When a wind-farm sensor starts hunting submarines

Dual-use technology is blurring the line between clean energy and defence. For impact investors, that's the opportunity — and the trap. Lily Regardsoe discusses why this approach to tech remains a contentious issue for green money.

A few years ago, a radar system built to detect ice forming on an offshore turbine blade was used as a maintenance tool. Today the same sensing tech is watching for ships that have switched off their transponders. The same physics, yet a very different mission.

Difficult questions for investors.

The debate around dual-use technology, innovations that serve both civilian and military applications, is becoming increasingly central to European impact investing. As the environment shifts, we're seeing a rise in both opportunities and tensions: investments that are pivotal to renewables, advanced technology and defence. It reflects a broader shift in Europe's economic and geopolitical priorities and it raises difficult questions for investors, fund managers and LPs.

Technologies that first developed for sustainability or renewable infrastructure are increasingly finding applications in defence and national security. Offshore monitoring systems, AI-driven analytics, drones, sensors, quantum computing, and advanced optics can improve renewable energy efficiency while also supporting military capabilities. 

For some investors, that dual applicability is the whole appeal: access to two of Europe's fastest-growing markets at once.

And there's a deeper, structural reason it keeps happening.

As appetite for deep-technology investment has grown, it has accelerated the development of climate and energy-transition technologies. But deep tech carries long R&D cycles and an inherently application-oriented nature, so as the geopolitical landscape shifts, many innovations first developed for civilian decarbonisation are increasingly likely to reveal, or be adapted for, dual-use military applications.

And the timing matters.

Europe is rearming at a pace not seen since the Cold War. At the 2025 NATO summit in The Hague, allies committed to 5% of GDP on defence by 2035; the Commission's ReArm Europe plan aims to unlock €800 billion, with a €150 billion instrument, SAFE, behind drones, missile defence and cyber. EU members spent around €381 billion on defence in 2025, almost double the figure a decade earlier. When public money moves like that, private capital follows.

So where's the opportunity?

On the one hand, dual-use technologies may offer stronger commercial upside than traditional impact investments. Companies positioned between these sectors can benefit from multiple demand drivers, larger procurement budgets and longer-term government contracts, what the sector likes to call co-benefits: one core technology, two demand curves. Many cutting-edge technologies are built for the renewables market and quickly find they have a defence purpose too; whether it's electrifying military vehicles, or advanced sensing first used for wind-turbine maintenance, repurposed for ship detection.

No longer hypothetical.

Finland's ICEYE built radar satellites to monitor sea ice and floods; the same imagery now tracks "dark" vessels and naval movements in the Arctic. France's Unseenlabs began by reading the radio signature of ships to detect illegal fishing and protect offshore wind farms and subsea cables, and is now a maritime surveillance partner to navies. Portugal's Tekever made drones to watch pipelines and coastlines; its aircraft have since flown combat missions in Ukraine. The crossover isn't a side effect any more. For many founders, it's the model.

At the same time, the investment dynamics of dual-use technology differ substantially from conventional technology or sustainability investing. Export controls and national-security regulations can severely limit a company's addressable market. Technologies with military applications are often subject to complex restrictions on where they can be sold, who can acquire them, and which countries can sit in the supply chain. A single sanctioned entity, several suppliers deep, can shut a company out of defence procurement entirely.

Across the political landscape

Europe is determined to build its own technological and industrial sovereignty. Over the next decade, policymakers are likely to prioritise domestic capability in critical technologies such as AI, quantum computing, semiconductors and defence infrastructure, driven less by free-market economics than by regulation, procurement policy and strategic incentives.

For investors, though, strategic autonomy cuts both ways. If European companies can't, politically or legally, be sold to acquirers outside the EU, where does the exit come from? Limiting access to international buyers may reduce valuations and restrict European firms' ability to scale into globally competitive businesses. The tension between protecting strategic industries and delivering attractive returns remains unresolved.

Supply-chain complexity is another major concern.

Unlike many traditional ESG or sustainability investments, dual-use technologies often depend on highly specialised international suppliers, which raises exposure to sanctions risk and regulatory scrutiny. The presence of a sanctioned entity anywhere in that chain could prevent a company from selling into defence, national-security or large corporate markets.

It also increases the burden of diligence. Investors may need to assess not just the company but also its suppliers, subcontractors, intellectual property flows, export jurisdictions, and geopolitical relationships. This is a fundamentally more opaque environment than standard sustainable-technology investing.

Then there's the question of expertise and governance. 

Investing here requires specialist knowledge that many traditional impact funds simply don't have yet. Understanding defence procurement, export controls, sanctions frameworks and alliances such as NATO or the Five Eyes partnership is essential to navigating the market, which is why you increasingly see GP teams bring in direct military, government or national-security experience, or lean on advisory firms to plug the gap.

Dual-use could also reshape the relationship between General Partners and Limited Partners. LPs must have deep trust in a GP's judgement, ethics and operational capability to invest in this area.

The combination of commercial opportunity, national-security sensitivity and ethical ambiguity creates a level of complexity well beyond most conventional venture or impact strategies.

And LPs are financially motivated — but that isn't their only motivation. The whole point of impact investing is to create positive social impact alongside financial return, so will they see the two held in balance? And how confident will they feel knowing this is a more complex market, one where GPs must rely on consultancies to plug the knowledge gaps?

The broader ethical debate.

And alongside the commercial and operational questions is a broader ethical debate. Impact investing has traditionally meant environmental sustainability, social progress and measurable positive outcomes. The inclusion of defence-related technologies challenges some of those assumptions. Supporters argue that European defence capability may underpin long-term societal stability and democratic resilience; no security, no transition.

Others question whether anything connected to defence can ever fully align with the principles of impact investing, particularly if it ultimately feeds the 'kill chain', even indirectly or many steps removed. There's no tidy answer and for a green brand, that's worth sitting with rather than rushing past.

The debate is ongoing, with many funds already investing and more circling. As Europe increases defence spending while accelerating the transition to renewable infrastructure, dual-use technology is likely to remain an increasingly important and contested area within both venture capital and impact investing.

The boundaries between climate resilience, energy security, industrial policy and defence are becoming increasingly blurred. And as a convergence accelerates, investors will face harder questions around returns, regulation, ethics, strategic autonomy — and what 'impact' actually means in practice.

European names where the clean-tech/defence crossover is already real:

• ICEYE (Finland) — radar microsatellites; climate and flood monitoring that doubles as maritime and naval surveillance.

• Unseenlabs (France) — RF ship-detection; protects offshore wind and subsea cables, sells maritime-domain awareness to navies.

• Tekever (Portugal) — surveillance drones for infrastructure and borders; now a European defence unicorn, battle-tested in Ukraine.

• Quantum Systems (Germany) — fixed-wing drones used for mapping and agriculture as well as military ISR.

• ARX Robotics (Germany) — electric unmanned ground vehicles; an electrification story with an obvious defence application.

• Helsing (Germany) — the flagship: defence-AI, software-to-hardware, reportedly raising at an $18bn valuation.