Tracking the rebuilding of Ukraine

The failure to agree a “reparations loan” to Ukraine backed by frozen Russian assets just before Christmas was a political blow to the European Union’s big political beasts. However, the bloc managed to come up with a “plan B”. 

Sovereign Russian assets frozen following its invasion of Ukraine in 2022 are estimated somewhere in the range of $300bn-$350bn, with about €210bn-€230bn immobilised across the EU, mostly in Euroclear. The initial plan was to use these funds to help Ukraine with its military campaign and to use the funds for the country’s reconstruction. The plan failed due to question marks over legal liabilities from Belgium, where most of the funds are held and concerns that seizing another country’s sovereign assets could undermine confidence in European financial institutions. 

Instead, a legally safer fallback plan was agreed, under which Ukraine was granted a €90bn loan which would be paid back only when Russia paid reparations for its full-scale war. However it is funded, the sums needed to rebuild Ukraine will be massive. 

According to the latest joint analysis from the Government of Ukraine, the United Nations, the World Bank and the European Commission, recovery and reconstruction over the next decade will require an estimated $524bn. This massive effort spans sectors such as construction, defence, engineering, energy, and materials, creating significant potential opportunities for companies operating in these industries. 

Major European contractors, with deep global expertise in construction and project management, are wellpositioned to secure contracts for rebuilding critical infrastructure, including bridges, roads, and power plants. So are raw material providers and owners of heavy equipment. So, which European domiciled exchangetraded funds (ETFs) could benefit from the use of Russia’s frozen assets in the rebuilding of Ukraine?

Industrials

European Industrials UCITS ETFs provide exposure to large-cap companies across heavy industry, infrastructure, and machinery. The fund’s largest allocation (around 25%) is to aerospace and defence, with additional exposure to electrical equipment, industrial machinery, and construction and engineering.

Infrastructure development

European and US Infrastructure Development ETFs are well-positioned to benefit from increased investment in critical projects. These ETFs capture companies aligned with four core infrastructure sub-themes:

• Construction & Engineering Services
• Raw Materials & Composites
• Products & Equipment
• Industrial Transportation

Clean energy and utilities

Ukraine’s energy infrastructure has suffered extensive damage, creating an urgent need for reconstruction. Rather than simply restoring what was lost, the country is poised to rebuild smarter and greener, aligning with EU energy policies focused on renewables, decarbonisation, and energy efficiency. Thematic renewables, utilities, and infrastructure ETFs with exposure to Europe and global supply chains (for renewables and grid systems) will likely benefit from this infrastructure building.

Defence

Defence-focused ETFs, encompassing both European and global markets, are well-positioned to capture long-term growth as governments worldwide prioritise national security and allocate increased funding to defence initiatives.