As Europe rearms, Nordic Investment Bank pushes further into defence

Following years of slow investment, Europe is arming and its defence sector is heating up. The Nordic Investment Bank (NIB), co-owned by the Nordic and Baltic countries, has historically focused on climate, innovation and productivity projects. But after a board decision last year, it is now redirecting part of its €36 billion portfolio into security and defence.

“Security and resilience are the foundation. If the region isn’t stable, we can’t continue financing the investments that are core to us,” said NIB’s Vice-President and Head of Lending, Jeanette Vitasp.

Russia’s full-scale invasion of Ukraine and continued belligerence toward its western neighbours forced a reset across Northern Europe. With NATO urging allies toward as much as 5% of GDP on defence, the Nordic and Baltic capitals have scrambled to turn political will into industrial capacity. Public budgets can buy kit; rebuilding supply chains at speed requires private capital and bankable structures. NIB moved in two steps: first, in July 2024 it revised its Sustainability Policy to finance security- and defence-related projects while still excluding weapons and ammunition; then, after a public consultation, in July 2025 it updated its Exclusion List to permit financing of conventional weapons and ammunition while keeping controversial weapons off-limits.

Unknown territory

Speaking to Arctic Today at the Arctic Circle Assembly in Reykjavík, Vitasp described what it took for a climate-first lender to step into a field it barely knew.

“It was a very slow start,” she said. “The defence industry hasn’t been that exposed to the banking requirements of what is bankable or not, and we in the banking sector also needed to understand the value-chain structures better.”

The pivot into an industry it had previously kept off the books meant that the bank needed to begin by importing expertise it didn’t have.

“We spent a great deal of time interacting with all the different stakeholders—national procurement agencies, ministries, the defence industry—to understand where the hurdles are and where there is a real financing need. You could say we’ve been educating each other.”

Along the way, NIB has had to define its own limits. The bank, Vitasp stressed, is careful to do its due diligence and to carefully vet every project.

“The changes we have made—being able to finance conventional weapons and ammunition, were important from a signalling effect, but that doesn’t mean we will finance everything in the defence space. We look at specific projects,” she said.

She also pointed to the balance NIB must maintain as a multilateral lender, which follows the lead of its member states.

“We are a vehicle for our countries,” Vitasp said. “We are owned by the finance ministers predominantly, so we don’t have our own agenda in that sense.” Maintaining investor confidence is a constant consideration. “We have a close dialogue with our investment community, making sure that our choices do not limit our ability to raise funding,” she said.

Demand on the rise

Despite the slow start, as the financial needs of the industry grow and national priorities sharpen, the bank has noticed a clear uptick in demand for its services.

“We now see a growing and strong demand,” she said. “I think it will grow because there will be so much spending going into the area in general, and there’s a need to mobilize capital.”

Vitasp is quick to add that the wave of defence investment represents more than a drain on budgets.

“It shouldn’t be viewed as an expense only,” she said. “This is also an opportunity — to grow industries and businesses that can be sustainable in the long term.”

With governments committing to defence budgets near 5% of GDP, she sees a chance for the region’s technology base to benefit.

“The defence industries today are spending a lot of money on new technologies,” Vitasp said. “This is also a way to make sure that our region stays a little bit ahead in that development.”

She drew a historical parallel; conflicts have often been a key driver of innovation.

“Historically, the military industry has innovated and this has then been applied in the civil society,” she said. “I think the money that now goes in here will make the defence industry spend on innovation that will then in the long run be used for civilian purposes.”

Asked whether space and other high-tech sectors could play that dual-use role, Vitasp gives an unequivocal: “Yes, absolutely”.

“It’s an urgent need that comes with a future opportunity,” she said. “So we try to look at it from both lenses.”

Arctic on the horizon

With the revised policy frame in place, the first public deals have arrived. This spring NIB signed a €400 million uncommitted facility with Lithuania to fund national defence-system investments through 2027, and a €5 million loan to Finland’s Savox Communications for defence-related R&D—early indicators of a pipeline skewing to sovereign infrastructure and dual-use communications rather than pure procurement.

The Arctic is likely to feature more in the bank’s near future as security needs harden. Most of its member states have security needs in the region that need adressing.

“I think there will be more investments in the Arctic region due to the geopolitical situation,” Vitasp said, while noting that NIB has not yet financed defence-related projects there.

Taken together, NIB’s pivot looks like a symptom of a wider shift: policymakers and the financial industry are reframing security as a prerequisite for the green and productivity agendas. As the world grows less stable, the region’s AAA-rated development bank is learning a new language of risk—translating rearmament into structures private capital can actually fund.