Drought-Proofing Europe: The Economic Impact of Climate Change

Let's take a look at Dublin Port overlooking Dublin Bay in Ireland.

Now places like Ireland are known for reliable rainfall, and that rain plays a big role in supporting wildlife farming as well as clean water supplies.

But new research from the European Central Bank shows Europe's economy isn't drought proof.

With climate change speeding up, the eurozone has already lost over €100 billion due to poor water quality and climate.

Change is a global problem, and economies around the globe are facing serious financial losses because of it.

Joining me here at the New York Stock Exchange this morning is Jeff Gitterman, CEO of Gitterman Asset Management.

Good morning and thank you so much for joining me.

Good morning.

Great to be here.

Well, here in New York City we are getting a drizzle outside, but when it comes to global economies and how they are at risk from climate-related droughts, give us an understanding of what's happening here.

So in Europe, more exposed than some other regions around the country, they're having more instances of droughts occurring.

They have more weather pattern disruptions.

They rely a lot in Europe on the ocean currents keeping the area warm and wet.

It's why Southern Europe is a big agricultural hotspot.

But when you look at Europe, about 15% of their economy is at a tremendous risk from extended droughts right now.

And shifting our focus back to this side of the Atlantic and what's happening in the US, give us an understanding of what's happening not just in US cities but also US states.

I mean there's a lot of instances now, especially with FEMA starting to back off, where we're having rain disasters, not just big storms.

The interesting thing insurance companies have come out over the last week or two and said a big part of their issue is now the minor effects of weather pattern changes.

So it's hailstorms.

It's getting 24 months of rain in a one day period and certainly.

Areas because as we've talked about before on the show, unfortunately the warmer the air gets, the more moisture it could hold.

So for every degree Celsius it could hold about 7% more water.

We're about 1.5 °C warmer than we were in the pre-industrial age.

That means the air is holding about 10% more water, so you have more droughts because the air can absorb more of the water from the ground and keep it in the air rather.

And turning it over as much as it would have when it holds 10% less rain, so it couldn't absorb as much and you would get a more regular and consistent pattern.

Now those patterns are being impacted and changed and in Europe because they rely a lot on hydropower and a lot on agriculture and manufacturing, they are more at risk than the United States is.

Plus their weather patterns are shifting a little bit more than in the US currently.

Yeah, and Jeff, every morning I think we all wake up and look at what's happening around the globe when it comes to extreme weather and some of these climate risks out there.

So what kind of government or private sector investments do you think are necessary to tackle drought risks?

Well, we need more groundwater retainment, we need more arable soil.

So the problem we have right now, especially since we went to mono cropping, which means we we actually produce one crop on that plot of soil and that's it.

We used to have farmers that would produce corn during one season and maybe cabbage during another season or fruit during another season.

Now they get paid so much just to produce from subsidies corn that that's all they produce.

So while they're not producing corn, all that soil is exposed to the sun.

It dries out the soil and it actually kills a lot of that top layer microorganisms that exist in the soil, so we're getting drier and drier and drier top layer soil, which means that when it rains, that soil, because it's so dry, can't absorb the moisture, so it just runs off, runs into the local rivers and streams or any basins that exist in the area and creates much more flooding than we used to get when those crops and Those different vegetation that we had growing could absorb a lot more of that water, and that's a big problem.

Also, we have invasive vegetation because we're planting when we're building a suburb into an area that never had a suburb before and we're doing all kinds of vegetation and things around the homes that don't exist in that area.

Sometimes that kills off local vegetation which was better than dealing with the local soil.

So we're moving.

To the wrong places.

We're warming the planet too quickly right now and we're suffering that.

And then back to Europe for a second.

They rely a lot on hydroelectric power, so that's at risk.

Manufacturing is at risk.

Agriculture is at risk, and then the banking sector has a huge amount of loans, $1.3 trillion in loans that are exposed to different industries that could suffer tremendously during droughts or long term.

Effects of not having enough rain and water.

And finally, Jeff, I do want to get your take on politics as well as policy.

So how do you see the feud between the nation's President Trump and Elon Musk impacting capital markets as well as policy?

I mean, I said before the election when Trump was courting Musk, and Musk was there to support him, that that wouldn't last.

He can only fit so many egos in a room, so no knock against either one of them, but I didn't think they would be compatible for long, and they have competing interests.

One has very selfish interests around the companies that they're running.

One has interests about running the country.

Those interests don't always.

Align and I expected at some point within the 1st 6 months when they didn't align that there would be problems between these two because their egos are big and they've both been known to be a little bit vindictive when it comes to Twitter and their different Xs and feeds that they're on.

So I don't think it plays well for either side.

I think it hurts the chances of this bill being passed because Musk has been very anti the big beautiful. and it also puts a lot of pressure on Musk's companies that are under a lot of pressure over the last week or two since this feud broke out that stock price has been getting killed.

So it's not good for anyone.

Hopefully they can patch things up and the country can focus on more important things.

OK, Jeff Bold, thank you so much for joining me on this Monday morning and for weighing in.

And as always, thank you so much for sharing your perspective.

Thanks for having me.

Thank you.