directive (CSDDD).
“The right to defence and the need for stability as a prerequisite for sustainable societies are increasingly being invoked to justify the inclusion of armament-producing companies within sustainable investment products,” said Patricia Pina, Chief Research Officer at Clarity AI. “For investors choosing to include defence within their sustainability definitions, strong governance, rigorous human-rights and end-use due diligence, and continuous controversy monitoring are critical to managing reputational risk and aligning with global standards for responsible business conduct.”
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About Clarity AI
Clarity AI is the leading sustainability tech company, leveraging advanced technology and AI to provide data-driven environmental and social insights to investors, corporates, governments, and consumers. AI has been at the core of Clarity AI’s offering from the start, supporting a fully flexible set of data solutions, insights, analytics capabilities, and tools used for portfolio management, corporate research and engagement, benchmarking, regulatory reporting, online banking, and e-commerce.
Within the investment sector, Clarity AI serves a direct network of clients managing around $55 trillion in assets and includes firms like Nordea, Crédit Agricole, PGIM, or Santander. Our strategic partnerships with financial institutions such as BlackRock, BNP Paribas, Caceis, or SimCorp, allow thousands of users to access Clarity AI advanced data analytics capabilities through their usual investment platforms, ensuring a seamless workflow experience. Clarity AI has offices in Europe, North America, and the Middle East. For more information visit www.clarity.ai
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