Climate impacts threaten Spain and Italy with rising costs by 2050
Rising heatwaves, an intensifying climate, and worsening prolonged droughts could place a heavy burden on two of Europe’s most exposed economies, Spain and Italy. Scope Ratings has outlined potential costs for these nations by 2050, drawing on climate scenarios from the Greening the Financial System Network, a coalition of central banks and supervisors promoting sustainable finance. While Spain could see losses of up to 4.6 million euros and Italy up to 10 billion euros, the European Union as a whole might face losses around 32.7 billion euros. These estimates reflect 8.3 percent of Spain’s per‑capita GDP and 5.8 percent of Italy’s GDP in 2050. The study notes that repeated heat waves and shifts in rainfall are already pushing European regions toward severe droughts that threaten economic, human, and natural systems. Spain stands out as particularly vulnerable to water scarcity, with seven of Europe’s ten most stressed basins located there, according to Gonzalo Delacámara, director of the IE University Center for Water and Climate Adaptation. While Spain bears a heavy drought burden, other European countries are seeing increasingly intense dry spells as well. A separate Water Risk Filter study projects that by 2050, about 15 percent of Europe’s population could face a high risk of water scarcity. (Source: Scope Ratings, 2024) This drought context is presented as a key stressor for investors, helping them gauge exposure to drought and potential risks within portfolios. 70 percent of drought-related losses in the period from 2020 to 2050 are projected to occur in Europe’s five largest economies, with Germany, France, and the Netherlands showing comparatively lower exposure. Spain and Italy, as the two largest southern economies, could account for roughly 45 percent of total drought losses. The Scope document also warns that droughts may push up debt service costs if public spending is debt-financed, thereby lifting debt-to-GDP ratios and complicating refinancing over the long run. It emphasizes that financial resilience hinges on recognizing these drought risks in economic planning and budgeting. (Cited: Scope Ratings)
Agriculture bears the greatest exposure to drought
Scope Ratings highlights agriculture as the sector most exposed to drought, potentially incurring losses of around 1.8 trillion euros, about 9.8 percent of the sector’s income. EU policymakers are encouraged to invest in more water-efficient farming techniques and to shift from water‑intense crops such as maize to varieties that require less irrigation. Such adaptation could help EU agriculture remain competitive on a global stage. Hazem Krichene, senior director of Scope ESG Research, pointed to these strategies as essential for building resilience across member states. (Attribution: Scope ESG Research, 2024)
A broader view shows that drought-related losses may vary across sectors, but a sizable portion of expected damage concentrates in the EU’s larger economies. In Spain, the most affected regions include Andalusia, Murcia, parts of the Valencian Community, Castilla-La Mancha, as well as the Balearic and Canary Islands. If current water stress trends persist, the next two decades could bring sharper challenges for investment planning. Sustainability experts at major firms stress that forward-looking strategies must account for water supply risks when evaluating long-term projects. (Industry insights, 2024)
Experts note that heat strains workers and raises efficiency costs, while water shortages complicate financing for ongoing and future activities. These dynamics are among the key reasons why drought risk remains a central consideration for corporate strategy and public finance alike. (Expert commentary, 2024)