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In a world marked by geopolitical instability, the importance of defense has surged, especially within Europe. With nations increasingly pledging historically high levels of funding to enhance their military capabilities, the spotlight is on constituents that lead the charge in defense technology and infrastructure. These typically operate in crucial industry groups¹ such as Aerospace & Defense, Technology Hardware & Equipment and Software & Services. Although these industry groups are pivotal for national security, their collective weight in broad indices may underrepresent their global impact. For instance, as of May 30, 2025, the Aerospace & Defense industry group constituted just 2.2% of the S&P 500^®. This disparity raises an essential question: How can market participants effectively track cutting-edge defense constituents that significantly contribute to national and international security?

This might call to mind benchmarks that contain many defense-related firms such as the S&P Aerospace & Defense Select Industry Index, the S&P Software & Services Select Industry Index and the S&P Technology Hardware Select Industry Index, which are derived from the GICS framework. However, such indices are designed with a broader perspective, rather than a cross-sectoral focus, as the constituent selection for each is not based on purity to the defense theme. For example, commercial aircraft companies that do not serve the defense industry might still be included in broader Aerospace & Defense indices.²

This complexity underscores the relevance of the S&P Europe Defense Vision Index, launched on April 7, 2025, that measures the performance of industrial and technology companies across Europe that are actively involved in the manufacturing, assembly, sale and transportation of both core military weaponry and a broader range of military-related, non-weapon products and services, such as military vehicles, wearable technology, military-grade software and communication systems.³ It uses the S&P Global Business Involvement Screens Military Contracting data, which can identify use cases, going beyond just product or service, and more accurately select constituents based on purity to the defense theme.

To assess the performance of defense-related indices relative to the broad market, Exhibit 1 summarizes an overview of annualized returns for the S&P Europe Defense Vision Index compared to the S&P Europe BMI, as well as the S&P Aerospace & Defense Select Industry Index, S&P Software & Services Select Industry Index and S&P Technology Hardware Select Industry Index compared to The 500™ over 1-, 3-, 5- and 10-year periods. The S&P Europe Defense Vision Index led the pack alongside the S&P Aerospace & Defense Select Industry Index (see Exhibit 1), and as of May 30, 2025, it had a cumulative return of 33.4% since its launch.

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In addition to ensuring the constituent selection is based on purity to the defense theme, the S&P Europe Defense Vision Index also broadens its scope beyond industry groups within the Industrials sector to include Information Technology and Communication Services sectors, recognizing that modern defense relies heavily on cyber capabilities, software innovations and military satellite technologies. The sector breakdown represented in Exhibit 2 reflects this comprehensive approach, showing that the index measures the full spectrum of industry groups and sectors involved in defense innovation.

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In conclusion, the S&P Europe Defense Vision Index stands as a benchmark for the rapidly evolving defense sector. En garde! The future of defense-based index solutions is here, and it’s ripe for exploration.

¹ See the Methodology Information for GICS: Global Industry Classification Standard.

² See the S&P Select Industry Indices Methodology.

³ See the S&P Thematic Indices Methodology.

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