- Denmarkâs banks, pension funds and insurers have formed the Financial Defence and Preparedness Partnership to coordinate and scale private financing for defence and preparedness.
- Danish pension funds have sharply increased defence exposure, with holdings rising from about DKK 9bn to nearly DKK 19bn between early 2023 and April 2024.
- Major providers such as PFA and Danica are loosening ESG exclusions to invest more broadly in defence and aerospace while still barring controversial weapons.
- Pension funds are also backing defence-focused private equity, including a âĴ220m commitment by PensionDanmark, AP Pension and AkademikerPension to the ETNA fund for European defence SMEs.
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The Danish pensions and banking sectors are shifting from cautious ESG-aligned exclusion toward strategic engagement with the defence industry, driven by heightened geopolitical risk and government signals. The creation of the Financial Defence and Preparedness Partnership (FDPP) formalises this trend to coordinate private sector roles in defence financing, clarify regulatory standards, and align institutional investment frameworks with national security needs.
This move reflects both an opportunity and a challenge. On the opportunity side, investors see defence as a growing asset class: portfolio returns in defence firms have significantly outperformed general indices; ESG criteria are being adjusted to allow defence exposure without breaching ethical thresholds. Institutions are offering clients opt-in and opt-out choices to balance returns, values, and reputational risk.
On the risk side, there remains fragmentationâamong pension funds, institutional policies, and regulatory frameworks. Exclusion lists persist for controversial weapons and violations of norms; transparency in ESG impact, supply chains, and defence procurement remains weak. Public perceptions and ethical concerns could still generate pushback.
Strategically, this convergence suggests Denmark is preparing to leverage private capital to support state defence goalsâincluding procurement, infrastructure, and industrial capacity. It complements increased public spending (an additional DKK 50 billion defence allocation over 2025-26) and policy instruments such as a proposed defence fund. But scaling sustainably will depend on robust legal and policy frameworks, clear investment standards, and risk-adjusted returns.
Supporting Notes
- The FDPP was jointly launched by IPD and Finance Denmark to âensure clear frameworks and better coordination around the defence industryâs financing needsâ and mobilise private investment in defence and preparedness.
- From January 2023 to April 2024, Danish pension firms ramped up defence exposure from just over DKK 9 billion to nearly DKK 19 billion.
- Danish pension funds totalled DKK 3.8 trillion in assets at end-2024.
- PFAâs investments in defence swelled from DKK 793 million at war onset (Feb 2022) to DKK 7.7 billion, an increase of over 800 percent; European defence stocks grew by 1,650 percent within PFAâs portfolio.
- From Jan-Oct 2025, PFAâs defence investments returned 371 percent vs a 38 percent gain for the global index.
- PFA and Danica modified their exclusion policies to allow investment in defence stocks; companies must still avoid banned weapons and controversy.
- Three big pension funds (PensionDanmark, AP Pension, AkademikerPension) invested jointly âĴ220 million in ETNA, a private equity fund for European defence SMEs. PensionDanmark: âĴ100 million; AP Pension: âĴ70 million; AkademikerPension: âĴ50 million.
- Finance Denmark reports individual defence-stock exposure rising from under 0.1% in 2019 to ~1.5% in 2025 of Danish fundsâ holdings; total value growing from DKK 2 billion in 2023 to DKK 10 billion in 2025.