White Paper by GARBE Industrial and Baker McKenzie: ESG Frameworks Do Not Generally Red-Flag Defence-Related Uses

News 15/09/2026

• ESG ratings are based on asset quality and ESG governance, not on the occupant’s industry affiliation  

• Specific compliance requirements or reputational concerns regarding defence-related real estate may constrain its investability in the eyes of some investors 

• Suitability for alternative use a key factor for the long-term property valuation in the defence and security sector 

 

Hamburg, 15 September 2026 – GARBE Industrial, one of the leading developers, providers and managers of logistics, light industrial and commercial real estate in Germany and Europe, together with the international law firm Baker McKenzie, has published a new white paper on the ESG classification of real estate in the defence and security sector. The analysis reveals that relevant European ESG frameworks do not generally red-flag leases with companies belonging to the arms industry, while also showing that ESG regulations take a neutral view of defence-related uses, and that they therefore, in principle, green-light investments in such properties or investment funds.  

 Neither the EU Taxonomy nor the Sustainable Finance Disclosure Regulation (SFDR) or the Corporate Sustainability Reporting Directive (CSRD) stipulate general sector-specific exclusions for this type of use. 

 

The Building is Rated, Not the Occupant 

 ESG assessments concentrate on the characteristics of a given property and on its owner’s governance and risk management structures. Definitive for the ESG classification are criteria such as energy efficiency, emissions, resource use or sustainability management. By contrast, the sector affiliation of the occupant does not represent a distinct regulatory rating criterion. 

 “A modern industrial or logistics property does not automatically lose its ESG eligibility because it is occupied by a company from the defence or security sector,” elaborated Tobias Kassner, Member of the Executive Board and Head of Research at GARBE Industrial. “Decisive aspects include the asset’s quality, its compliance with regulatory requirements and the company’s ability to control potential threats in a transparent manner.” 

 At the same time, the study shows that regulatory admissibility is not necessarily synonymous with investability. “Defence-related occupants and properties have admittedly become part of the regular investment canon. However, certain investors and market players might continue to see defence-related uses as risky, especially if they are wary of reputational risks. Then again, market participants are taking an increasingly nuanced view of this assessment, and our analysis found no ESG-regulations-based rationale to back the latter,” said Kassner. 

 

Suitability for Alternative Use a Key Factor 

 In addition, the study highlights the significance of the suitability of defence-related properties for alternative use. Highly specialised properties will lend themselves only to a limited number of follow-up uses if abandoned by the occupant, whereas standardised industrial and logistics real estate is far more flexible. 

 “For investors, the suitability for alternative use remains a key factor,” said Dr. Daniel Bork, Partner, Real Estate Practice Group of Baker McKenzie, who co-authored the white paper. “It lowers the potential letting risks while also enhancing the long-term marketability of a given property. Moreover, it contributes to the resource-conserving long-term use of real estate, and therefore vindicates a positive assessment from the ESG perspective.” 

 “Our white paper shows that defence-related uses are neither a general knock-out criterion in the ESG context nor a care-free opportunity,” said Kassner. “What matters is a nuanced classification. Giving equal weight to regulatory requirements, the expectations of investors and finance partners, and the long-term usability of a property will enable you to make a well-informed judgement of such use classes.” 

 The full white paper can be downloaded here: Defence and ESG in the Real Estate Industry 

 Other GARBE research papers, including the cited analysis on projected defence-related demand, can be accessed here: https://www.garbe-industrial.de/en/download-center/