Sharp increase in defense budget North Atlantic Treaty Organization NATO's Nordic countries are poised to provide significant growth opportunities in 2026 for companies developing cybersecurity, theater communications systems and counter-drone technologies.
In particular, Nordic government agencies such as the Nordic Investment Bank (NIB) offer so-called “concessional loan financing” to companies developing advanced technologies with dual-use applications in the civilian and military markets.
The Nordic states will spend a total of 50 billion euros on defense and security in 2026, based on the budgets presented to their national parliaments in October.
The level of spending is almost 30% higher than what the four NATO countries spent in 2020, and is expected to become even lower when the Nordics' projected total capital spending on defense exceeds €70 billion.
In its 2026 budget, Norway committed to investing an additional €51 billion in defense between 2025 and 2036.
In Sweden, the 2026 budget bill includes a plan to create a defense innovation unit to develop research infrastructure and develop innovative defense and security technologies in partnership with the private defense industry.
Interest is growing
Scandinavian companies working in specific areas of cybersecurity, satellite intelligence gathering, electronic warfare and next-generation 6G Communications technologies are attracting increased interest from a new generation of investors in the form of pension funds and bank-managed defense investment programs.
The largest of these defense and security funds were launched in the second half of 2025 by financial groups Nordea, Danske Bank, Svenska Handelsbanken and the Nordic Investment Bank (NIB).
Pension funds are joining forces with the banking sector to stimulate public-private investment and finance collaboration to meet the Northern region's growing defense needs.
This development comes against the backdrop of Russia's invasion of Ukraine in February 2022, an event that forced militarily neutral and non-aligned Finland and Sweden to join NATO in the face of the increased risk of geopolitical instability arising from the conflict and affecting the High North and Baltic Sea countries.
The increased interest from pension and investment funds is driven by planned and significant increases in national defense spending by Nordic governments. This trend is expected to accelerate sales and growth, particularly in “defense-only” small and medium-sized enterprises (SMEs), as well as companies engaged in the production and supply of dual-use products targeting the civilian and military markets.
Further evidence of a dual-use dividend for SMEs emerged in September when NIB, a multilateral financial institution owned by the governments of Sweden, Norway, Denmark, Finland, Iceland, Estonia, Latvia and Lithuania, entered into a euro agreement.An uncommitted credit line of $400 million with Lithuania to strengthen the Baltic state's national defense system between 2025 and 2027.
Strengthening defense capabilities
The 20-year NIB funding agreement is intended for the procurement of advanced technologies and dual-use defense materials to strengthen Lithuania's national security infrastructure and strengthen the country's defense capability.
The capital investment from the credit facility will be used to acquire a range of defense products and expertise, including IT, counter-drone systems and cybersecurity enhancement services, it said. Andre GarlicGeneral Director of NIB.
“Improving security is essential to national sovereignty and is paramount to economic development,” he added. “Lithuania will use this credit line to finance projects necessary for long-term defense sustainability.”
NIB's growing reputation as a government-backed lender to the SME sector was underlined by a five-year €5 million investment loan provided to Finland-headquartered Savox Communications. The investment loan will be used to finance Savox's research and development projects in the field of wireless communications and integrated data services.
Savox is among a growing number of Scandinavian SMEs that are changing their business models to develop and manufacture dual-use products to increase sales in both the civilian and defense security markets.
The NIB loan will enable Savox to develop military applications for its modular communications and theater situational awareness systems, it said. Jerry Kettunen, Savoxa general manager
“Access to NIB funding means we can accelerate the development of next generation data solutions for the defense sector,” he said. “It is important that NIB has identified the defense sector as a strategic focus. This support contributes to the internationalization of the defense industry in both Finland and the Nordic countries, and strengthens the defense capabilities of our region.”
Wet it off
Given the growing role of SMEs as defense technology suppliers, the annual Slush startup The Helsinki event will include a series of dual-use, defense and security events that will bring companies in the field together with angel investors, private equity groups, venture capitalists and executives from government-owned military and private defense businesses.
Slush Startup, which will take place from 15 to 20 November, bills itself as the largest Nordic defense sector matchmaking event for security startups in 2025.
The increasing presence of Nordic governments in public-private partnerships in defense technology became evident when the Finnish Ministry of Defense began collaborating with Nordic telecommunications companies. Telia and Nokia will conduct the world's first standalone 5G handover between multiple countries on a live network.
The groundbreaking test demonstrated the potential of 5G to deliver critical capabilities for defense and other key national security areas, ensuring seamless cross-border 5G network continuity, said Jarmo Vähätiitto, head of the Finnish Defense Command's command, control, computers, communications and cyber defense division.
“The test was an important milestone in demonstrating the dual-use capabilities of 5G for defense while developing communications capabilities in the NATO domain,” he said. “We are certainly open to other partnership opportunities with Nokia and Telia to explore further opportunities to integrate 5G into our defense and security operations.”
The 5G baseline test was carried out during a joint Nordic military exercise and involved maintaining an uninterrupted and secure data connection at a site while moving across multiple networks operated by Telia in the three countries.
Nordic pension funds are well positioned to significantly increase investment in leading defense groups and dual-use SMEs in 2026 and 2027. In particular, Danish pension funds, led by AkademikerPension and PFA, have already doubled their capital investments in defense and security companies from June 2024.
Direct investment by pension funds in public defense infrastructure increased in August when Insurance and Pensions Denmark (IPD) and the Danish banking association Finans Danmark jointly The Financial Defense and Preparedness Partnership (FDPP) is an investment vehicle designed to provide greater clarity and better coordination of the future financing needs of the defense industry.
The FDPP partnership will enable Denmark's banking and insurance sectors to better mobilize more private resources to support national defense and security through investment and financing to advance next-generation cybersecurity, counter-drone and sensor technologies, said Ole Krogh Petersen, CEO of IPD and Chairman of the PFA Pension Insurance Group.
“The new security landscape we are seeing requires new solutions – and greater collaboration between the public and private sectors,” he said. “The FDPP will help assess how we in the financial sector can best contribute to the government’s priorities, including Denmark’s upcoming defense industrial strategy and the creation of a national defense fund.”
The Danish financial sector also supports Interforce, an organization created under the Danish Defense Command (DDC) to develop areas of cooperation with Danish business and industry. As of the end of September, more than 1,400 Danish companies had joined Interforce.
Under the scheme administered by the DDC, employees of private enterprises receive additional paid leave if they voluntarily serve as reservists in the Danish Defense Forces, the Danish Home Guard or the Danish Emergency Management Agency.
Defense and security funds established by Nordic banks and pension funds since July 2025 include Nordea's Empower Europe Fund, Svenska Enskilda Banken's (SEB) European Defense and Security Fund and Danske Invest Danske Bank's Defense and Security Fund. All three funds will invest in companies to build stronger defense infrastructure, security systems and resilience in the Nordic and European countries.
“Our thematic fund allows us to meet client needs while contributing to the development of a stronger and safer Europe,” said Javiera Ragnarz, head of SEB Asset Management, which manages the Empower Europe fund.
