Berlin, Germany – In a move reflecting a radical shift in Europe’s security and financial doctrine, Germany’s sovereign wealth fund Kenfo plans to abandon the strict restrictions it has long imposed on investing in arms manufacturers. This decision comes in response to a volatile geopolitical reality characterized by escalating tensions on the continent and the urgent need to bolster defense capabilities.
Changing investment policies
The fund’s CEO, Anja Mikos, revealed in an interview with Bloomberg that the fund can now purchase stocks and bonds issued by defense companies.
This decision represents a reversal of a previous policy that prohibited the fund from holding liquid assets in companies that derive more than 5% of their revenue from defense-related activities. Mikos clarified that this shift does not signify a complete abandonment of ethical standards. Investing in companies that manufacture controversial weapons, such as cluster bombs, will remain strictly prohibited.
She stated, “We still believe that armament is not ideally sustainable, but it has become an unavoidable necessity given the changing global security landscape.”
Protecting democracy as an investment strategy
Kenfo’s move comes amid a broader reassessment among European investors, who now view arms financing as a sustainable strategy for safeguarding democratic values.
With Chancellor Friedrich Merz’s government pushing to increase defense spending, the fund’s management felt it was no longer logical to remain outside this vital sector. Mikos predicted that the fund’s investments in the arms industry would rise significantly by mid-year. She also indicated that procurement decisions would be made through external asset managers based on projected financial returns, with a focus on companies within the European Union, the UK, Norway, and Switzerland. This approach aims to ensure compliance with export control standards.
A pressing geopolitical context
This shift comes amid Russia’s ongoing war in Ukraine and increasing pressure from the United States on NATO allies to raise their defense spending.
Germany has responded by relaxing constitutional restrictions on borrowing, paving the way for massive defense investments exceeding €500 billion by 2029. Berlin aims to achieve this goal of spending 3.5% of its GDP on defense, six years ahead of schedule.
About the “Kenfu” fund
Kenfo was founded in 2017 with the primary objective of financing the final storage of radioactive waste from decommissioned German nuclear power plants.
Since its inception, the fund has focused on long-term returns derived from sustainable sectors. However, the complexities of the security landscape in 2026 necessitated expanding its portfolio to include the defense sector, which was previously considered a reputational risk.
