Defence Developments: EU Establishes New Defence Industry Programme
28 November 2025
The European Parliament has adopted the long-mooted European defence industry programme (EDIP) regulation which looks to strengthen the EU defence industry, accelerate defence manufacturing and augment support for Ukraine.
The EDIP has been established the same week that the Parliament has to sustainable finance benchmarks which could enable companies manufacturing ‘controversial’ weapons to attain environmental, social and governance (ESG) labels. This could include firms producing nuclear weapons, incendiary weapons and depleted-uranium ammunition.
Key Client Takeaways:
EDIP’s Launch to Strengthen EU Defence Industry
- The European Parliament has adopted the EDIP, a €1.5 billion initiative aimed at boosting defence manufacturing, fostering joint procurement, and supporting Ukraine. It includes a €300 million Ukraine Support Instrument, while a separate €150 million FAST fund has been established to accelerate supply chain transformation.
Political Dynamics and ESG Controversy
- EDIP received broad support from centrist parties, while far-left and far-right groups opposed it. The same week, the EU approved much more politically polarising changes to sustainable finance benchmarks, allowing companies producing controversial weapons to qualify for ESG labels — sparking fresh debate over the compatibility of defence and sustainability.
Support from Minerva in Navigating ESG and Defence Complexity
- Minerva Analytics helps investors manage ESG challenges in defence through our Minerva Nexus solution, offering ESG Norms Screening, a Controversial Products Framework, and tailored advisory services. These solutions enable clients to align investments with regulatory obligations and sustainability goals amid a shifting political and regulatory landscape.
The legislation establishing the EDIP was supported by 457 votes and opposed by 148 votes, with 33 abstentions. The regulation was overwhelmingly supported by Members of European Parliament’s (MEPs) votes from the centre-right European People’s Party, the left-wing Progressive Alliance of Socialists and Democrats (S&D) and centre-left Renew Europe, while it was also strongly supported by the left-wing Greens/European Free Alliance. The far-left Left in the European Parliament and far-right Europe of Sovereign Nations were strongly voted against the EDIP, while more than half of the right-wing Patriots for Europe’s MEPs voted against the legislation. This suggests that parties towards the centre of both sides of the political aisle backed the EDIP, while those on both fringes of the political spectrum in the European Parliament opposed it. The regulation must now be formally endorsed by the EU’s 27 member states before it is published in the Official Journal.
The EDIP’s budget is set to total €1.5 billion (U$1.7 billion) which is intended to be invested in bolstering the EU’s defence industry, foster joint European defence procurement, ramp up defence manufacturing and increase support for Ukraine. To address the latter objective specifically, €300 million has been ringfenced to go to the Ukraine Support Instrument. Co-legislators have also agreed to create a Fund to Accelerate Defence Supply Chain Transformation (the FAST instrument) totalling at least €150 million through additional financial contributions. MEPs also backed the “buy European” principle, under which the cost of the components for defence products originating from non-associated third countries cannot exceed 35% of the estimated total cost of components to secure funding from EDIP.
The regulation had already been informally agreed with the European Council last month. The EDIP has been long in the making, with the European Commission initially proposing the regulation in March 2024. According to the EU, the European defence industrial base consists of a number of large multinational companies, mid-caps and more than 2,000 small- and medium-sized enterprises, collectively representing an estimated annual turnover of €70 billion.
“EDIP is the first EU defence instrument that is truly European, said Raphaël Glucksmann, S&D MEP and co-rapporteur from the Committee on Security and Defence. “EDIP will enable us to build a more resilient and sovereign Europe, through joint investment, common procurement from the European defence technological and industrial base, and further integration of the Ukrainian and European defence industries. This is key to making sure we can protect our democracies effectively and autonomously.”
There has long been confusion about the compatibility of ESG and defence, but as detailed in Minerva Analytics’ “Beyond the Defence Headlines: Is ESG the Problem?” briefing published in July, ESG rules do not prevent defence investment but rather require investors to explain how such exposure fits into a sustainable strategy. The legal red lines remain narrow, with cluster munitions and anti-personnel landmines being banned while nuclear weapons sit in a regulatory grey zone.
The European Parliament’s de facto approval of an overhaul of EU legislation that permits investment in ‘controversial’ weapons to be included in the bloc’s sustainability framework could well prove a seismic shift going forward. The European Commission has suggested that the definition of ‘controversial’ weapons should be clarified and simplified “because the relevant international treaties and conventions to which member states are parties do not reference controversial weapons but rather prohibited weapons”.
MEPs for the S&D, the Greens/European Free Alliance and the Left in the European Parliament were against the changes from the Commission, in a much more clear-cut case of the left-wing vs. the right-wing than on the EDIP regulation vote. However, their opposition was insufficient to prevent the change from being enacted.
The European Commission suggested cutting down the number of weapons companies that are excluded from the EU’s sustainability benchmarks in order to avoid confusion and uncertainty for the companies’ investors earlier this year. It has also weighed in on the discussion of what counts as ‘sustainable’ in defence in recent months through its ReArm Europe/Readiness 2030 initiative to bolster the bloc’s defence capabilities, as covered by Minerva Analytics. The programme frames investment in security infrastructure as consistent with UN Sustainable Development Goal 16, which calls for Peace, Justice, and Strong institutions.
Last week, the European Commission also unveiled a set of measures with the goal of significantly enhancing military mobility across Europe. These measures include remove regulatory barriers – such as having one single permission procedure to move military devices for all 27 EU countries- and creating an emergency framework for fast-track procedures and priority access to infrastructure. The EU simultaneously issued a roadmap to “unleash disruptive innovation” and modernise Europe’s defence industry. The priorities of this roadmap include prioritising support investment in defence companies, accelerating the development of new technologies and expanding access to defence capabilities.
While conventional weapons and nuclear deterrence are hotly debated, cluster munitions and anti-personnel landmines are legal red lines and not ESG grey areas. However, in early 2025, five European governments – Estonia, Finland, Latvia, Lithuania and Poland – announced plans to withdraw from international conventions banning cluster munitions and landmines. An investigation by the Guardian published earlier this month contained photos suggesting that Israel had used the widely-banned cluster munitions in Lebanon during its 13-month conflict which loomed large last year.
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Last Updated: 28 November 2025