Defense sector and investors: help The Hague (and Brussels) shape vision and policy

“Pension funds for defense are available; The Hague is the one holding back,” headlined the Dutch Financial Times (FD) on Monday, March 10. But a secure Europe is in everyone’s interest. Why wait passively? There is so much expertise and intellectual power within both the defense industry and among investors. Leverage this to accelerate policymaking and decision-making in collaboration with The Hague.

For a long time, defense companies have faced significant obstacles in securing financing, partly due to the reluctance of banks and pension funds. This has hindered investments in security and innovation. Pension funds have often been hesitant to invest in defense, citing social responsibility and ESG (Environmental, Social, Governance) criteria.

That time is clearly over. A cold wind is blowing from across the Atlantic, and pension funds are reconsidering their stance. They now indicate their willingness to invest in the defense industry—whether through private equity and venture capital or via the European investment vehicle that European Commission President Ursula von der Leyen is setting up.

The past weeks have made one thing painfully clear: Europe cannot remain dependent; a free society must be able to defend itself independently against regimes that seek to undermine its freedom. A strong, independent, well-funded defense industry is necessary to guarantee our security.

The money is there, but where will it be allocated? Existing backlogs cannot be resolved overnight. Without sufficient production capacity and innovation, a portion of these funds will remain unused. So, what is the plan? Pension funds say they are waiting for “policy and vision” from The Hague. While The Hague is actively working on this, nothing prevents the defense industry and investors from stepping forward and helping shape that vision rather than just waiting for it.

On March 12, the Cabinet sent a letter to the House of Representatives identifying key bottlenecks and announcing steps to address them. The letter also emphasizes the importance of dialogue, facilitated through the recently established ‘DefPort’ platform, which includes a financing roundtable in line with the Dutch polder model. However, given the current geopolitical situation, a more ambitious approach is warranted. Make this a top priority—establish a high-level public-private task force where the government, investors, and the defense industry work together. The sector holds a wealth of vision, expertise, and practical insight. Share this with the Ministry of Defense to create a cross-pollination of knowledge and perspectives.

Dialogue and understanding must come from both sides. Just as the Ministry must understand the challenges of the defense sector to mitigate them, the defense industry and investors should also familiarize themselves with the Ministry’s constraints—and those of European institutions working on a defense fund. And not just the technical aspects of which defense systems are needed, but also the political dimensions of decision-making and the challenges faced by the Ministry.

For example, on March 11, a narrow majority in the House of Representatives supported the motion by MP Eerdmans (JA21), rejecting the potential issuance of European debt to finance defense investments. This decision significantly complicates the Cabinet’s ability to credibly participate in European defense discussions. Understanding how policy is formed ensures that industry stakeholders do not obstruct but rather facilitate decision-making, equipping the Ministry with the right information to inform and persuade Parliament effectively.