How We Work

DFM’s analytical approach is rooted in a core insight of strategic theory: while the tools of warfare evolve, the logic of war endures. The ability to project force, control territory, and impose coercion remains central—even in the age of cyber operations, space systems, and unmanned platforms. No single domain can substitute for a credible full-spectrum posture. Deterrence, in particular, requires the integrated availability of capabilities across all operational domains: land, sea, air, cyber, and space. A political actor that specialises in only one area forfeits credibility and strategic depth.

For liberal democracies, becoming strategically autonomous does not mean excelling in one dimension alone. It means building a coherent and usable defence architecture, capable of deterrence and coercion across the full spectrum of military and technological power. This is necessary to ensure that political authorities have at their disposal instruments capable of dissuading a threat or, if necessary, neutralising it—whether in response to an actual attack or in anticipation of one.

Such instruments must range from credible deterrence—the ability to threaten unacceptable costs on an adversary—to more assertive forms of strategic action, including denial operations, compellence, disruption of hostile capabilities, or, in extreme scenarios, the capacity to effect political or military regime change.

The utility of force must therefore be understood as a spectrum, encompassing prevention, deterrence, defence, response, and escalation management. An autonomous Europe cannot rely solely on symbolic capabilities or niche specialisations; it must be able to act across this full continuum, alone or with allies, and to do so with credibility, readiness, and institutional legitimacy.

By connecting top-level strategic priorities with bottom-up innovation ecosystems, DFM makes visible the structural alignment between public strategy and private innovation. In doing so, it enables more informed, coherent, and risk-aware capital allocation in one of the most politically sensitive and structurally complex sectors of the European economy.

A top-down structure

Defence Finance Monitor operates on a strategic, institutional, and regulatory level. It does not evaluate companies directly nor provide financial analysis. Rather, its role is to illuminate the strategic framework within which technologies and enterprises can be deemed relevant from the perspective of defence investment in liberal democracies, particularly within the frameworks of NATO, the EU, and aligned national strategies.

Our logic follows a top-down structure, coherent with how the defence sector is governed and financed in the EU and NATO context. At its core, DFM’s work is guided by one principle: a company becomes relevant for investors only if it is relevant to public buyers—namely, national Ministries of Defence, Armed Forces, and European institutions. And a company is relevant to those buyers only if it helps solve a clearly identified strategic problem.

The process can be described as follows:

1. Strategic Problem Definition
   It begins with a recognised strategic objective: ensuring European strategic autonomy, reducing technological dependencies, strengthening deterrence capabilities, or achieving superiority in critical domains such as cyber, space, or AI.

2. Institutional Framing
   These strategic problems are translated into official documents—Strategic Compass, EDF regulation, PESCO programmes, NATO guidelines, and national defence strategies—which define:
   – priority capabilities to be developed
   – key technological domains
   – available funding and procurement instruments
   – political, ESG, and regulatory admissibility criteria

3. Operational and Industrial Translation
   Strategic priorities are implemented through programmes, tenders, and public-private partnerships. These define:
   – specific solutions sought (e.g., quantum sensors, autonomous systems, tactical communication)
   – technical and operational requirements
   – the type of enterprises considered eligible or strategic

4. Enterprise Relevance
   A company is only investable if it is institutionally relevant. This means:
   –it addresses a mission-critical need identified in official defence capability plans or procurement priorities.
   – it aligns with a public programme or strategic roadmap
   – it meets security, compliance, and export control standards
   – it has a credible pathway to public procurement or funding

5. Strategic Interpretation for Investors
   DFM does not perform financial due diligence, which remains the responsibility of the fund. Instead, it provides the multilayered institutional context that enables investors to interpret whether a technology or company is meaningfully aligned with the strategic defence priorities of liberal democracies. It helps answer the foundational question: is this company positioned to address a strategic challenge that European public actors are actively trying to solve?

By connecting top-level strategic priorities with bottom-up innovation ecosystems, DFM makes visible the structural alignment between public strategy and private innovation. In doing so, it enables more informed, coherent, and risk-aware capital allocation in one of the most politically sensitive and structurally complex sectors of the European economy.