Defence investment in Guernsey and Jersey: a governance-first approach

Defence investment has re‑emerged as a strategically important and structurally growing area of capital allocation. Heightened geopolitical tension, including the conflicts in Ukraine and Iran, along with a renewed focus on state‑on‑state risk, have driven a sustained increase in defence spending across the UK and Europe.

This has extended beyond traditional procurement into a new generation of defence technologies, including AI, cyber capability and autonomous systems, with private capital increasingly deployed alongside public funding.

While the growth trajectory is clear, defence investment is not simply another asset class. It introduces additional layers of complexity around governance, ownership, end use, regulatory scrutiny and investor suitability, requiring a more disciplined and structured approach.

Channel Islands defence investment landscape

The Channel Islands have moved decisively to support the responsible development of defence‑related investment.

In Guernsey, recent engagement between regulators and industry has reinforced the role that private capital can play in supporting security and long‑term stability. This sits alongside the regulatory approval of defence‑related investment structures and broader strategic initiatives to integrate defence into the jurisdiction’s core funds offering.

In Jersey, regulatory evolution has focused on clarity and proportionality. Updates to the Sound Business Policy have refined the definition of defence‑related risk, moving away from broad exclusions towards a risk‑based framework. This enables legitimate defence investment while requiring firms to demonstrate appropriate governance, transparency and compliance with sanctions, export control and non‑proliferation requirements.

Across both jurisdictions, the direction of travel is clear - defence investment is recognised as legitimate and necessary, provided it is structured, governed and managed responsibly.

Praxis – a governance first investment discipline

Our perspective reflects the intersection between return potential and alignment with policy, regulation and fiduciary responsibility.

Central to this approach is the ability to apply informed judgement. Defence investment requires disciplined differentiation between strategically aligned and acceptable activities and restricted or higher‑risk areas requiring enhanced scrutiny or exclusion.

This extends to oversight of ownership structures, end use, export controls, sanctions exposure and broader reputational considerations.

To support this, Praxis has established a Defence Advisory Panel (DAP), which provides sector‑specific expertise across the Group.

The Panel operates as a central source of insight and challenge, available to each Board within our regulated entities. This ensures that decisions relating to defence exposure are:

• informed by relevant sector expertise
• subject to appropriate governance oversight
• consistent with regulatory expectations and evolving policy positions

By embedding this capability at Board level, Praxis helps to ensure that defence‑related activity is considered within a structured and defensible framework.

Structuring and governance in practice

This translates into supporting clients to:

• design ownership and governance frameworks capable of withstanding enhanced regulatory and investor scrutiny
• embed export control, sanctions and non‑proliferation safeguards within investment structures
• define and monitor defence exposure clearly across funds, private client portfolios, pensions and corporate vehicles
• align investment strategies with evolving regulatory and policy expectations across the UK, Europe and allied jurisdictions
• ensure that private wealth exposure is appropriately assessed for suitability, transparency and reputational alignment.

This approach allows clients to move beyond headline exposure towards a disciplined and defensible investment strategy, recognising defence as a legitimate component of modern portfolios.

Conclusion

As defence capital becomes more embedded within institutional and private wealth portfolios, the differentiator will not be access to opportunity, but the ability to structure, govern and justify that exposure with clarity and discipline.

Our role is to bring the judgement, governance and sector insight required to do this effectively, ensuring that defence investment is approached with the rigour expected by regulators, investors and stakeholders alike.

To find out more about our Corporate & Fund Services, please get in touch with Gavin.