Nordic investors drive investment in region’s defence sector

The dramatic increase in the defence budgets of North Atlantic Treaty Organization (Nato)-aligned Nordic countries in 2026 is primed to deliver significant growth opportunities for companies developing cyber security, battle theatre communications systems and drone countermeasures technology

In particular, Nordic state-run agencies such as the Nordic Investment Bank (NIB) are offering so-called “favoured loan financing” to companies developing advanced technologies with dual-purpose applications in the civilian market and military domain.  

The Nordic states, based on budgets presented to their national parliaments in October, will spend a total of €50bn on defence and security in 2026.

The level of spend is almost 30% higher than what the four Nato-aligned nations spent in 2020, and is set to be dwarfed further when the projected total capital outlay by the Nordic countries on defence rises above €70bn.  

In its 2026 budget, Norway has pledged to invest an additional €51bn on defence during the period between 2025 and 2036.

In Sweden, the 2026 budget bill includes a plan to establish a Defence Innovation Unit to develop research infrastructure and develop groundbreaking defence and security technologies in partnership with the private defence industry. 

Interest grows

Nordic companies operating in the specific areas of cyber security, satellite-based intelligence gathering, electronic warfare and next-generation 6G communication connectivity technologies are seeing a heightened level of interest from a new breed of investors in the shape of pension funds and bank-run defence industry investment programmes. 

The largest of these defence and security funds were launched during the second half of 2025 by finance groups Nordea, Danske Bank, Svenska Handelsbanken and the Nordic Investment Bank (NIB).  

Pension funds are joining forces with the banking sector to drive public-private investment and financing cooperation to meet the Nordic region’s increased defence strengthening needs.  

This development is happening against the backdrop of Russia’s invasion of Ukraine in February 2022, an event that caused military neutral and unaligned Finland and Sweden to join Nato in the face of the enhanced risk of geopolitical instability arising from the conflict and impacting the High North and Baltic Sea-rim countries  

The elevated interest by pension and investment funds is tracking the planned and significant increases in national defence spending by Nordic governments. This trend is expected to accelerate sales and growth, in particular, in the region’s “pure defence” small and medium-sized enterprises (SMEs), as well as companies engaged in the manufacture and supply of dual-purpose products that target civilian and military markets.   

Further evidence of the dual-use dividend for SMEs emerged in September, when the NIB, a multilateral financial institution owned by the governments of Sweden, Norway, Denmark, Finland, Iceland, Estonia, Latvia and Lithuania, entered a €400m uncommitted credit facility with Lithuania to boost the Baltic state’s national defence system during 2025 to 2027.

Bolstering defence capabilities

The NIB’s 20-year financing deal is earmarked for advanced technology and dual-purpose defence materials procurement to bolster Lithuania’s national security infrastructure and fortify the country’s defence capabilities.  

The capital investments arising from the credit facility will be used to purchase a range of defence products and expertise, including IT, counter-drone systems and cyber security enhancement services, said André Küüsvek, the NIB’s CEO. 

“Improved security is essential for national sovereignty and paramount for economic development,” he added. “Lithuania will use this credit facility to finance projects needed for long-term defence resilience.”  

The NIB’s growing reputation as a state-backed lender to the SME sector was highlighted by its five-year €5m investment loan to Finland-headquartered Savox Communications. The investment loan will be used to finance Savox’s research and development (R&D) projects in the areas of wireless communication and integrated data services.  

Savox is among a rising number of Nordic SMEs that are changing their business models to embrace dual-purpose product development and production to grow sales to both the civilian and defence-security markets.  

The NIB loan will enable Savox to develop military applications for its modular communication and battle theatre situational awareness systems, said Jerry Kettunen, Savox’s chief executive 

“Access to NIB funding means we can accelerate the development of next-generation data solutions for the defence sector,” he said. “It is significant that NIB has identified the defence sector as a strategic area of focus. This support contributes to the internationalisation of both Finnish and Nordic defence industries, and reinforces the defence capabilities of our region.”

Slush it up

Underlying the growing role of SMEs as suppliers of defence-application technologies, this year’s annual Slush Startup event in Helsinki will feature a series of dual-use, defence and security events that bring companies in the domain together with angel investors, private equity groups, venture capitalists, and executives from the state military and private defence industry.  

Slush Startup, which will run from November 15–20, has positioned itself as the largest Nordic defence sector “matchmaking” pitch event in 2025 for startups operating in the security sphere.  

The increased presence of Nordic governments in private-public defence technology partnerships was manifest when Finland’s Ministry of Defence collaborated with Nordic telecoms Telia and Nokia to conduct the world’s first standalone 5G slice handover between multiple countries in a live network.  

The groundbreaking trial demonstrated the potential of 5G to provide mission-critical capabilities for defence and other key national security areas by providing seamless cross-borders 5G slice continuity, said Jarmo Vähätiitto, the head of the Finnish defence command’s command, control, computers, communications and cyber defence unit.  

“The trial was an important milestone to showcase the dual-use possibilities of 5G for defence while advancing communication capabilities within the Nato domain,” he said. “We are certainly open to other opportunities to partner with Nokia and Telia to explore further possibilities for integrating 5G into our defence and security operations.” 

The core 5G test was run during a joint Nordic military exercise, and involved maintaining a continuous and secure data connection in the slice while moving across multiple Telia-operated networks in three countries.  

Nordic pension funds are well-positioned to substantially increase investments in leading defence groups and dual-purpose SMEs in 2026 and 2027. In particular, Danish pension funds led by AkademikerPension and PFA have already doubled their capital investments in defence and security firms since June 2024.

Direct investments by pension funds in state-owned defence infrastructure was boosted in August, when Insurance and Pension Denmark (IPD) and banking association Finance Denmark (Finans Danmark) collaborated to roll out the Financial Defense and Preparedness Partnership (FDPP), an investment vehicle intended to provide more defined frameworks and improved coordination around the defence industry’s future financing needs.  

The FDPP partnership will enable Denmark’s banking and insurance sectors to better mobilise more private resources to support national defence and security through investments and financing to advance new-generation cyber security, anti-drone and sensor technologies, said Ole Krogh Petersen, CEO of IPD and chair of pension insurance group PFA.

“The new security picture we are experiencing requires new solutions – and closer cooperation between the public and private sectors,” he said. “The FDPP will help to assess how we in the financial sector can best contribute in relation to the government’s priorities – including Denmark’s upcoming defence industrial strategy and the establishment of a national defence fund.”

Denmark’s finance sector is also supporting Interforce – an organisation established under the Danish Defence Command (DDC) to develop areas of collaboration with business and industry in Denmark. Over 1,400 Danish companies had joined as members of Interforce as of the end of September.

Under the DDC-run scheme, employees of private enterprises receive extra holidays with pay if they volunteer to serve as reservists in the Danish Defence Forces, the Danish Home Guard or the Danish Emergency Management Agency. 

Defence and security funds launched by Nordic banks and pension funds since July 2025 comprise Nordea’s Empower Europe Fund, Svenska Enskilda Banken’s (SEB’s) European Defence and Security Fund and Danske Bank’s Danske Invest Defence and Security Fund. All three funds will target investments in companies to build strengthened Nordic and European defence infrastructure, security and resilience systems. 

“Our thematic fund allows us to meet client demand while contributing to the development of a stronger and more secure Europe,” said Javiera Ragnartz, head of SEB asset management, which is managing the Empower Europe Fund.