Swedish bank SEB’s abrupt reversal on excluding defense stocks from its funds, barely a year after implementation, underscores the seismic impact of conflict. Triggered by rising geopolitical tensions and Russia’s invasion of Ukraine, SEB’s decision echoes a broader trend among financial institutions distancing themselves from defense firms amid ethical concerns. The EU’s abandonment of plans to label defense as socially harmful marks a notable shift, acknowledging the contradiction between deeming defense unsustainable while promoting military autonomy. Evolving public sentiment, exemplified by Germany’s backing of arms exports to Ukraine and changing attitudes in Finland and Sweden towards NATO, emphasizes the pivotal role of the defense industry in safeguarding Europe’s safety. However, the complexities inherent in categorizing defense companies within ESG frameworks—ranging from treaty compliance to monitoring end-use—demand nuanced evaluations. Despite a surge in defense stocks post-Germany’s move, the crisis exposes the risks of a blanket approach to such a critical industry. Europe’s defense sector, vital for strategic autonomy, deserves ESG recognition tempered by stringent compliance and meticulous case assessments to uphold safety and security while addressing ethical concerns.