How ESG Rules Stopped Europe from Arming Itself — and How Russia's Invasion Changed Everything. Jak Zasady ESG Powstrzymały Europę od Zbrojenia Się — i Jak Inwazja Rosji Zmieniła Wszystko.

I. The Problem — Why Banks Stopped Lending to Defence Companies I. Problem — Dlaczego Banki Przestały Pożyczać Firmom Obronnym

To understand why European defence companies struggled to access finance, you need to understand two overlapping regulatory frameworks that reshaped European banking and investment from approximately 2015 onward: ESG (Environmental, Social and Governance) standards, and the EU Taxonomy.

ESG is a broad framework that financial institutions use to assess whether the companies they invest in or lend to meet certain standards of environmental responsibility, social impact, and governance quality. By the mid-2010s, ESG had become mainstream in European institutional investment — pension funds, insurance companies, and asset managers were all incorporating ESG screens into their investment processes. One of the most common social screens was exclusion of weapons manufacturers. This exclusion was not just for cluster munitions and chemical weapons — it often extended to conventional firearms and, in the stricter interpretations, to any company whose primary product was designed to cause harm.

The EU Taxonomy is a more specific and legally binding framework — a classification system that defines which economic activities count as environmentally sustainable under EU law. It was introduced in 2020 to guide capital flows toward green investments. Crucially, weapons manufacturing was not included as a sustainable activity. For a bank trying to maintain a high Green Asset Ratio — a metric it was required to disclose publicly — holding loans to defence companies dragged that ratio down. The rational response for compliance-conscious banks was to reduce or eliminate defence sector lending.

The practical consequences were severe, particularly for smaller and mid-sized defence companies that lacked the political leverage of the large primes. Firms were refused loans for working capital. Some had basic banking services — accounts, payment processing, international transfers — restricted or terminated. The European Banking Federation documented the problem in detail: defence companies were being treated as pariah clients not because they were doing anything illegal, but because they were legal businesses operating in a sector that financial regulation had inadvertently stigmatised. Aby zrozumieć, dlaczego europejskie firmy obronne miały trudności z dostępem do finansowania, musisz zrozumieć dwa nakładające się ramy regulacyjne. ESG (Środowiskowe, Społeczne i Zarządcze) to szeroka rama, którą instytucje finansowe stosują do oceny spółek. Taksonomia UE to bardziej konkretna i prawnie wiążąca rama — system klasyfikacji definiujący, które działalności gospodarcze liczą się jako ekologicznie zrównoważone. Produkcja broni nie była uwzględniona jako zrównoważona działalność. Praktyczne konsekwencje były poważne, szczególnie dla mniejszych i średnich firm obronnych.

II. February 2022 — The Moment the Consensus Broke II. Luty 2022 — Moment, w Którym Konsensus Się Załamał

On 24 February 2022, Russian forces crossed the Ukrainian border in a full-scale invasion. Within weeks, the European political and financial consensus on defence had fractured. Governments that had held defence spending at or below 2% of GDP for decades suddenly began announcing major increases. Defence companies that had struggled to open bank accounts found themselves fielding calls from investors. The ESG frameworks that had been built over a decade of peacetime European security assumptions were suddenly confronted with a simple question that their architects had apparently not considered: if a European country is invaded, are the weapons defending it sustainable or not?

The answer took some time to work through the regulatory machinery, but the direction was never seriously in doubt after February 2022. The European Commission moved quickly to clarify that conventional defence activities — weapons and ammunition that comply with international law and exclude banned systems such as cluster munitions and chemical weapons — are not prohibited under the EU Taxonomy or the Sustainable Finance Disclosure Regulation (SFDR). The key statement from the Commission: the non-inclusion of defence industrial activities in the green taxonomy "does not prejudge defence industries' environmental performance and should therefore not affect their access to finance." In plain English: not being classified as green does not mean you are classified as harmful.

This sounds like a small technical clarification. In practice, it was a significant signal that removed the ambiguity that compliance departments at banks had been hiding behind. The practical effect was rapid: between 2022 and 2025, exposure to aerospace and defence in ESG European equity funds increased by a factor of 2.7. By early 2026, 43% of ESG European equity funds hold some defence exposure — up from near zero before the invasion. 24 lutego 2022 roku rosyjskie siły przekroczyły ukraińską granicę. W ciągu tygodni europejski polityczny i finansowy konsensus w sprawie obrony pękł. Komisja Europejska szybko wyjaśniła, że konwencjonalne działalności obronne nie są zabronione na mocy Taksonomii UE lub SFDR. Między 2022 a 2025 rokiem ekspozycja na lotnictwo i obronę w europejskich funduszach ESG wzrosła 2,7-krotnie.

III. The Programmes — What €800 Billion Actually Means III. Programy — Co Faktycznie Oznacza 800 Miliardów Euro

The European Commission launched a series of instruments between 2022 and 2026, progressively scaling up from emergency measures to a comprehensive long-term defence industrial strategy. The cumulative funding mobilisable across all instruments could reach up to €800 billion by the end of the decade. Here is what each major instrument does and who it helps: Komisja Europejska uruchomiła szereg instrumentów między 2022 a 2026 rokiem, stopniowo skalując od środków nadzwyczajnych do kompleksowej długoterminowej strategii przemysłu obronnego.

IV. What It Means for Investors — The Capital Flows Are Changing IV. Co To Oznacza dla Inwestorów — Przepływy Kapitału Się Zmieniają

The policy shift described above has direct and measurable consequences for capital flows into European defence equities and bonds. Three dynamics are operating simultaneously.

First, institutional capital is returning to the sector. The number of defence-themed investment funds in Europe doubled in a single year to 47 by early 2026. ESG funds — which had systematically excluded defence — are now largely permitted to invest in conventional defence companies under the clarified regulatory framework. Morningstar data shows that 43% of ESG European equity funds now hold some aerospace and defence exposure, narrowing the gap to non-ESG funds (56% exposure). This is new capital entering the sector that was structurally excluded for years.

Second, the cost of capital for defence companies is falling. When banks competed to avoid the sector for ESG compliance reasons, defence companies faced a limited pool of willing lenders and therefore paid higher rates for the credit they could access. As the ESG stigma lifts — the EIB expands, commercial banks re-engage, investment funds start buying the sector again — competition among capital providers increases and the cost of capital falls. This directly improves the economics of defence industry investment and makes new production capacity financially viable at lower hurdle rates.

Third, the investment horizon is extending. Defence procurement cycles are long — a contract to supply ammunition or build vehicles runs for years, sometimes decades. What the ESG period denied defence companies was not just access to credit but access to the patient, long-term capital needed to invest in new production lines, train specialists, and build the capacity that governments are now urgently requesting. With institutional investors able to hold defence positions in ESG-compliant portfolios, the duration of capital available to the sector is extending — which is exactly what defence industrial capacity build-out requires. Trzy dynamiki działają jednocześnie. Po pierwsze, kapitał instytucjonalny wraca do sektora. Liczba funduszy tematycznych obrony podwoiła się do 47. Po drugie, koszt kapitału dla firm obronnych spada. W miarę jak piętno ESG ustępuje, konkurencja wśród dostawców kapitału rośnie i koszt kapitału spada. Po trzecie, horyzont inwestycyjny się wydłuża. Fundusze instytucjonalne mogą teraz trzymać pozycje obronne w portfelach zgodnych z ESG.

V. Poland's Position — The Largest Beneficiary in Europe East of the Rhine V. Pozycja Polski — Największy Beneficjent w Europie na Wschód od Renu

Poland's position in this landscape is exceptional. It is spending 4.7% of GDP on defence — the highest proportion of any NATO member — and signed the EU SAFE loan agreement for €43.7 billion in May 2026. It has the fastest-growing defence industrial base in Europe, anchored by PGZ and increasingly supported by international partners (Honeywell, General Dynamics, ICEYE). And it sits at the geographic frontier of the security challenge that is driving all of this capital mobilisation.

For investors focused on Poland, the convergence of these trends creates a structural opportunity that is visible in our portfolio companies already. KGHM — Poland's largest mining company and our largest position — produces copper and silver that are essential inputs for every defence electronics system, every armoured vehicle, every precision-guided weapon, and every military communication system being built or upgraded across Europe. The defence industrial expansion is a copper demand story as much as it is a geopolitical story. Every Borsuk IFV, every Homar-K launcher, every Miecznik frigate, and every Abrams tank contains copper. KGHM makes it.

The broader investment thesis for Poland remains what it was at Fides Polonia's founding: this is a country with world-class industrial assets, growing domestic demand, an increasingly sophisticated capital market, and a geopolitical position that has transformed from a risk factor into a strategic advantage. The ESG-to-ReArm shift in European defence finance is one more structural tailwind behind that thesis — and one that looks durable, because the security environment that caused it shows no signs of reversing. Pozycja Polski jest wyjątkowa. Wydaje 4,7% PKB na obronę i podpisała umowę pożyczki UE SAFE na 43,7 miliarda euro w maju 2026 roku. Dla inwestorów skupionych na Polsce, zbieżność tych trendów tworzy strukturalną okazję. KGHM produkuje miedź i srebro, które są niezbędnymi nakładami dla każdego systemu elektroniki obronnej budowanego lub modernizowanego w całej Europie. Ekspansja przemysłu obronnego to historia popytu na miedź.

VI. The Fides Polonia View — Security Is the Precondition for Everything Else VI. Perspektywa Fides Polonia — Bezpieczeństwo Jest Warunkiem Wstępnym Dla Wszystkiego Innego

The Bruegel Institute — one of Europe's most respected economic research organisations — put it directly in a 2025 paper on this exact question: "If Brussels wants to see a fast re-alignment of private capital towards defence, it should send a clear message to the financial industry that security is now considered a precondition for achievement of all other policy goals — including ESG goals."

That message has now been sent. The Defence Readiness Omnibus, the Commission's SFDR clarifications, and the EIB mandate expansion together constitute exactly the signal the financial sector needed. And the response — 43% ESG fund exposure, doubled number of defence investment products, EIB actively lending — suggests the market heard it.

Catholic Social Teaching is relevant here in a way that goes beyond the obvious. Gaudium et Spes §79 states that governments have the right and obligation to provide for the legitimate defence of their citizens, and that this right carries with it the moral permission to maintain the means of defence. A financial system that systematically denied capital to the companies building those means — not because of criminal activity, not because of environmental destruction, but because of an overly rigid application of sustainability frameworks that conflated conventional defence with prohibited weapons — was a financial system that had lost the plot. The correction was necessary. The question now is whether it will be sustained with the discipline and long-term thinking that genuine European security requires. Bruegel Institute postawił to bezpośrednio w artykule z 2025 roku: "Jeśli Bruksela chce zobaczyć szybkie ponowne dostosowanie prywatnego kapitału do obrony, powinna wysłać jasny sygnał do branży finansowej, że bezpieczeństwo jest teraz uważane za warunek wstępny osiągnięcia wszystkich innych celów politycznych — w tym celów ESG." Ten sygnał został już wysłany. Katolicka Nauka Społeczna jest tutaj istotna. Gaudium et Spes §79 stwierdza, że rządy mają prawo i obowiązek zapewnienia legalnej obrony swoich obywateli.