For net-zero investors, is Europe the most investable economy?

In a world increasingly shaped by the sometimes-conflicting forces of climate imperatives and geopolitical uncertainty, Europe stands out as a stable, policy-driven, and industrially aligned environment for net-zero investing. While the US is strong in terms of technological innovation and private-sector dynamism, the current administration’s policy stance threatens to slow the country’s progress towards a more sustainable future. Europe, in contrast, is embedding climate action into its economic DNA – providing fertile ground for forward-looking investors.

An effective net-zero economic model

Europe’s strong industrial base is deeply rooted in the sectors undergoing the most profound transformation in the net-zero transition. Manufacturing and construction account for around 40% of the European Union’s (EU’s) GDP, while energy and transport add more than another 10%.¹ This makes it more directly exposed – and responsive – to decarbonisation pressures.

FIG 1. Emissions by industry sector in Europe²

Strong policy commitments and regulation

Broad public and cross-party political consensus provides a stable foundation for the shift to a more sustainable economy in Europe. This is supported by an arsenal of policy commitments and regulation, including the European Green Deal, Net-Zero Industry Act (NZIA), Fit for 55, vehicle emissions legislation and the Carbon Border Adjustment Mechanism (CBAM), along with a well-developed Emissions Trading System (ETS).

• European Green Deal. Enshrines the net-zero by 2050 commitment in law, earmarks a third of the EU’s budget and recovery fund, offers a broad pipeline of investable themes across sectors and is equitably structured for inclusivity
• ETS. Increases the competitiveness of low-carbon solutions and creates a price signal for investors by putting a clear price on carbon emissions (USD80-100 per tonne in 2024). (See Figure 2.)
• CBAM. Creates a competitive moat for EU-based low-carbon producers against cheap, high-emission imports and levels the playing field for low-emission projects, encouraging investment
• ICE bans. The legal requirement for all new cars and vans sold in the EU to be zero-emission by 2035 (and emit 55% less CO2 by 2030) ensures the phaseout of internal combustion engine (ICE) vehicles
   

FIG 2. A rising cost for emissions (EUR per tonne of CO₂) has incentivised mitigation in Europe³

Net-zero infrastructure and energy efficiency

The EU’s unprecedented policy of capital investment in energy infrastructure and efficiency derisks a climate-aligned focus for long-term investors. This is supported by streamlined permitting for net-zero projects. The bloc invests more than USD 10 in clean energy for USD 1 in fossil fuels – among the highest ratios globally⁴. USD 110 billion of EU money went into renewable energy generation in 2023, along with USD 65 bn into power grids – a 20% year-on-year increase⁵. Investment into energy storage and demand-side flexibility to support electrification and improve grid resilience is also strong.

A clear industrial strategy for clean technology

Designed as a response to the US Inflation Reduction Act and Chinese clean tech dominance, the NZIA creates a clear, investable roadmap aimed at scaling up domestic production of a wide range of clean technologies. It provides policy certainty and demand visibility for photovoltaic and thermal solar, onshore and offshore wind, energy storage, carbon capture and storage (CCS), grid technologies and heat pumps, among others. The Act also seeks to secure access to critical raw materials and CO₂ storage capacity.

FIG 3. Share of global clean-technology manufacturing capacity by region, 2024⁶

Steadily declining emissions

EU emissions peaked 35 years ago and have been declining steadily ever since; between 1990 and 2023, they fell by 37%. This progress has been driven by a combination of lower energy demand, renewables deployment and structural shifts in industry and transport, as well as milder winters. Significantly, the bloc’s GDP grew by more than 68% over the same period.⁷

FIG 4. EU emissions per capita are lower than both China and the US⁸

A growing clean-energy mix

Most EU countries use a high proportion of energy from clean sources, and this is increasing over time. The phasing out of coal has been an important element of clean energy uptake, with solar overtaking hard coal as an electricity source in 2022.¹⁰ France and Sweden are particularly strong in terms of clean power, generating 94% and 98% of their electricity respectively from renewable or nuclear sources in 2023. Across the bloc, solar and wind installations have quadrupled since 2013 to reach 80 megawatts of installed capacity (see Figure 5).

FIG 5. Annual solar and wind installations have grown rapidly in Europe over the past decade¹¹

The US: behind the curve? Despite its technological prowess and powerful private sector, in comparison to the EU, the US faces structural challenges in reaching net zero: A services-dominated economy. Real estate, professional services, insurance, finance and healthcare are leading contributors to US GDP, with manufacturing and construction relatively smaller. This enables innovation but limits exposure to impactful decarbonisation12 Policy weakness. While law, the IRA does not commit to specific emissions reductions, and the US still lacks a federal carbon-pricing mechanism. In a polarised political environment, policy can be weakened by executive orders or budget cuts Obstacles to renewables uptake. Despite vast potential, fragmented federal, state and local regulations, permitting bottlenecks and land-use conflicts are frustrating the development of utility scale wind and solar and slowing the rollout of grid improvements A dirtier energy mix. US emissions peaked around 2007 but the decline has been somewhat inconsistent since. The lack of a federal coal phaseout policy means the fossil fuel still accounts for 20% of US electricity generation. FIG 6. Across a range of measures, Europe leads the US in the net-zero transition13

Conclusion: Europe’s net-zero edge

In a world where climate policy is becoming industrial policy, Europe is not just catching up – it’s leading. For investors seeking long-term, policy-aligned exposure to the net-zero transition through companies grounded in an industrially focused economy, Europe offers a compelling case. The continent’s regulatory clarity, public and political support, and industrial strategy make it a cornerstone of any serious net-zero investment strategy, in our view.