Edmond de Rothschild Says Client Queries ‘Pouring In’ After Europe’s Wildfires

(Bloomberg) — Edmond de Rothschild Group, the Swiss money manager, says it’s been fielding client inquiries since the summer amid concerns that Europe’s intensifying wildfire season represents a fundamental shift in how to view portfolio risk in the region.

“Particularly private banking clients have raised more questions,” says Eric de Tessieres, chief sustainability officer at EdR, which oversees about $250 billion in assets.

For example, one Europe-focused client “asked very specifically whether this has an impact on the valuations of her real estate portfolio, particularly on specific properties within her portfolio,” de Tessieres said in an interview. “If insurance premiums rise too much, or if it becomes harder to rent out a property, that will inevitably have an impact on its value.”

The comments follow a string of brutal heat waves that laid bare how unprepared much of Europe is for wildfires, droughts and other heat-related shocks. Economists have warned that Europe’s economic growth will suffer in the near term as heat impacts everything from productivity to commodities prices. Investors are now trying to understand the implications for their portfolios.

“The events of this summer, the heat waves and the wildfires, allow us to re-engage with clients,” de Tessieres said. “Since our clientele is very European, questions have really been pouring in much more frequently since this summer — far more so than during the massive wildfires in Los Angeles.”

Europe Burned Hectares Could Increase 39-192%: Bloomberg Intelligence

De Tessieres says EdR now intends to conduct “more frequent portfolio valuations” to identify which holdings are most exposed. “These climate-related risks will have an impact on the pricing or desirability of certain assets.”

Rising temperatures in Europe, the planet’s fastest-warming continent, have drawn warnings from insurers, pension funds and central bankers. The European Central Bank is in the process of adjusting how it treats bank collateral used in liquidity operations due to the impact of climate change on asset values. At the same time, chronic climate risks are “not priced in by the markets,” BlackRock Inc.’s global head of sustainable and transition solutions, Louise Kooy-Henckel, said this month.

De Tessieres says his teams “are still in the process of analyzing and understanding” how the fallout of rising temperatures “is spreading across a sector and a geographic region. Once they have completed this analysis, that is when the real investment decisions will be made.”

The money manager is also trying to get “more access and visibility to insurers and reinsurers data,” he said. There’s a growing need among professional investors “to obtain more data to assess the impacts of physical risk on a forced business interruption, as well as on the value chain of that business. This is also true if there is a climate-related disaster in another region of the world where a company has many of its suppliers.”

At the same time, EdR is keen to invest in companies that are set to profit from the risks ahead.

“Our management teams are also working to identify investment opportunities arising from these physical climate risks,” de Tessieres said. He listed companies working on cooling solutions beyond just air conditioning, particularly for use in industrial buildings.

“There are also companies involved in the full range of firefighting solutions, such as those that manufacture fire-retardant products,” he said. “These are opportunities that our portfolio managers have identified and continue to pursue.”

What Bloomberg Intelligence Says:

Western Europe’s hottest June-July period on record, alongside intensifying wildfires and floods, is broadening adaptation needs and supporting a multiyear capex cycle across infrastructure, agriculture, transport and power. Industrials including Schneider Electric, Prysmian, ABB and Wartsila are positioned across several of those needs as climate resilience overlaps with investment in power networks, storage and cooling. Flood losses of €88.6 billion in 2020-25 are accelerating spending on prevention, drainage and protective infrastructure, benefiting companies such as Acciona and Marshalls. Extreme heat should also support HVAC demand for NIBE and Carrier, with air conditioning in just 23% of European homes pointing to a prolonged retrofit and installation cycle.

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