Geostrategic Signals: Financing Resilience (Rothschild & Co)

Summary

• Triodos estimates heat and drought could cost Europe €180bn this year, around 1% of EU GDP.p.3
• The Bloomberg Prepare & Repair Index outperformed the S&P 500 by 7.2% annually over five years.p.3
• Europe issued over 1,000 green bonds with adaptation use of proceeds, 10 x the US total.p.3
• Black Sea ports that normally carry 80-90% of both countries' grain have halted exports, with Ukraine's exports down 75% in early August.p.4
• Ukraine and Russia supply nearly 30% of world wheat, and Ukraine around 40% of sunflower oil.p.4
• 14 of the top 30 resource-rich countries are effectively off-limits to the US and Western Europe, so the focus is on de-risking, not decoupling.p.6
• Over the next decade, $7–10 trillion of capex is expected on AI in the US, infrastructure in Canada and Germany, and NATO spending increases in Europe, increasingly funded by private credit.p.6

Key insights

1. Climate risk is amplifying geoeconomic vulnerabilities across supply chains and energy markets, with record-low Rhine levels forcing cargo rerouting.p.3
2. Capital is likely to flow where resilience is investable, not as a matter of virtue.p.3
3. Europe's adaptation-related green bond issuance is 10 x the US total despite lower estimated long-term GDP losses from physical hazards.p.3
4. A single chokepoint can quickly create a global food shock, making food supply-chain resilience a matter of national security.p.4
5. China's export controls on critical minerals are increasingly biting in AI and defence supply chains.p.5
6. The state's role is deepening from arm's-length backing to ownership, through direct stakes and golden shares.p.6
7. Governments and corporates are shifting from a mindset of supply chain optimisation to resilience.p.6
8. Defence reindustrialisation faces fragmented national industrial bases, and vehicles such as a Defence, Security and Resilience Bank may help.p.7