Europe’s sweltering summers are the new normal, which means major new opportunities for investors looking, affirms the CEO of global financial advisory giant deVere Group.
Nigel Green’s bullish analysis comes as Western Europe endures one of the most severe heatwaves in modern history, with France reporting around 1,000 excess deaths in a single week, temperatures exceeding 40C across multiple countries, and governments issuing rare “risk to life” warnings affecting tens of millions of people.
He says: “Investors who view Europe’s escalating heatwaves purely as an environmental crisis are making a mistake.
“They should also be viewing them as one of the biggest structural investment shifts unfolding anywhere in the developed world.
“Europe has spent decades building economies, cities, housing, healthcare systems and infrastructure around climate conditions that no longer exist.
“Rebuilding them for the climate that does exist will require trillions of euros of investment over the coming decades.
“This creates enormous opportunities.”
The deVere CEO says markets are still underestimating how quickly extreme heat is becoming a permanent economic feature across Europe.
“Scientists have been warning for years that Europe is warming faster than any other continent.
“We’re now seeing what that actually means for economies, businesses and asset prices.
“France has recorded around 1,000 excess deaths in just one week. Rail networks have shut down, nuclear power production has been disrupted by rising river temperatures, agricultural yields are coming under pressure, hospitals are operating under emergency conditions. The list goes on.
“This is what structural economic change looks like to me.”
The deVere CEO says one of the clearest opportunities lies in an area that many investors have historically overlooked: cooling.
“Only around one in five European households currently has air conditioning. In the United States, it’s close to 90%. That gap is extraordinary.
“If Europe’s summers continue to resemble the summers we’ve experienced this year, demand for residential cooling, commercial cooling, industrial cooling and energy-efficient climate control technologies is likely to explode.
“The companies positioned to meet that demand could experience decades of structural growth.”
He also believes investors are underestimating the scale of investment that will be required to modernize Europe’s electricity infrastructure.
“Every additional air conditioning unit, every cooling system, every data center and every adaptation technology requires electricity.
“Europe’s grids were not designed for prolonged periods of extreme summer demand.
“This means enormous investment opportunities in grid modernization, electricity transmission, battery storage, energy management software and power generation.”
Nigel Green says water could become one of the defining investment themes of the next decade.
“Extreme heat creates water stress, water stress creates political, economic and commercial pressure.
“Companies involved in water treatment, storage, recycling, efficiency and distribution could become some of the biggest beneficiaries of Europe’s changing climate.”
He also identifies healthcare and urban infrastructure as sectors likely to experience sustained growth.
“Heatwaves already kill more Europeans than any other weather-related event. Ageing populations and rising temperatures are creating a powerful long-term investment case across healthcare infrastructure, pharmaceuticals, medical technologies and climate-related health services.
“At the same time, European towns and cities themselves will need to be redesigned.”
The deVere chief executive argues that investors are making the same mistake they often make during periods of major structural change.
“They assume that tomorrow will broadly resemble yesterday.
“But Europe’s climate is changing faster than markets are pricing.”
He concludes: “Investors who identified the internet revolution early generated extraordinary returns. Investors who understood the energy transition early generated extraordinary returns.
“The adaptation economy may become one of the defining investment stories of the next generation.
He concludes: “Europe’s sweltering summers are not an anomaly. They’re the new normal. Savvy investors will already be on the case.”