For the first time in history, all the world’s major economies have initiatives ready that can support digital innovation and progress toward a net zero economy. This blog focuses on Europe’s digital and clean transition and details the themes that will play a pivotal role in building economic resilience across the region.
- Unprecedented fiscal stimulus has the potential to create powerful structural changes across Europe.
- Themes that will likely play a pivotal role in Europe’s twin digital and clean transition include Renewable Energy, Cleantech, and Connectivity.
- Themes that will likely benefit the most from the transition include Autonomous & Electrical Vehicles, Telemedicine & Digital Health, Cybersecurity, Cloud Computing, and Robotics & Artificial Intelligence (AI).
Europe has unveiled multiple fiscal plans to support the COVID recovery and its green and digital transition. Combined, the Multiannual Financial Framework (MFF) for 2021–2027 and the Next GenerationEU (NGEU) represent about €2 trillion of spending over the next seven years. One third of these investments will finance the European Green Deal, an ambitious project that aims for the European Union (EU) to be carbon neutral by 2050. Achieving this goal requires a major overhaul of European infrastructure, spanning energy production, food consumption, transport, manufacturing, and construction.
European Infrastructure Today: Regional Gaps Evident
Currently, annual investment in European Union (EU) infrastructure is at 2.5% of GDP, which is 20% below its pre-2008 Global Financial Crisis level. Persistent underinvestment in infrastructure for much longer could have long-term negative impacts on potential growth and productivity, which makes these fiscal plans so consequential.
Ecological Transition: Steps Taken Toward Carbon Neutrality
At the centre of Europe’s green plans is the European Commission (EC). It intends to reduce greenhouse gas emissions by supporting industries within the energy and ecological transition sectors, such as CleanTech and Renewable Energy.
The key areas of investment of the Recovery and Resilience Facility include:
- Clean technologies and renewables
- Energy efficiency of buildings
- Sustainable transport and charging stations
Digital Transition: People, Competitiveness, and Sustainability
The key areas of the Recovery and Resilience Facility investment include:
- Enhanced connectivity via broadband services expansion
- Digitalisation of public administration
- Data cloud capacities and sustainable processors
- A reskilled and upskilled workforce via education and training
Europe’s digital strategy has three main pillars: people, competitiveness, and sustainability.
- People: Innovation can have disruptive effects on society, both positive and negative. Policies and investments in digital skills, cybersecurity including fighting online disinformation, and increased regulation of AI can help manage the disruption and ensure that it doesn’t infringe on people’s rights.
- Competitiveness: With the Digital Services Act, the EU is creating a regulatory environment for digital economic activities that could attract innovative businesses and increase competition in the related industries. This legal backdrop could spur private investments in regional digital companies across all sectors.
- Sustainability: Technology is at the core of the EU’s strategy to achieve carbon neutrality by 2050. The EU is likely to invest in sustainable production of components that enable its digital transition. Specifically, the EU wants to become self-sufficient in two critical areas: semiconductors and rare-earth materials.
Themes Likely to Benefit from Europe’s Twin Transition
The massive fiscal spending will likely boost demand in the short term, but more importantly, it will provide the perfect backdrop for the adoption of other disruptive technologies over the longer term.
Themes poised to benefit from Europe’s ecological transition:
- Renewable Energy and Cleantech
- Wind and Solar
- AgTech & Food
Themes poised to benefit from Europe’s digital transition:
- Autonomous & Electrical Vehicles
- Internet of Things
- 5G & Connectivity
- Cloud computing
- Data Centres
- Digital content
- Robotics and AI
- Telemedicine & Digital Health
Unprecedented fiscal stimulus will pave the way for Europe to upgrade its physical infrastructure, increase its clean energy capacity, and deploy large-scale connectivity to support its efforts to expand digital infrastructure. Investing in digital and green transitions through a thematic lens means targeting companies poised to directly benefit from the materialisation of these global themes, independently of any geographic or sector allocation.