Geopolitical Blog
Investing in security. Unlocking growth.
Last month, I chaired the Pacific Future Forum (PFF) aboard HMS Prince of Wales in Tokyo Bay, the first Royal Navy flagship alongside there since WWII. Days later, I joined the opening panel of the IISS conference in Prague on the future of Europe’s defence. Different settings, yet a consistent message: in today’s world, economic and national security are inseparable across the Indo-Pacific and Euro-Atlantic oceans regions.
For business leaders and investors, this is not a distant policy debate. It is the context in which capital will be deployed and value created -or destroyed - over the decade ahead.
Three themes stood out across both gatherings.
- Co-dependence: Geopolitical and economic risks are tightly coupled. Most geopolitical crises have limited economic impact. But some flashpoints could rapidly translate into systemic financial risk. A crisis around Taiwan would not only risk a military confrontation but a global economic and financial shock, disrupting supply chains and capital markets from New York to Frankfurt to Tokyo. Energy security, undersea data cables and trade routes are no longer background conditions for growth - they are strategic assets.
- Integration: NATO Allies talk of being “allied by design.” The same principle applies to business. Defence, energy, technology, infrastructure and finance cannot be considered in isolation. Growth will increasingly come at the intersections - dual-use technologies such as AI, autonomy, advanced materials and clean energy that serve both commercial and security needs. Firms that understand these linkages will be better placed to capture long term opportunity.
- Reform: Governments are beginning to reform procurement, regulation and industrial strategy to meet the pace of change. But policy volatility - whether ESG or unclear demand signals -undermines investor confidence. Sustainable flows of private capital into defence and resilience will come only when defence and security are treated as growth sectors that deliver competitive returns backed by stable policy.
For business and investors, the implications are clear. First, financial strategy must integrate geopolitical resilience alongside market fundamentals. Second, the opportunities in resilience - energy transition, secure infrastructure, defence innovation and supply-chain diversification - are not temporary hedges but structural growth themes. Third, success will depend on partnership: aligning private capital with public policy to secure both returns and the systems on which prosperity depends.
Beyond the immediate strategic context, the investment landscape itself is shifting. Defence is now a sustained investment opportunity: even if a ceasefire in Ukraine were agreed tomorrow, the trajectory of spending is locked in across NATO and its partners. Yet traditional state-led procurement will not be sufficient. New industrial models will be needed to crowd in private finance, blending public funding with institutional and private capital to scale innovation and resilience at pace.
Central to Europe’s defence investment ambitions is Germany, which has already committed to doubling its defence spending over the next five years to ~€650bn, the result of which could be a significant medium-term boost to growth. Despite fiscal constraints across the bloc, renewed attempts to mutualise European debt suggest such dramatic spending won’t simply be confined to Germany - Rothschild & Co Redburn estimate €2.2trn of potential supranational debt capacity[1]. Together with reform of public procurement policies, this demand may support the supply-side revitalisation outlined in last year’s Draghi report on competitiveness and, while years of underinvestment in manufacturing capacity will not be quickly reversed, the defence-industrial boom that had been playing out in the US in recent years may yet start to percolate to Europe.
What Tokyo Bay and Prague both demonstrated is that the 20th-century distinction between security and economics has dissolved. The investors and businesses who adapt to this new reality - recognising co-dependence, building integration and demanding reform -will be those best placed to navigate volatility and seize opportunity in the contested decade ahead.
Lord Mark Sedwill
Chair of Geopolitical Advisory, Rothschild & Co
[1] Rothschild & Co Redburn: Focus on the Theme not the Region. 10 September 2025
