BlackRock has launched a UCITS iShares ETF[1] tracking the STOXX® Europe Targeted Defence index, meeting rising investor interest for precise exposure to European companies providing military supplies.
The STOXX Europe Targeted Defence index selects constituents based on their share of revenues from providing military equipment and services. The methodology screens out companies involved in Controversial Weapons — such as cluster munitions, anti-personnel mines, and chemical and biological weapons — as well as those that violate UN Global Compact principles or OECD guidelines, according to ISS ESG.
“Our European clients have consistently expressed demand for European defence exposure in recent months,” said Jane Sloan, EMEA Head of Global Product Solutions at BlackRock. “Many European countries are set to increase defence spending, working together and prioritizing European companies.”
“BlackRock is providing investors precise exposure to European defence as well as bringing capital to Europe that supports local industry and the strategic objectives of European countries,” Jane added. “This new launch provides clients with a necessary toolkit to precisely express granular views and access the long-term structural tailwinds presented by the defense theme.”
Performance
Over the past five years, the STOXX Europe Targeted Defence index has surged nearly eightfold (692%), compared to an 85% increase for its parent index, the STOXX® Europe All Country All Cap (Figure 1). By comparison, the broader, sector-based STOXX Europe Total Market Aerospace & Defense index has risen almost fivefold (386%).
Figure 1: Returns
Gains in shares of European military suppliers have accelerated in 2025. The European Commission (EC) has called for a ramp-up in military production from member states to spend better, work together and prioritize European companies.
The EC in March presented a package to help European Union nations spend over EUR 800 billion in defense and in military research from European providers. NATO countries have called to boost defense investment from 2% of gross domestic product to 3.5%.[2]
Selection and weighting scheme
Companies in the STOXX Europe All Country All Cap index are assessed by their military equipment and services revenue, based on ISS ESG research. Companies that have more than 10% of their total revenue derived from those business lines are selected into the index. Companies with a higher share of military revenue get a larger weight in the index. Constituents’ weights are capped at 15%. This methodology ensures the index is more targeted towards defense players.
“At STOXX, we are committed to developing index solutions that respond to evolving strategic priorities of Europe,” said Axel Lomholt, General Manager at STOXX. “Our new STOXX Europe Targeted Defence index reflects this mission by providing a transparent, rules-based approach to selecting companies that contribute to Europe’s defense and security.”
“By integrating our high-quality Military Equipment revenue data for selection and weighting of companies active in the Defense industry, the index showcases the unique synergies of ISS STOXX, where data, insight and index innovation come together to serve the evolving needs of the market.”
As of May 21, there were 27 companies in the index. Eight of them are not classified as ICB’s Aerospace & Defense.
Figure 2: STOXX Europe Targeted Defence index – Top ten holdings by weight
Ongoing collaboration
With this latest product, BlackRock and STOXX have collaborated on 17 thematic-focused ETFs since 2016, with total assets under management now amounting to USD 8.5 billion.[3]
[1] The iShares Europe Defence UCITS ETF (DFEU) was listed on Euronext Amsterdam and Frankfurt’s Xetra exchanges on May 28.
[2] Euractiv, ‘Rutte says NATO allies ready for big jump in defence spending commitments,’ May 15, 2025.
[3] Source: ETFBook, data as of May 19, 2025.