i

Important security note: Warning of attempted fraud in the name of DWS

We have detected that fraudulent individuals are misusing the "DWS" trademark and the names of DWS employees on the internet and social media. These fraudsters are operating fake websites, Facebook pages, WhatsApp groups and Mobile Apps. Please be aware that DWS does not have any Facebook Ambassador profiles or WhatsApp chats. If you receive any unexpected calls, messages, or emails claiming to be from DWS, exercise caution and do not make any payments or disclose personal information. We encourage you to report any suspicious activity to info@dws.com, including any relevant documents and the original fraudulent email. Additionally, if you believe you have been a victim of fraud, please notify your local authorities and take steps to protect yourself.

Europe’s investment appeal

Europa
Alternatives
Infrastructure
Real Estate
ESG

11/20/2024

The investment routes to express European Transformation

Maria Milina

Research Analyst

Michael Lewis

Head of Research, ESG

Murray Birt

Senior ESG Strategist

Dirk Schlüter

Co-Head, DWS House of Data

Richard Marshall

Head of Infrastructure Research

reben bos headshot

Ruben Bos

Head of Real Estate Investment Strategy

Headshot image of Michael Verhoeven

Michael Verhoeven

Product Specialist

Banner image of digitallights

IN A NUTSHELL

  • Europe has been at the forefront of sustainability policies for years, illustrated by rapid decarbonization and the deployment of renewables. Europe also leads on most dimensions of economic inclusion and social progress.
  • The U.S. election, the continuation of the Russia-Ukraine conflict and broader geopolitical and strategic risks simply fuel the impetus for Europe to transform and unlock capital investment to finance transformation.
  • Action such as public-private finance partnerships to de-risk and scale-up breakthrough technologies as well as regulation to make it easier for start-ups and small to medium-sized enterprises (“SMEs”) to access capital markets demonstrate this transformational agenda.
  • We view Alternatives as the best route to capture transformative investment opportunities. Alternatives occupy a place in the risk-return spectrum between traditional lower-risk rates and investment grade credit on the one hand and risky equities and high yield credit assets on the other.
  • One of the most attractive asset classes within Alternative is infrastructure, which now forms around 20% of assets under management in European alternatives. We expect its appeal to continue given European infrastructure has three crucial benefits relative to other regions namely policy, diversity, and value.
  • Real estate investment is pivotal in supporting Europe’s transformation and can play an important role in achieving economic, social, and environmental goals. Structural drivers for the asset class include Europe’s aging population, increasing healthcare spending and advancements in artificial intelligence.
  • Similarly, private investments via direct lending offer investors a unique chance to finance SME transformation. Given the floating nature of direct lending loans, the prospect of further monetary easing in Europe should, in our view, provide an additional fillip to this asset class.

 

Introduction

In this paper, we explore the case for Europe as an investment location. We show how the policy and regulatory environment across the continent is increasingly being tilted to address structural challenges such as weak competitiveness as well as towards unlocking capital investment to finance sector transformation. We then delve into the characteristics of Alternatives as an asset class. Finally, we assess specific investment opportunities within the infrastructure, real estate, and direct lending sectors.  

1 / Europe as an investment location

Europe has long been a leader in sustainability policy, but the re-election of U.S. President Trump, with his commitment to trade tariffs, poses a significant risk for Europe. Additionally, ongoing geopolitical risks, including Russia’s invasion of Ukraine, further drive the need for European transformation. Major issues were identified, and recommendations made in important reports from former Italian Prime Minister Letta[1] and former European Central Bank President Draghi.[2] These reports echo the findings and efforts of DWS from our European Transformation initiative since December 2022.

1.1 Europe’s strong environmental and social credentials

Europe stands as a global success story in sustainability and social inclusion, two of the world’s most critical issues. Europe has more ambitious climate targets compared to the U.S. and China, i.e. a 55% reduction from 1990 levels by 2030,[3] compared to the U.S.’s 50-52% reduction from 2005 levels, which translates to about 43-45% from 1990 levels,[4] and China’s target focuses on peaking emissions prior to 2030 and improving carbon intensity.[5]

Since 1990, Europe has seen its greenhouse gas emissions decline by 33.9% or -1.2% on a compound annual growth rate (CAGR). This compares to a CAGR decline of just 0.1% CAGR in the United States and a rise of more than 3% for China and India.[6] When it comes to the adoption of renewables, Europe has achieved 44% of its power generation stemming from this source.[7] The equivalent share in the United States is just 23%. Europe also leads on most dimensions of economic inclusion and social progress, including income inequality and life expectancy.[8] The missing piece to the region’s appeal as an investment location is the continent’s performance in terms of economic growth and productivity. This has become a central pillar of the European Commission’s efforts to addressing the region’s competitive position.

1.2 Decarbonization, digitalization and defense are Europe’s key priorities

Three strategic priorities to address Europe’s competitiveness were well summarized in the recent report by a former Italian prime minister Mario Draghi: Europe needs to digitalize and decarbonize the economy and increase its defence capacity.[9] Digitalization should address Europe’s productivity problem, fostering innovation and efficiency. Decarbonization is crucial not only for meeting ambitious greenhouse gas (GHG) targets but also for transitioning to secure low-cost clean energy sources. In an era of rising geopolitical tensions, reducing dependencies and increasing security by diversifying suppliers of critical raw materials and minimizing reliance on imported digital technology should strengthen Europe’s resilience and strategic autonomy.

European Transformation Europe`s Investment Appeal

Watch Michael Lewis, Head of ESG Research speak about our latest report: European Transformation and Europe’s Investment Appeal

62.9102_grafik_michael_lewis_20241127
3:55

Europe’s investment appeal
Click here to download the full article
1

European Commission (April 2024) Enrico Letta’s Report on the Future of the Single Market

2

Report by Mario Draghi for European Commission (September 2024) Future of EU competitiveness

3

European Commission (September 2020) Communication on the 2030 Climate Target Plan

4

Congressional Research Service (January 2023). U.S. Greenhouse Gas Emissions Trends and Projections from the Inflation Reduction Act

5

Climate Action Tracker (September 2024). Countries – China

6

European Commission (2023). JRC Science for policy report. GHG emissions of all world countries

7

EDGAR (October 2024). JRC Science for policy report. GHG emissions of all world countries 2024

8

McKinsey Global Institute (January 2024). Accelerating Europe: Competitiveness for a new era

9

Report by Mario Draghi for European Commission (September 2024). The future of European competitiveness

The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries, such as DWS Distributors, Inc., which offers investment products, or DWS Investment Management Americas, Inc. and RREEF America L.L.C., which offer advisory services. There may be references in this document which do not yet reflect the DWS Brand.

Please note certain information in this presentation constitutes forward-looking statements. Due to various risks, uncertainties and assumptions made in our analysis, actual events or results or the actual performance of the markets covered by this presentation report may differ materially from those described. The information herein reflects our current views only, is subject to change, and is not intended to be promissory or relied upon by the reader. There can be no certainty that events will turn out as we have opined herein.

Source: DWS Investment GmbH.  

 

Important information – For EMEA, APAC & LATAM

DWS is the brand name of DWS Group GmbH & Co. KGaA and its subsidiaries under which they do business. The DWS legal entities offering products or services are specified in the relevant documentation. DWS, through DWS Group GmbH & Co. KGaA, its affiliated companies and its officers and employees (collectively “DWS”) are communicating this document in good faith and on the following basis.

This document is for information/discussion purposes only and does not constitute an offer, recommendation or solicitation to conclude a transaction and should not be treated as investment advice.

This document is intended to be a marketing communication, not a financial analysis. Accordingly, it may not comply with legal obligations requiring the impartiality of financial analysis or prohibiting trading prior to the publication of a financial analysis.

This document contains forward looking statements. Forward looking statements include, but are not limited to assumptions, estimates, projections, opinions, models and hypothetical performance analysis. No representation or warranty is made by DWS as to the reasonableness or completeness of such forward looking statements. Past performance is no guarantee of future results.

The information contained in this document is obtained from sources believed to be reliable. DWS does not guarantee the accuracy, completeness or fairness of such information. All third party data is copyrighted by and proprietary to the provider. DWS has no obligation to update, modify or amend this document or to otherwise notify the recipient in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

Investments are subject to various risks. Detailed information on risks is contained in the relevant offering documents.

No liability for any error or omission is accepted by DWS. Opinions and estimates may be changed without notice and involve a number of assumptions which may not prove valid.

DWS does not give taxation or legal advice.

This document may not be reproduced or circulated without DWS’s written authority.

This document is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, including the United States, where such distribution, publication, availability or use would be contrary to law or regulation or which would subject DWS to any registration or licensing requirement within such jurisdiction not currently met within such jurisdiction. Persons into whose possession this document may come are required to inform themselves of, and to observe, such restrictions.

© 2025 DWS Investment GmbH

Issued in the UK by DWS Investments UK Limited which is authorised and regulated in the UK by the Financial Conduct Authority.

© 2025 DWS Investments UK Limited

In Hong Kong, this document is issued by DWS Investments Hong Kong Limited. The content of this document has not been reviewed by the Securities and Futures Commission.

© 2025 DWS Investments Hong Kong Limited

In Singapore, this document is issued by DWS Investments Singapore Limited. The content of this document has not been reviewed by the Monetary Authority of Singapore.

© 2025 DWS Investments Singapore Limited

In Australia, this document is issued by DWS Investments Australia Limited (ABN: 52 074 599 401) (AFSL 499640). The content of this document has not been reviewed by the Australian Securities and Investments Commission.

© 2025 DWS Investments Australia Limited

For Investors in Taiwan: This document is distributed to professional investors only and not others. Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted.  

as of 11/19/24; 103679_1 (11/2024) (12/2025)